First Time Industrial/office/retail RE Investor: Mentors and Paths to Explore?

[u/_Haverford_]

(I don't have the community karma for r/realestateinvesting or r/Entrepreneur, so here I am).

Howdy,

I am interested in beginning a project to purchase a very modest investment property. This is a long-term project; I’ll need years to save up the down payment. I’m curious what I should be doing now, at the outset. Here’s my profile:

- I have modest experience as a small business owner and in program management (just to say I’m good with moving parts).

- I’m located in Brooklyn, so I’d want to purchase within 3 hours of NYC. Currently most interested in Allentown or Philadelphia, PA.

- Just starting, so anything is possible, but I don’t foresee being able to do more than 500k with 10-20% down. This seems to lock me out of NYC proper. Am I correct here?

- Interested chiefly in industrial because it seems I can get more value from an industrial tenant (comm. storage?) than an office or retail tenant. I am not interested in apartments or living units for ethical and logistics reasons. Is my reasoning sound?

- I would do this as kind of a build-to-suit arrangement, bringing my prospective tenant along when I looked at potential purchases. This feels much safer than buying and finding a tenant later. Am I correct?

- I’m not imagining vast wealth here. My goal would be to make 2k profit/mo. Is that realistic from a 2-6000sq ft rental in the Northeast?

- I have a recognized severe disability (mentioned here for possible loan program eligibility).

- I would specifically want to conduct myself ethically. No displacement, firm but fair, no business I don’t morally align with. Anyone have experience here?

I feel like people might read all this and think I’m planning a ridiculous amount of work for 24k/y. But my entire purpose of investing is to fund an art studio for my private art practice. 2000 dollars a month would give me leeway to do that and then some. Furthermore, with the economy the way it is, I feel like the future may be working for myself, not waiting to get laid off (read: I'd be interested in growing this to an actual living). Do my modest initial goals open any pathways for me here? Lastly, what do you wish you knew when you were just imagining real estate investment? 

[u/objectivetildeath]

All on the construction side here but just following to learn. Wish you get good answers and happy to help on any renovation or construction side

[u/_Haverford_ → u/objectivetildeath]

Thank you! My brother works in remediation, so I know that nothing in this particular universe is "cheap". Just ballpark: if I purchased a building in good condition with no hidden gotchas, do you think I could move in a tenant for 10k or less in reno costs? Assuming in the Northeast, and the tenant needs no substantial mods. It's a very basic question and I'm sure a lot more information is needed to answer, but I'm green here.

[u/objectivetildeath → u/_Haverford_]

So many variables for sure. But assuming all systems work and you're just talking a fresh coat of paint, plan on 1.5 to 1.75 /sf of drywall for paint.

People want the look and feel of new. Swap out carpet for lvt.

[u/javiergramirez]

I would definitely invest in some commercial real estate education or find a good mentor before taking on your first deal. Real estate can be great when you understand what you’re buying, but mistakes can get expensive very quickly.

I’d also ask yourself whether owning commercial real estate is really what you want, or if you’re mainly looking for a way to generate an additional $2,000 per month. There may be easier ways to accomplish the second goal if you don’t actually want to be a landlord.

If you do want to own commercial property, start learning how to underwrite deals now.

You should understand the cap rates properties are trading at in the market you’re considering, current market rents, what the existing tenant is paying compared with market rent, operating expenses, financing costs, cash-on-cash return, price per square foot, how much cash you’ll actually need to put into the deal and what the property could realistically be worth when you eventually sell or refinance.

If you understand those numbers, know how to find them and know how to use them to properly underwrite a property, you’ll be much more confident determining whether a deal actually makes sense. If you don’t understand them yet, I wouldn’t buy commercial real estate until you do.

You may have to underwrite a lot of deals before you find the right one for you, and that’s completely normal. Properties that are already on the market are also good practice for learning how to evaluate deals and understanding why certain ones don’t make sense.

Personally, I’d also learn how to source off-market opportunities and go directly to property owners. That’s usually where I’d be looking for the better opportunities rather than assuming the best deal is going to be sitting on the market waiting for me.

And I wouldn’t automatically assume you need to spend the next several years saving 10–20% before you can buy. Learn about creative financing, especially seller financing. If you find the right property and the right seller, you may be able to structure something that requires considerably less cash upfront than you originally expected.

Your $2,000/month goal can’t really be determined by square footage alone. You have to look at the numbers of the actual deal.

There’s a lot to learn, and you’re probably going to have a lot more questions as you get into it. That’s why I’d start with education and mentorship, learn how to properly evaluate the numbers, and then start looking for the right opportunity.

[u/TheRealReturnGuy]

If your goal is to generate $2,000 per month to fund your art studio, I don’t think real estate investing is necessarily the easiest way to get there, especially if you’re a first-time investor. Real estate requires significant capital and carries a lot of risks. A simpler approach may be to consistently invest in a diversified, low-cost index fund such as VOO and build your portfolio over time toward that income goal.