INTRODUCTION

A WORKSHOP

BUT, BEFORE WE BEGIN

A BIT ABOUT YOU...

• Your :30 Elevator Pitch
• Any RE/CRE Experience?
• Any Fun/Scary Stories?
• Expectations For today?

A LITTLE ABOUT ME!

• 33 Years in the Game
• 325 MF & MU Units
• Former Community Banker
• Former GC (Gov't & Mkt)
• RE Managing Broker
• CE Instructor

KEY TOPICS

12 KEY TOPICS (1-6)

• A Brief History
• The 3-Most Common forms
• Setting Your Investment Goals
• Identification
• Analysis
• Financing

12 KEY TOPICS (7-12)

• Assembling Your Team
• Management
• Existing Tenants? Now What?!
• Leasing
• Operations
• Disposition

A BRIEF HISTORY

It All Began in 110 A.D...

• Shops & Apartments
• Multi-Level Structures
• Common Until 1900s
• Modern Transport + Population Growth Changed Development Patterns

Then it Got Twisted!

• Planners Segregated Uses From 1910s-50s
• Unintended Consequences
• Resurgence in the '70s & '80s
• Reimagined in the '90s & '00s

Societal Benefits?

• Knowledge Spillover
• Economic Growth
• Social Capital

MOST COMMON

#1 Main Street

• 2-3 Stories
• Commercial at Grade
• Residential Above
• Facing 'Main Street'

#2 Live/Work

• Business in/on Premise
• Reside Above/Adjacent
• Warehouse Lofts

#3 Office Residential

• Offices & Residential
• Vintage Buildings
• The Pittsfield Building

4. Neighborhood Commercial

• Corner Bar
• Salons
• Sundry Shop
• Amid Residential Homes

5. Urban Resi/Comm

• Multi-Story Residential
• Commercial/Civic at Grade
• Tenant-Focused Retail
• River City or Lk Point Tower

6. Office Convenience

• Office Building
• Small Service/Retail
• Banks & QSRs
• Tenant-Focused Retail
• The Jeweler's Building

7. Mall Conversion

• Residential Retrofit
• Adjacent to the Mall
• Northbrook Court

8. Retail District Retrofit

• Suburban Village-ization
• Cliched Architecture
• Lots of Stucco
• Inoffensive

9. Studio/Lt. Industrial

• Creative Studios
• Maker Space
• Live on-Site

10. Hotel/Residential

• Condos
• Retail
• Hotel
• 401 N. Wabash

11. Parking w/Retail

• Parking Garage
• Street Retail
• Standalone Structure

12. SFH District w/Shopping

• Planned Community
• Shopping in Core
• Summerlin, Las Vegas

ESTABLISHING

Live/Work?

• Convenience
• Necessity
• Defray Occupancy $

Investment?

• Economic Productivity
• Key Metrics
• Cap Rate
• NOI
• Cash-on-Cash

IDENTIFYING

Property Sources

• Off-Market Property
• MLS-Listed Assets
• Bank REOs
• CRE Portals

ANALYZING

5 Key Metrics

• NOI
• Cap Rate
• Cash Flow
• Cash-On-Cash
• DSCR

NOI

• Net Operating Income
• Cash Flow > Expenses
• Before Debt Service
• If No Debt NOI = $ Flow

CAP RATE

• Capitalization Rate
• NOI / Purchase Price
• Independent of Debt
• Hi Cap = Low Price
• Risk v Reward

CASH FLOW

• Cash is King!
• Net After Debt Service
• What's Left Over

CASH-ON-CASH

• Return on Your Equity
• Cash Flow / Invested $
• Appreciation & Debt N/A

DSCR

• Debt Service Coverage Ratio
• Bank Metric
• Surplus % of P & I
• 1.25 : 1 or 125%

FINANCING

Financing Options

• CIC (CDFI)
• Community Bank
• Non-Bank/Private Lender
• SBA
• National/Regional Lender

CIC is Your Lender!

• #1 Mixed-Use Pros
• Purchase Money
• Rehab Money
• Lending Mandate!

Financing With CIC

• 75% LTV
• 25% Equity Contribution
• Any Commercial Use
• And 5+ Residential Units

ASSEMBLING

Your Lender

• Excellent Rates & Terms
• Understands Your Deal
• A True Business Partner

Your Realtor

• Expert Guidance
• Trusted Advisor
• On & Off-Market Deals

Your Attorney

• Must-Have in Chicago
• Sound Legal Advice
• Keeps You Safe

Your Insurance Agent

• Protects Your Property
• Peace of Mind
• Lender Requirement

Your General Contractor

• Needed For Work
• City Requirement
• On-Time & On-Budget

MANAGING

Do it Yourself?

• Hard Work
• Save Money
• Deal With Tenants

3rd Party Manager?

• Absentee Ownership
• Manage The Manager
• Pay Management Fee

EXISTING TENANTS?!

WIPED-OUT!

RUN WITH THE DEAL!

Residential Tenants

• Are Inherited
• Subject-To Tenants' Rights
• CRLTO Governs

Commercial Tenants

• Are ALSO Inherited
• Estoppel Letter Required
• NO CRLTO

LEASING

Residential Leases

• It's a Gross Lease
• Fixed Monthly Rent
• Separate Utilities
• Most Common Form

Commercial Leases

• Most-Common
• Gross Lease
• Modified Gross

Commercial Leases

• Less-Common
• Double Net (NN)
• Triple Net (NNN)
• Absolute Net (AbsNNN)
• Percentage

Net Lease Components

• Base Rent
• Pass-Thrus
• Property Tax
• Insurance
• Common Area Maintenance CAM
• Water

Is the Tenant's Use Legal?

• Zoning Compliant Use?
• Municipal Approvals Required?
• Check the Zoning Map
• Check the Zoning Ordinance

OPERATING

OPERATIONAL GAMEPLAN

• Cap-X Plan
• Accounting Strategy
• Tax Strategy
• Hold v Sell Strategy

DISPOSITION

Keep, Sell or Trade?

• Hold & Bequeath?
• Outright Sale?
• 1031 Exchange?

BRING IT!

WANNA WORK TOGETHER?