Before you finish up your goals for 2018, we want to know if you have thought of doing commercial real estate transactions?

Do you own or have existing clients who own single family homes or condos that are currently rentals in which they have a fair amount of equity?

When doing a portfolio analysis for people in similar situations, many times they would be in a better position to sell the single family residence (SFR) and 1031 exchange into an apartment building. Many times, an owner can buy a market priced multi-family building and better their position. What makes this great is that you can represent them in the sale & purchase transaction (or at least earn a referral fee on the buy side if you don’t do commercial transactions).

Let’s put together some assumptions for a 2 SFR vs. an Apartment Building

2 Single Family Residential Homes
• 2 San Diego single-family homes (SFR) purchased for $250,000 each
• Current total value of the 2 SFR is $1,000,000
• Free and clear without financing or debt
• Rented out for $3,000 per month each
• Vacancy rate 3%
• Expenses paid by Owner – Insurance, Property Taxes & Repairs and maintenance
• Appreciation rate 3%
• Increase in rent income – 3% per year
• Increase in expense – 3% per year (Except for Property Taxes which in California only got up 1% per year)
• Sold in Year 10 with 6% Closing Costs

Apartment
• 15-Unit Apartment Building in San Diego Purchased for $2,500,000
• Down payment is $1,000,000 (from the equity of the properties they sold)
• Loan is $1,500,000
• Interest Rate is 4.25%, amortized over 30 years
• 10 1 Bed/1 Bath Units rented out for $1,000 per month
• 5 2 Bed/1 Bath Units rented out for $1,300 per month
• Vacancy rate 5%
• Depreciation 27.5 years
• Appreciation Rate 3%
• Increase in rent income – 3% per year
• Increase in expense – 3% per year (Except for Property Taxes)
• Sold in Year 10 with 6% Closing Costs

How much is the difference in their net accumulated proceeds at the end of 10 years?

Do the math, and there’s more. The cash flow before taxes after year 10 for the apartment is more than the SFR and much more after that.

Curtis Gabhart will teach you more about this in his PowerPoint, “Transitioning to Commercial Real Estate.” This presentation will help you learn if the highly lucrative, highly competitive business of commercial real estate brokerage is right for you. He will be discussing some ideas about how you could incorporate as a residential agent to either replace or supplement your income through commercial real estate transactions. This class is only taught once a year at Gabhart Investments, but please take a look at the presentation for more information.

Here is one simple idea that can be implemented now, that should generate you from $15,000 to $50,000 with little effort.

Are you wondering why Curtis is sharing this information?

Ok well, let us tell you a secret….. There are no secrets and many of these things you are smart enough to figure out yourself, but if he can help generate ideas we hope at some point, we can do business together and here is what he could do with our team.

He owns several real estate-related companies, from a construction company, a painting company, investment funds and commercial brokerage.

Also as we are all aware, our code of ethics won’t allow a realtor to provide a service outside our field competence without the assistance of one who is competent on such type of property, unless the facts are fully disclosed to the client (Article 11). This should not stop you from earning through commercial real estate transactions as early as now.

If you decide to start your career in commercial real estate, we can do some transactions together. Curtis also does coaching. Or if you don’t want commercial real estate at all, we can start working together through referrals.

Many of you don’t have time or don’t want to spend the ongoing money to do commercial (we spend thousands per month on things like CoStar, Loopnet premium, Reis etc) and realize that a referral may only take a couple hours of your time for thousands of dollars in return which means you make more money per hour. In many cases, we have a much higher probability to successfully doing a deal. In return, Curtis will be sending you residential referrals. He has a team and our job is to make you look good on any referrals you send us and to keep you on the top of mind when the client has residential needs. When working with us, we also consider you as the client and we do not only promise to follow up well, we will keep you in the loop of what is happening so you know we are doing our job.

P. S. Curtis would be open to sit down with you and have a discussion on helping you develop Commercial Real Estate deals through your existing clients or people you are talking to.