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Ho hum, the FED raised rates last week as expected.  Nothing significant came out of their meeting.  Looks like we may get another hike in December.  And, at this point, it is all a balancing act until we start seeing signs of a recession.

How Being Reasonable Paid Off:

I just finished a deal that started for me back in April.  It was a very convoluted transaction that could have died many times.  I bring it up here as it is an example of what can happen when both sides really want to work together.

On the buyer’s side, we had a need for a 1031 exchange property.  However, the buyer did not know when their property was actually going to close.  Yet, they found an out of state property that they felt met their long-term family needs.  For those that understand a bit about commercial lending, having a floating closing date on the front end meant that we were going to have to float the interest rate on the purchase side.

Anyway, we managed to navigate the interest rate risk by being nimble in our lender choice.  Note that we changed lenders along the way as the needs of the buyer become clearer.  We had a certain hurdle rate to hit in order to make the investment fit the financial objectives.  Also, some lenders put clients at risk more than others.

Let me quickly expand on that last comment.  Our first lender choice did not play well in the sandbox.  When you stripped down what they were offering the client, it was clear that the eventual loan amount would have probably been a few hundred thousand less than what was required.  However, that lender was less than straight-forward when it came to getting answers.  This almost killed the deal for both sides.

So, I went back to the drawing board to find a lender that was more direct in their dealings.  Eventually, we found one that checked off all of the needed boxes.  Great, now we are back on track.  Now during all of this, the seller was very accommodating with our buyer.  All too often in the commercial world, sellers become a bit more cutthroat than is necessary.  In this case, the seller felt the offer was worth being reasonable.

Long story, longer here, both sides were working well together; and then the seller made a mistake.  The seller assumed we were going to close by the end of September; and he was attempting to buy his own exchange property.  The mistake made was that if he did not close by the end of September, then he would lose $200,000.  Now the pressure was on him.

I got a call from his Broker explaining all of this to me.  Simplifying a bit, it was felt by the Broker on our side, the buyers, and myself, that we all should help the seller save the $200,000 if possible.  My lender also jumped in to help.  Now none of these parties had to do it.  It just happened to be the right thing to do.  This seller had been so reasonable that we all felt the need to protect him.

The end of the story is that we got it done.  I ended up wearing my old insurance hat a bit; and also had the lovely experience of being an escrow officer.  In essence, we did what we had to in order to get this completed.  In my years of doing this, I have never seen this level of cooperation from all parties.  The karma was very positive.

I suspect we all will find ways to work together again.  As hard as it was, I respect the heck out of everyone involved.  This is how deals should be done.

If you work this way, then let me know how I can help you.  This was hard, but I must admit, it really forged some great friendships along the way.

Investments Opportunities for Purchase with Strong Cash Flow:

Back on the January 15th update, I wrote about “Creating Residential Listings Using Commercial Opportunities.”  Each week,  I am presenting some of those investment opportunities to better educate all on what is actually available.  Note that these are all Single Tenant Net Leased properties that have listed in about the last 10 days.  In addition, I assumed a 5.25% loan with 50% down.  This is just a small sample of what is actually available.

If you assume investors in the Bay Area are getting a cash flow of 3.5%, then you can see the potential improvement with these properties above.  This approach is great for the investors desiring increased cash flow, an opportunity to get out of daily property management, and/or taking the challenges of rent control off the table.  Should you wish to discuss any of these or others, then give me a call.

That’s it for this week.  As always, feel free to give me a call with any of your strategic financing needs.

Articles of Interest:

Forbes shared “How Can Commercial Real Estate Investors Protect Their Property In The Digital Age?

CNBC reported “Bay Area home sales tank 10 percent in August — to the slowest pace in 7 years.”

NREI reported “Gyms Are Expanding and Many are Eyeing Mall Vacancies.”  Note that we have seen this for a while in the Bay Area.

NREI also reported “Six Takeaways from the Urban Land Institute’s Real Estate Economic Forecast.” This article shares lots of information on the state of the markets.

The SJ Mercury News reported “Bay Area home sales grinding down — could this be the top?



Type Rate Fixed Term
Apartments 4.585% – 5.190% 3 to 10 year (30 yr amortization)
Commercial 4.895% – 5.490% 3 to 10 year (25 yr amortization)
SBA Lending Call for Options Call for Options
SV Commercial Lending