Real Estate investment

[Shauly101]

 Other option is becoming an LP (limited partner) on someone's deal.

how to you find these deals - and how to you scrutinize them

[whacked1]

how to you find these deals - and how to you scrutinize them

First and foremost is finding someone you trust. If you know ppl in real estate, let them know you are looking to invest and they should put you on their list. If you dont have anyone in a first relation, ask a friend who they invest with etc etc.

Always check how much money the gp is putting into the deal. You want them to have skin in the game and not just playing with your money. Try to see what they did on previous deals, what were their returns. If you are unable to analyze the deal yourself, there are people/companies that will can break it down for you. Shouldn't be too expensive (obviously depends how much you are investing...)

[good sam]

how to you find these deals - and how to you scrutinize them

Do yourself a favor, have the operating agreements reviewed by a lawyer.

[Fish Tank]

Should ask a tax professional. But there might be limits of how much passive income losses you can use to offset regular income.

So that is what I thought but then someone told me you can only deduct a loss (depreciation) if you are considered a "real estate professional"

Typically these investments are very tax beneficial as even a good property, distributing funds will have a negative profit for tax purposes.

My understanding is that the difference between a RE Pro and not is whether it is called active or passive income.

I was recently listening to a podcast, and it was explained like this:

If you are not classified as a real estate professional, you can only deduct the depreciation/losses against passive income streams.

If you are classified as a real estate professional, you can deduct the losses against income earned from active income streams as well.

To be classified as a real estate professional the IRS requirements are:

• More than one-half of the personal services you performed in all trades or businesses during the tax year were performed in real property trades or businesses in which you materially participated.

• You performed more than 750 hours of services during the tax year in real property trades or businesses in which you materially participated.

[Shmulie]

If you are not classified as a real estate professional, you can only deduct the depreciation/losses against passive income streams.

are long term capital gains considered a passive income stream?

also CMIIW but I think if you don't have any passive income to deduct against the "losses" they carryover and you can use it over the next few years or until the property is sold

[Mordyk]

I need help with some basic calculations as this area is really not my strong suit.

if a commercial property costs $2.1mm and brings and income of $162k annually.  is this decent?

how do I make the calculations?

Thanks

[shapsam]

I need help with some basic calculations as this area is really not my strong suit.

if a commercial property costs $2.1mm and brings and income of $162k annually.  is this decent?

how do I make the calculations?

Thanks

$162k before or after expenses?

[ushdadude]

https://www.airdna.co/

[Mordyk]

$162k before or after expenses?

before expenses. trying to get expenses numbers.

Expenses are $40k.  but can increase rent with some minor upgrades

[Yehudaa]

I need help with some basic calculations as this area is really not my strong suit.

if a commercial property costs $2.1mm and brings and income of $162k annually.  is this decent?

how do I make the calculations?

Thanks

before expenses. trying to get expenses numbers.

Expenses are $40k.  but can increase rent with some minor upgrades

Hate to be the one to say this but there's way too little info to assess an investment. With the two numbers you provided it looks like roughly a 5.8 cap, but that could be amazing or horrible depending on asset type, location, what kind of financing you can get, how much cash you'll need, potential upside, tenancy/vacancy risk, cost to fill vacancies, your plans (exit, refi/cash-out, etc), etc.

For example, a property in the middle of nowhere in a low-demand market with huge tenants that expire soon and will need lots of work to get new tenants in is obviously a massive risk as you might sit with vacancy for years, pay a ton of TI, LL work, commissions, etc to fill. On the other hand, a property with A+ covenant long-term tenancies or huge upside in a super-hot market will obviously trade at a much higher value. Your financing will also reflect all of these factors, which will have a huge impact on your returns.

In short, you need a proper pro forma to figure this out.

[AsherO]

Hate to be the one to say this but there's way too little info to assess an investment. With the two numbers you provided it looks like roughly a 5.8 cap, but that could be amazing or horrible depending on asset type, location, what kind of financing you can get, how much cash you'll need, potential upside, tenancy/vacancy risk, cost to fill vacancies, your plans (exit, refi/cash-out, etc), etc.

For example, a property in the middle of nowhere in a low-demand market with huge tenants that expire soon and will need lots of work to get new tenants in is obviously a massive risk as you might sit with vacancy for years, pay a ton of TI, LL work, commissions, etc to fill. On the other hand, a property with A+ covenant long-term tenancies or huge upside in a super-hot market will obviously trade at a much higher value. Your financing will also reflect all of these factors, which will have a huge impact on your returns.

In short, you need a proper pro forma to figure this out.

IOW, if you're investing this kind of money you better know what you're doing or you could potentially get into trouble.

[Mordyk]

Hate to be the one to say this but there's way too little info to assess an investment. With the two numbers you provided it looks like roughly a 5.8 cap, but that could be amazing or horrible depending on asset type, location, what kind of financing you can get, how much cash you'll need, potential upside, tenancy/vacancy risk, cost to fill vacancies, your plans (exit, refi/cash-out, etc), etc.

For example, a property in the middle of nowhere in a low-demand market with huge tenants that expire soon and will need lots of work to get new tenants in is obviously a massive risk as you might sit with vacancy for years, pay a ton of TI, LL work, commissions, etc to fill. On the other hand, a property with A+ covenant long-term tenancies or huge upside in a super-hot market will obviously trade at a much higher value. Your financing will also reflect all of these factors, which will have a huge impact on your returns.

In short, you need a proper pro forma to figure this out.

Thanks! i appreciate you taking the time to spell this out for me.

[Yosel]

I need help with some basic calculations as this area is really not my strong suit.

if a commercial property costs $2.1mm and brings and income of $162k annually.  is this decent?

how do I make the calculations?

Thanks

Please tell me that it is a 17 unit in Newark

[Mordyk]

Please tell me that it is a 17 unit in Newark

no. i semi % fluctuated the amounts for confidential purposes

[ari3]

IOW, if you're investing this kind of money you better know what you're doing or you could potentially get into trouble.

Or else have someone you trust that knows what he is doing thoroughly look over the deal

[michael]

I have 5000 square feet of second floor office space available in Brick NJ. Have been trying through brokers to lease the space for six months, with little interest. We have a sign outside the building advising of the availability. Asking price is low. Any other ideas?

[S209]

I have 5000 square feet of second floor office space available in Brick NJ. Have been trying through brokers to lease the space for six months, with little interest. We have a sign outside the building advising of the availability. Asking price is low. Any other ideas?

Price, exact location, condition?

[michael]

Price, exact location, condition?

$5k per month. 11 Princeton Avenue in Brick. Good condition, can send pictures. Second floor above a retail strip.

[whacked1]

I have 5000 square feet of second floor office space available in Brick NJ. Have been trying through brokers to lease the space for six months, with little interest. We have a sign outside the building advising of the availability. Asking price is low. Any other ideas?

I cant speak for Brick NJ, but office space in general is very weak now. Retail seems to have bounced back (somewhat). Office is swamped (especially with the absorption of weworks etc).

Some ideas you can try: first off make sure space is showing well (well lit, clean, etc), offer full commission for co-broker, offer GC to agent that transacts the deal (avoids him having to split with agency), host open house for brokers with art exhibit etc to create buzz....

Again, not sure about Brick, these are some in the general market that seem to work

[AsherO]

I have 5000 square feet of second floor office space available in Brick NJ. Have been trying through brokers to lease the space for six months, with little interest. We have a sign outside the building advising of the availability. Asking price is low. Any other ideas?

If the financials make sense, maybe you can offer $c toward remodeling it to lessee’s needs in exchange for x year lease.