Hi, I’m Peggy Beauregard. We are the Real Estate Matchmakers. We match cash to deals and deals to cash. We save you time and you make money. The deals come to us and the returns go to you.
And I said I would share and go over a deal so you could get a better idea and learn more about how the real estate works.
So, this is one of the syndicators I work with, or sponsors, whatever you like to call them. And this is something that’s already closed, and so, I thought I could use this to give you an idea of the things to look for when you’re looking at a potential investment.
And this particular one is an industrial. You’ll see that the purchase price is 9 million. It tells you what the gross square feet are, gross building size in square feet. And there’s 4 tenants in it. It’s 100 percent occupied. The property was built in 1973. And it is rather old, and got remodeled either twice, or over a period of time, or they—it depends. Now they might have done one unit at a time, and so, when somebody might have moved out, or needed upgrading, they would do the rehab on it.
It has 150 parking places. Now, one of the things we talked about is cost segregation, and this is really important to know, because 150 parking, that means that you have to do blacktop, you have to do snow removal, because this happens to be in Michigan, or some place where there’s snow. You have to redo the lines, all of that.
And, it’s on 21 acres, so it’s quite large. As you can see, their net rentable space is 250,000 square feet.
And here’s the NOI, the net operating income. It is $879,212. That’s the income minus the expenses, the net operating income. Based off of the net operating income, you know what the capitalization rate, or your interest rate return is at 9.25 percent.
And here’s the price per square foot - $36,68. That’s the price per square foot. By taking the square footage and dividing it by the price, you know how much you’re paying per square foot.
And that’s just a general look over, which every sponsor has. These are really important things to know. Your occupancy is super important, the number of tenants is important. Here’s why. You’ve got 4 tenants. If one moves out, you’re still going to get your cash flow. If you’re in something larger that’s got 20, then you—if somebody moves out, you’ve got your cash flow. If your number is 1 and somebody moves out, then you are 100 percent vacant. It’s really important to know what your vacancy rates are.
You need to know what’s going on in the economy, you need to know if this is the kind of property that’s going to have the right tenants in it for the next 20 or 30 years. That’s what’s important.
Obviously, these are big manufacturers that need 250,000 square feet. Even if you divided that by 4, you’d still have 80,000 square feet.
Let me know if you have any questions about this. I know it could be a little complicated. I’ve been doing this for a long time, so it’s really easy for me. I just look at it and I know, “Oh, great, that’s a very nice cap rate. How much money do we need to raise? What kind of loan?”
So, there are other questions, and I’m going to go over that in the next video.
