Real Estate Investing Adventures

Continue?

Terry — Fri, 17 Oct 2008 12:02:05 +0000

I haven’t posted since July 2008. Put a lot of time into this blog both in the posts and in trying to get the word out, but just haven’t found much of an audience interested in the ins & outs of commercial real estate investing. I may start posting again in 2009. I have a number of interesting investments with plenty of lessons learned. Would be interested in your comments.

Getting Prepared - Second Commercial Project

Terry — Sat, 12 Jul 2008 19:32:39 +0000

If the first real estate project taught me one thing - it was to be prepared. You have to be ready to pull the trigger immediately when you come across a good deal. That means having everything in place so you are ready to go. See one of my previous posts that discusses what this actually means. It is also important to be able to quickly evaluate the financials of a deal to see if it is worth pursuing. Being prepared enabled me to grab a property on very short notice that ended up being very profitable and will be the focus of my next series of posts.

Developing the Real Estate Evaluation Spreadsheet

There are numerous real estate evaluation and financial spreadsheets and programs out there to help you with your real estate investments. However, I wanted to develop my own spreadsheet. I wanted to make sure I really understood how the formulas and numbers worked so I could better understand the actual financials of my deals. I didn’t want to plug my numbers into a “black box” and trust the output. I bought the book below and walked through the examples until I could write my own spreadsheet.

If you would like to buy the same book, just click on the link above. Another good book is:

Once I had my spreadsheet programmed, I was able to evaluate deals very quickly. My next post will walk through the spreadsheet I developed looking at the specific layout and why I included certain financial measurements.

Negotiating The Offer - First Development

Terry — Fri, 27 Jun 2008 19:32:08 +0000

The Offer

We received our first offer. Finally! The person found out about our property through one of our metropolitan area newspaper advertisements. The property was originally listed for $2.375 million. The offer came in at $2.1 million. This was an 11.6% discount from list. What would you do? (more…)

Real Estate Pricing Model – First Development

Terry — Sat, 21 Jun 2008 00:03:32 +0000

We were nearing completion on the property and still hadn’t received an offer. This had us worried. The monthly carrying costs were approaching $11,000 per month! This was the highest priced lake home ever done on speculation on this lake. It was time to re-evaluate the asking price of $2.375 million dollars. If we had to “fire sale” this thing to get out from under the carry costs, what was the minimum we could take and still break even? (more…)

Real Estate Commissions - First Development

Terry — Wed, 11 Jun 2008 10:02:07 +0000

If you remember from a previous post, we were marketing the property ourselves. We wanted the sales team at the development to represent the property. However, they wouldn’t budge from the 6% sales commission. On a multi-million property, this was a significant amount of money. In addition, they didn’t really have any marketing plan whatsoever other than show the place to drive in traffic. We thought we could do much better with our own marketing plan and also save the commission. Unfortunately although we had some response, we were still not satisfied.

My partner’s wife decided to get her own real estate license. We would benefit in a number of ways:

The real estate commission would be split if she represented us.
The sales team at the development would be obligated to show the property once it was listed with another agent.
The property would now be included in the Multiple Listing Service

My partner found a semi-retired broker in charge, formed a LLC and we were in business. No more 6% commissions. Again we still needed to sell the place, but at least we didn’t feel as if we were being taken advantage.

Wrapping Up Construction - First Development

Terry — Sun, 08 Jun 2008 18:19:58 +0000

Here’s some shots of the project in the final completion stages:

Finished Dock

Fireplace at Upper Deck (more…)

Real Estate Marketing Plan Results - First Development

Terry — Thu, 05 Jun 2008 09:27:13 +0000

Marketing Plan

If you remember from a previous post, we had decided to not have the development’s agents represent our property because of their unwillingness to negotiate on the 6% commission. We were going to sell the property ourselves. We developed our own marketing plan that consisted of:

Produce color renderings and floor plans and have them mounted and on display at the construction site along with contact information to attract any “drive-by” traffic.
Advertise in the NY Times real estate section as well as in a number of other metropolitan papers.
Set up a Google Adwords campaign targeting people searching for homes on this particular lake or region.
Send out a mailing to everyone who had previously bought in the development to start some word of mouth buzz with family and friends of current owners.
Contact the individual sales people in the development and offer a 3% bonus for a sale. (more…)

Managing Construction Completion - First Development

Terry — Sat, 31 May 2008 14:22:52 +0000

Construction Completion

The typical construction project starts off slow, goes like crazy for awhile and then slows back down to a crawl as you are trying to get the project done. Finishing the last 10% of a project is tougher than doing the middle 30%. You are dealing with all the little finish details and items that didn’t quite work right that were put off until the end. The coordination of the various types of work and the large number of subcontractors all make the final 10% of completion a real challenge. So how do you manage it? There is no easy answer. You just have to dig in and push every day. It is well worth your time to do so. Without actively managing the completion of a project, you could lose a month or two. In interest carry alone, think of what that does to your potential profit. When you add up all the costs, management time and missed opportunities, the cost of not completing well can be staggering. (more…)

Negotiation Tactics and Tricks

Terry — Fri, 16 May 2008 18:56:58 +0000

This post is about negotiation tricks and tactics. Successful real estate development and investing requires you to be a good negotiator. Understanding the common negotiating tactics that may be used by you or on you is essential to becoming skilled at negotiation. Whether or not you choose to use these tactics, it is vital to understand that tactics work. However, once you recognize the tactic, its effects are reduced or eliminated.Here’s a number of negotiation tactics along with how they are used: (more…)

Marketing Plan - First Development

Terry — Wed, 14 May 2008 14:26:27 +0000

As discussed in a previous post, the development we were building in has its own dedicated sales team. It made sense to have them represent us for a number of reasons:

They ran both a national and regional advertising campaign
They typically showed all available properties to potential customers no matter how them became interested in the development
They were physically located at the development and were selling only this development every day (more…)