Reviewing a Flex Industrial Development Project (Office Hours)
This episode of Office Hours dives into determining feasibility, underwriting, and construction numbers for flex industrial developments, and more.
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Key Takeaways:
Alec is developing a 10,000 square foot flex industrial building near an airport in Spotsylvania, Virginia
It's important to do market research and comps to understand achievable rental rates in the area
Construction costs can vary significantly depending on location, but Alec has estimated a cost of around $112 per square foot for this project
Due diligence like geotechnical surveys and understanding local permitting/fees is critical for development projects
Creative financing strategies like seller financing and walking debt can help fund development costs
About Your Host:
Tyler Cauble, Founder & President of The Cauble Group, is a commercial real estate broker and investor based in East Nashville. He’s the best selling author of Open for Business: The Insider’s Guide to Leasing Commercial Real Estate and has focused his career on serving commercial real estate investors.
Episode Transcript:
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Welcome back to the commercial real estate investor podcast live from the cobble group Studios here in Nashville, Tennessee for another episode of office hours. If you are getting into commercial real estate, you have any questions about how investing works, how to get your first deal, how to find investors, and you want to talk with me jump in life we go live every tuesday at 8:30am Central Standard Time to answer your questions. Anything you've got on commercial real estate, today is going to be a fun episode, we're diving into a project that one of my coaching clients ALEC is working on. And I think it's gonna be one that you're all gonna find pretty interesting because it is an industrial flex product, really. And that has seemed to be very popular here recently. It's obviously an asset class that I enjoy quite a bit. So as we're going through it, feel free to jump in and ask your questions. I'll also be answering any other questions that may not necessarily pertain to Alex project as we're going through it. But let's go ahead and bring Alekan and get this party started. Alec What's going on man? Hey, how's it going?
1:34
It's not doing well. Give us give us a brief overview of background on yourself and kind of how you got into commercial real estate. Yeah, I was in college, three or four years ago. And I was certainly a an actuary. And I knew
1:51
I knew the W two way wasn't the way to build a net worth or the life that I wanted.
1:57
And I also wanted to start a company and do business with people.
2:04
Yeah, so while I got a job, I was doing real estate at night and trying to figure that out, jumped into residential and commercial then doing my first development right now. So awesome, man. Well, that'd be good. Because that's one of the questions I get asked all the time. As people are getting started in commercial real estate, they want to get into development. And it's a bit more complicated than it is just buying an existing building as I'm sure you've learned. Let's let's talk about how you got into it. So let me pull up the the photos of the property so that you can get a little bit more context. If you're watching on YouTube. If you're listening in. We're looking at some renderings right now of the flex building. It looks like it's a metal exterior with some some windows are those row up like glass garage doors, Alec?
2:51
No. So we'll have the bay doors in the back. I don't know if you can see there's like a little white door. That's the door where they get in and the bigger the bigger windows, just the window that the door will be in but there'll be a glass door there. Awesome. Is this going to be a single tenant or a multi tenant? Yeah, so I'm planning on playing on a condo wising it so and that's a that's a site right there. It's just a one acre site. I'll kinda why's it. So there'll be four tenants, and the building will be split into four parts. So you can buy
3:21
like one quarter of that building a few months or three quarters, whatever you want to do. Awesome. Yep, that makes sense. So cool. Yep. So you've got parking on in the front, and on the side of the building looks like you've got rear access, you've got to drive in and drive out. So to have those looks like you've got maybe trash in the back, as well as some access doors. Let's see what else we got going on here. Here's another rendering from the aerial view.
3:49
It's a nice little kind of corner lot. You've got a lot of visibility on this parcel, which is good. Did I see that you were closer to an interstate or a major highway?
3:59
Um, yeah, we're, we're kind of close to I 95. The, the field of that area is it's you know, near a retail zone. So it'll be it'll be more for like plumbers or for, like small contractors. So just like a contractor garage. Yeah, absolutely. I mean, I don't know five is a pretty popular interstate, we've actually looked at buying some property out that way too. I like these renderings, man. I mean, it's nice and clean. It's simple. That's that's the great thing about Flex is that you don't have to overthink the design. I mean, you just go with you know, some nice windows, taller ceilings. How tall are the ceilings in the property? Yeah, so we'll do we haven't ordered a metal building yet but it'll be 18 foot clear heights up. Awesome. And it probably goes down to what 16 or so at the eaves. So the walls would be 18 and that that uh, the pitch on that roof is a little exaggerated. The pitch won't be that. That high up. It'll be a little bit more flattering than that. Okay, awesome. Well, cool, man. So this is the
5:00
Personal here, let's get into you want to talk about market comps first? Yeah, absolutely.
5:06
So yeah, walk us through this. Why did you decide that this was a development worth doing?
5:11
Yeah. So the biggest thing, when you get into development is figuring out if there's a demand for the product that you want to build,
5:19
like, and that's location specific and product specific to.
5:24
So the first thing to do is like, check work, where can you get, like 1415 bucks, triple net rents? That's what I was looking for. And then the second thing I was looking for is where is it good county to work. And
5:37
I found that Spotsylvania is a little bit easier county to work with. And you can figure that out by talking to contractors, or by talking to other developers, and figure out like in that little industrial Bay, that I or that little industrial park that I'm building in,
5:51
you can get 1415 bucks, triple net rents, if it's a new building the building size, so yeah,
5:58
yeah, I mean, those are the numbers you want to hit, right? I mean, whenever we're looking at ground up flex buildings, anywhere from 14 to $16. A foot triple net is is what we're aiming for. In some markets, you can justify higher than that. And some markets, you can't justify anything higher than 12. So it completely depends. So that's a good market to be in. So let's let's talk through sales cops. I mean, why? Like, do the numbers out there support building and selling a project like this? Or is it something that you'll have to hold in cash flow for a little bit? Yeah, it supports? Yeah, we'll be able to sell it right. We'll have to hold it a little bit. Because once you get your first loi for a tenant, it's the start the clock starts ticking what the building will be worth. So I think an appraiser will appraise it based off the first loi, like six to six to 12 months after that first sell why? Yep. And so you're talking about con doing these out? Are you? Are you going to be selling directly to the tenants? Or are you going to lease it up and then sell those based on a cap rate? Yeah, I would, I would be very happy selling it to an end user, make me very happy.
7:09
And also, we can offer some sort of seller financing like a seller carry to help them get into the condo for a lower down payment.
7:18
I will I'm gonna plan on keeping one of the condos just for the depreciation, others a depreciation play with the condos, if you keep one of them, you also keep the ground up permits to I am still talking to a cost expert how that works. I don't really understand that. But
7:34
yeah, yeah, I mean, that's, that's what I always recommend, talk to a Cost Segregation expert, because they'll be able to walk you through all of that, but definitely not a bad idea to keep one of the units to help with the depreciation, because that's the, that's one of the tough parts about development is that you're, you're not really able to get into long term capital gains, which means that you're gonna have to either 1031 exchange if you don't want to pay capital gains tax, or just bite the bullet and pay it back. So if you get if you keep one of the units and depreciated, it'll, it'll definitely help with your tax situation there. As Dylan is asking, what is the roof cost per square foot now to build something like this? That's a great question. We're gonna dive into all of that today.
8:12
So it looks like here, you've got, you know, lease comparisons for flex buildings. I mean, you're showing here, how far of a radius did you go around this property to determine cops just in that industrial park? So it's a industrial park with I don't know how many buildings, I think it's in the site plans, but let's say like 2030 buildings.
8:34
And you basically so you like immediate neighbors? Yep, yep. And so you can kind of get an idea. So the the older tenants, you're gonna get lower rents, you have to kind of compare to the, the newer, the newer buildings. So if you look at like that bottom 13506 sham Park, that's a newer building that gets closer up to 13. I think we have a competent that's for 14 or 15. But like the newer the billing the like, higher rents, you can get so yep, yeah, there's one that's 2100, square foot end cap unit wasted, $15, a square foot, triple net, $2 and triple net fees. This is great. So I always recommend when you're pulling comps, try and find as many properties that are immediately nearby as possible, because those are your best cops hands down. So Alec, yeah, good, good move on pulling them literally from the immediate neighbors. And if you're if you're listening on the podcast, these comps range anywhere from it looks like about $10.50 a square foot net, to about $15 per square foot net. So you know, if you're if you're looking at doing a development project, trying to figure out where your rents might be, the first thing I would do is look into, okay, what is the project that's $10.50, a square foot triple net, what are they offering? How old is the building? How long has the tenant been there? Compared to the $15 a square foot triple net? And that'll kind of help you determine, you know, what amenities do I need to have for the building to make it worth it? What do I need to be offering
10:00
You know, are there any sort of rent concessions, you know, unit sizes, et cetera? It'll kind of help you dive into that. Let's see, Charlotte is saying, for some reason is not pulling up Charlotte saying what are the biggest risks to watch out for while developing a property like this? That's a great question. And that's actually what we're gonna get into next. So let's look at
10:20
where do we have that? Where you were talking about the soils and geotechnical? Is this the image that you wanted to share? Yep. So this is, we'll have that corner lot right there, on that corner lot, that the whole area was
10:35
site prep was done, let's say I think 1015 years ago, there was an old soil base in there, I'm not sure if that was used as a retention pond or what but a corner of the building will actually go over that. And if you don't do a geotechnical, if you don't understand
10:51
the the salt, like how soft the soil is, or what type of work you need to do to get this sort of firm up, like you can build a building and it can be worth nothing like it could be destroyed within a year,
11:02
just because there's no foundational integrity there. So you have to really, yeah, there's a lot of things you have to look into. And getting a geotechnical is just one aspect to make sure that product is set to absolute failure. That's absolutely right. I mean, Alec was able to find this property that already had plans with it. So he hasn't even had to go through that whole process, which is awesome. Like, if you are doing your first development do that typically makes it a lot easier. But make sure that you you have a civil engineer or an architect or somebody that understands construction, very well make sure they take a look at it so that they can verify that the plans will actually work on the site. So if you're unfamiliar with a geotechnical survey, essentially what it is, is a, you probably have a civil engineer do this, that's typically what we do, they've got subs that they'll send out to do these. And basically, they go out to the site, and they take core samples. So they will drill down a certain amount of feet. And it depends on you know, the site, the location, sometimes they'll drill down until they hit rock, depending on how you decide to set up the geotechnical. Sometimes they'll just keep drilling until they hit 15 feet or whatever that is. And they look at those core samples to determine what kind of soils that you have there. Because the last thing you want to do is basically be building on top of a sinkhole, right, because these buildings are heavy, you pour a concrete pad, then you start framing on it, then you put all of the you know, exterior sheathing, everything starts to add up. And so it's going to compact into the soil if it's not a strong enough soil to hold it. I've actually I got a couple of instances where developers did that wrong. There was one a few years ago that was building an apartment complex that they didn't do a geotechnical. And they started digging into the soil, you know, thinking that there was going to be limestone for them to set their peers on top of, and it ended up being 80 feet down into the ground before they hit limestone. And that the soil was way too soft for them to build anything on top of without it just you know, completely tearing apart. So they had to dig down 80 feet, and pour concrete piers all the way up to the top is a very, very expensive change order. So you want to make sure that you are keeping an eye out for that, as you're going through that process. Alright, Alec, what would you want to dive into next year budget of your pro forma?
13:20
Um, yeah, let's get into the pro forma. And then we can work backwards budget. Awesome. Yeah, so the like, once you figure out what type of rents you can get, figure out what type of cap rate your market gets, and that fluctuates. based on market conditions. Like right now we're in a period where Capris cap rates are come up a little bit.
13:41
But as you can see what the top table, those are the potential triple net rents that you can get, and I just assign probabilities to each one.
13:50
Like, let's say, let's say the product can be done in six months, like that's what the probability the rents would be. And then you priced it at different cap rates. So let's say you have a, you can sell the building at a six cap, you can sell for a lot higher, but if it's a 7.5 cap, you're gonna sell for a lot lower per square foot. That's right. So if you're, if you're listening on the podcast, we're looking at, you know, one of the one of the lines is $12.50 per square foot, triple net, a price at a six cap would be $208, a square foot on the sale, six and a half cap would be $192.07. Cap would be 178. So you can kind of see and start to stress test your project to make sure, you know, hey, in a worst case scenario, if we, you know, end up only being able to get $12.50 a square foot and rent, and then you know, we're only able to exit at a seven and a half cap, which is $167 a foot is the project worth doing. I like to do that on every single deal that I do. Because it's always best to look at the worst case scenario and say, Look, if in a worst case scenario, if we, you know, missed our assumptions, does this still still make sense for us to do Can we still sell it
15:00
And at least walk away with our money or and hopefully make a profit. Can we hold it in cash flow for a little while, until you know, interest rates come down and cap rates compress? You know, it's always good to just stress test a deal and make sure that you're not being too aggressive. I see a lot of people to get very aggressive, like, oh, no, we're definitely gonna get get, you know, $15 a square foot at a six cap? Well, you know, you gotta you gotta take that into account, right? I mean, maybe you'll probably get $15 a square foot, he's showing $14.50 A foot here. There's cops that support that it's a brand new product. But if if Alex VALIC was coming to me and saying, No, we're definitely going to get a six cap on the exit, we're going to get $242 a square foot, I'd say, Well, you might want to consider where the interest rates are in the market and how small the project is, right? I mean, a six cap is going to make sense for an institutional investor. And institutional investors want 100,000 square feet. So it's best to think of who your end buyer might be, before you start going, and all that. So you've done a great job here, pulling in all your probabilities, the different rents the different cap rates, you can hit on exit. So I mean, Alec, just out of curiosity, if you did hit $12.50, a foot, triple mat, and a seven and a half cap. Does that. Does that work for you guys? Yeah, it still works. So we and these are more conservative estimates. But um, yeah, we priced it out, or worst case scenario, we should be able to break even and our investors get their money back or return on their investment. Yeah, that'd be great. Let's see rich with cars are saying I assumed that the newer buildings would demand a higher rent per square foot. In regards to lease cops, that's absolutely true. And so that's, I mean, because usually you've got, you know, just a better looking building, tenants are willing to pay for that, you've typically got better access, right? Some older buildings have, you know, shorter, shorter ceilings, and they've got, you know, one drive and drive out, you might have one roll up door that everybody has to share it. So when you're building new construction, you typically just build a better product. And tenants are willing to pay for that.
17:09
So all right, performance looks good. Let's look at the site survey real quick. So you know, everybody can kind of see
17:17
what you got going on here. I mean, you can see there's, it is a pretty good sized office park.
17:22
The project is right here at the kind of bottom right corner. But you can see I mean, there's a field house over here, it looks like there's some office space,
17:33
a couple of more vacant lots, which means there's going to be some more development here in the future.
17:39
And you're not at the end of the street, which is always nice to me, I think this is a great area out.
17:44
Thank you. And we're right by an airport. So my property is bored with the airport. So there you go. That's, that's always nice. If you can build flex space near an airport, you know, it makes it a lot easier. And these guys typically airports are pretty close to highways, which is always nice. But you know, if you've got like an E commerce company, or anybody that's going to be shipping and receiving quite a bit, it makes it very convenient for them to be able to just drop things off.
18:11
Alright, let's get into your budget, because we were talking earlier about construction costs. Sounds like you're going to be ordering a prefabricated building for this. Is that correct? Yep. Metal of prefab building. Awesome. So walk us through your construction budget on this one.
18:24
Yeah, so we bought the land for 275. And I would say it's a pretty good deal, because it came with site plans, you're probably going to spend for the site project 50 to 70k for site plan. So that's included.
18:37
Tap fees are not included. So if you if I think row 26 or 2527.
18:46
Yeah, so tap fees can get pretty expensive. As you can see that that's for a pretty small tap. And that's a tap into the water and the sewer. So you have to account for both of those. But like, let's say you want to build in Virginia, let's say you want to build a 20,000 square foot building, you're gonna have to put sprinklers in there. And that's, you're gonna have to pay tap fees for that you're gonna have to tap in six inches for that. And that's another like $300,000 just for TAP fees. Wow, that's just unbelievably expensive. By the way. I'm looking at that from Nashville. I'm like, Man or tap fees are nowhere near that. Yeah, I think Virginia has been trying to slow the growth a little bit and also capitalize on the growing market. So the cities and counties are trying to make more money. So over the board, tap fees went up, I think.
19:33
I think 300% I'd have to check the numbers again, but it went up pretty significantly significantly in the last like, two years. So
19:41
yeah, that's that's pretty high. You'll have some pretty high permitting fees too. Yep, permits are pretty expensive. But thankfully we don't have to pay for site plans. And also another thing was site plans. Thankfully in my county it only takes three months to get site plans approved assuming nothing goes wrong. If you want to build in Raleigh for example, like
20:00
Yeah, you can get 1921 bucks triple net, but uh, it might take, it might take a year, two years to get site plans approved white counties a lot. You just have to Nashville.
20:13
Yeah. We're still going through the permitting process on our hotel, which I'm in hell have been working on that for two years.
20:20
It's an area. Yeah, yeah, let's let's talk about, you know, these per square foot cost, I mean, looking at the metal framing, and insulation. And just so everybody's aware, I think we mentioned it earlier, but it's a 10,000 square foot building. The reason that we typically recommend building flexspaces in increments of 10,000 square feet, is because of what Alex was saying earlier, with regards to the sprinkler systems, if you start to go over 10,000 square feet, you have to input sprinklers. And it gets unbelievably expensive. And you know, you can fire rate these buildings without having to use sprinkler systems. So
20:55
if you're looking at a you know, 345 acre site, instead of building, you know, 100,000 square foot building of flax, you could look at building 10 10,000 square foot buildings, it allows you to phase it out. So you de risk the asset by not building too much and hoping that it absorbs, you can just kind of phase it go one building at a time, make sure it gets leased up before you move on to the next one. So looks like in here, you've got metal framing and insulation at $13.20 a foot that is the beauty of going with a prefabricated metal building system on flex space. I mean, you can get it at a pretty good cost.
21:28
Walk us through everything else. What do you what are you thinking about here?
21:31
Yeah, so we, my partner, he's from Ukraine. So we're able to partner with some factories out there to get cheaper prices on a lot of things for metal buildings, you're gonna see,
21:46
you'll, you'll probably see around 16 to 20 bucks a foot just depending on where metals at
21:52
or how metal is doing in the market currently. But like in China, you can probably get cheaper, you can get a cheaper building, you don't have to pay an import tax, I think of like 20 25%. So just keep that in mind. If you import anything, there's going to be an important tax just depending on where it's at.
22:10
There's some American companies where you can get a good price, but you have to really shop around and also build a relationship up with them. So if you want to buy backdoors anything like you have to build up a relationship and know, like, let them know that you're gonna be a long term customer and you might bring more customers do. Right? It's always about the it's always about the relationship there rich with Coors is asking our tap fees equivalent to impact fees.
22:34
Yes, and no, it kind of depends on the market. Tap fees is basically, you know, to literally tap into the utilities that they've got going on there. Some municipalities will loop in tap fees and impact fees together. Sometimes they're totally separate. So it just depends, like, you know, Williamson County here, Brentwood, just south of Nashville, they've got some insane impact fees that are separate from their tap fees.
23:02
Okay, looking at your budget, a couple of things that stand out to me. One, you've got lighting with a rebate included. Can you talk to us about that? Yeah, depending on.
23:12
So for the county that we're working in, we're, I think two main energy does the lighting, and they offer like a rebate for it. I actually don't know too much about it. I want to get there, I'll I'll get there. But they offer you some type of rebate. And the government might also offer some type of subsidy to I I'm not as familiar with it, because we're not in that stage of the process. But
23:35
yeah, well, that'd be cool. If you're if you're able to do that. What about the phosphorus credits? Yeah, I don't I don't understand what that is. But
23:44
so when we got when we got the site plans from the broker was actually the wrong site plans were had a retention pond, the new site plan, the new and approved site plans by the county did not actually have a retention pond and said
23:59
you needed to buy something called phosphorus credits. And I don't really understand what that is. But you go to a, an environmental bank, and you basically just buy the credits. So you're just paying the bank money, and you don't, you don't get any thing in return. You just get the credits. And I'm not. I don't really know, I don't it's like some type of government thing. So yeah, that's interesting. I wonder if it's because of some sort of impact that the site development is having, that you have to buy that. I mean, it's not uncommon to have to buy you know, I mean, we all hear about tax credits and things like that. But there's there's other items out there that are similar. So let's look at your expected cost. So all in is 1,000,001 23, which is $112 a square foot. Typically, when you're building flex, you're going to be anywhere from I mean, I've seen $75 a foot on the cheap end. I don't know how people were able to pull that off because I've never been able to figure that part out as high as about 130 $135 a foot so at 112 That's a pretty good price per square foot.
25:00
That's really where ideally you are. I mean, if you can get 110 to 150, and you're you're sitting pretty, you know, especially if you're looking at 12 to $14, a foot triple mat, you know, just on hard costs, you're looking at, you know, 10% plus cap rate to build, which is, which is excellent.
25:22
So,
25:23
Alec, what else? What else on this project? What are you guys gonna get started on it?
25:28
Yeah, so we were waiting for some,
25:32
we're just waiting for some cash to come in. So.
25:37
And we haven't signed our operating agreement with our partners quite yet. Cuz there's one way that we can financing it one way that we'd like to finance it. And I'm trying to close on this deal right now. But there's something called a walking debt. And I don't know if you if you guys follow Casey Miracle on Twitter, but he's, he's really cool. And he talks about walking debt. But essentially,
25:57
what you do is you find a building, that is, as you tried to get, you try to negotiate seller financing terms, and then
26:05
you get what's called a substitution of collateral, and then you short sell the building and then move the debt over to your project, as long as collateral is worth more and that they have more protection. So everybody, everybody wins in this situation. So what we're trying to do is in I'm, I'm trying to buy I'm trying to buy this townhome out in Boulder, right now, seller financed, and I'm giving them a above market price. But the seller financing terms are like let's say three 4% interest rate we haven't.
26:36
We haven't closed anything, but that's kind of what we're negotiating. What we'll do then is we'll wholesale it to somebody for a lower price. So they'll get like a value add price or discounted price. And then we'll move that debt over to this project, and then that that will fund this entire project. So that's a pretty interesting way to set it up. I've never heard of that before. Yeah. And to protect the seller, you want to do escrow payments. So kind of kind of how a bank will fund a development project is, like, let's say you did your site prep, they'll bring out inspect, and they'll inspect it, and then they'll release more money to you. And then once you do your concrete, they'll release more money. So if if you do it that way, if you if they escrow money over time, and it's through title company, everybody's protected. And let's say the project goes south, they get the development site, which is you know, worth more than the amount that they
27:27
amount for their note. So I love that man. Well, Alex, thanks for joining us today and walking us through this project. It looks like an exciting one. And I can't wait to hear you
27:37
how things go on it. Cool. Appreciate Tyler. Absolutely, man. We'll catch you later. Cool.
27:47
All right. So we got a couple more questions here in the live chat. I'm gonna go ahead and answer before we cut out today. Let's see Kenny is saying, Hey, Tyler, we're thinking of purchasing a single corporate triple net tenant what to look for as a newbie appraisal or environmental report needed. Thanks. So yeah, when it comes to triple net investments, if it's your first one, you know, the biggest thing is to make sure that you've got a really good commercial real estate attorney, because you're gonna want make sure that they review the waste, because that's essentially what you're buying is the lease and the credit of the tenant that backs that lease.
28:19
So highly recommend getting a really good attorney to work with you. I've got a great one here in Nashville that works across the country. If you want to talk to her happy to introduce you just shoot me a DM on Instagram, or send me an email office at the capo group.com Happy to hook you up, you will be getting an appraisal, environmental reports are not necessarily needed. But it depends on what your lender is going to require. I typically like to do them anyway, just as a part of my due diligence, so I know exactly what I'm getting into. Because you never know. I mean, there could have been a dry cleaners next door 20 years ago. And unfortunately, that that can just bring up some issues. So it's worth doing. But the biggest thing is to is to make sure that you're reviewing the lease, like whenever we do triple in investments, typically our clients don't even go out and see them. You know, when we're brokering these deals, we might fly out and take a look at them if the client wants us to but we hire a local building inspector, we go through and get a survey if it's needed. Sometimes they'll have an updated one. We'll do.
29:25
I mean, that's kind of add, I mean, have conversations with the bank. We're reviewing the lease, plenty of our clients never even go out and see the properties when they buy them because we're able to do enough of the due diligence remotely. But yeah, survey, environmental phase one. Hopefully not a phase two and
29:44
a building inspection. Other than that, I mean, there's there's not a lot to do. That's the great thing about buying these single tenant Net Lease deals.
29:51
Let's see Logan's saying I've got 1.76 acres zoned commercial industrial just north of Raleigh on US Highway One. Care to check it out and see if it would make sense to clear
30:00
level and use his iOS. Yeah, absolutely. Shoot over to me happy to take a look at it.
30:05
Again, that's office at the cobble group.com. And let's see we can do. I've got I've got some buddies out North Carolina, that might be interested in taking a look at that as well.
30:16
Bader saying, do you get quotes from suppliers on all these line items to prepare your budget and pro forma. So there's, there's a couple different ways to do it, if you've never done it before, yes, you want to talk to a general contractor that has all of these items, specifically a contractor that has been doing these this type of construction, and is hopefully actively working on some so that they have fresh bids on price per square foot basis.
30:41
It's, once you get to know it a little bit, you don't necessarily have to have that going into every single project. But it's always good to have if you've already got plans to get a couple of beds and figure out exactly, or at least close to what your price is going to be plus or minus 10%. Because it's
31:01
there's just a lot of things that can go wrong there. And you don't want to make too many assumptions on your budget because you're going to base your construction loan off of that. And so, you know, if you come in too low, then you've got to go back to the bank, renegotiate your construction loan. You don't necessarily want to do that. It's kind of a pain.
31:20
Let's see.
31:24
Obstacles is saying Great. When you hear about the creative financing adventure, people are engaging in the current market. I love the seller financing deal just spoken about. That's a pretty interesting structure. I've never heard of that before. I'm gonna have to look into it.
31:36
And, and see what we can do there.
31:39
Ethan is asking for Alex email, Ethan, let me talk to Alec and make sure that that's something okay to give out. And shoot me a DM on Instagram. If he says yes, I'll shoot that over to you. Evans saying have four acres of commercial land under contract by we'll be building extra large storage, what do you think is a good percentage of department to have on build
32:05
or pay as much cash is possible?
32:08
I think he probably meant down payment.
32:11
So typically, when I'm doing you know, development, especially in a day like today where the market is, I think 30 to 35% down, that's just makes me comfortable, makes the bank comfortable makes it a lot easier to deal with.
32:25
You know, if you're only looking at working on one project at a time, and you have enough cash to put up to 50% down, I would say go for it. I think that it D risks the project quite a bit and makes it worth it.
32:37
Especially in a day like today. It'll keep your carrying costs low as you're going through the development. And then you'll be able to refi pull all of that cash back out, move on to the next project. So there you have it for today's episode of office hours. Thank you all for joining us live and walking through Alex project. Alec, thank you for jumping in and sharing that with us. I hope it was very educational for everybody that's interested in getting into development. And we will see y'all in the next one. This episode of the commercial real estate investor podcast is brought to you by cre launch Pro. This online commercial real estate program is designed to take you from beginner to pro commercial real estate investor with access to all of my courses, our online community and monthly group coaching calls. Learn how to confidently buy your first commercial property today at www dot c r e launch pro.com
This conversation explored how Neighbor.com helps commercial real estate investors unlock hidden value in their properties through self-storage and vehicle parking solutions. It also discussed trends in the storage industry and opportunities to generate new income streams from underutilized spaces in offices, multifamily, and other commercial asset types.