Grand Finale

After spending our Saturdays in empty buildings and walking through vacant lots Jerod Mund discovered lots 1012-1016 Lipscomb  Street in Fort Worth, Texas only listed for only $142,000! This was a far cry less than the $750,000 property we ran away from. We discussed it over the phone and met at UTA in the business building 3rd floor computer lab. Sitting next to each other we compiled all resources, and results from all those we talked to in the industry. Our renderings we ordered from a architect were unfortunately not complete so we moved ahead.

Parking was somewhat of an issue but I was confident that we could receive a variance. The property currently on the site was an eyesore and not generating the tax base our new property could for the city. I believed we could reach out to Council Member Joel Burns and receive a letter of support as well as from everyone on Lipscomb. The Board of Adjustment would more than likely side with our group. We also showed how much we would receive if we made the property solely residential as compared to office. Either way due to the lending guidelines and cost to acquire the land we were still not going to make significant returns and would not seek to do this deal. 

Our team believes that  if given about a year we could find possibly a distressed property in the area that we could possibly acquire through a short sale or some other unique way and find profitability.    

Plans

The Allen-Glater-Mund group is spending our Saturdays combing the Near Southside of Fort Worth searching low and high for a feasible property. During the week we discuss our construction, financing, and demolition leads. I have reached out to Vendigm  Construction managing partner Anthony Burks he is swamped with live projects and would like to but can't free up his schedule to meet with class. Jason is reaching out to his friends in the lending community and Mund is analyzing properties with his access to commercial info.

I remembered Ross McCuisson, UTA MSRE alumni. His company, McDougal Real Estate a Lubbock based outfit  is currently renovating and developing commercial property in Grand Prairie he agrees to help with our cause. Throughout the week the Allen-Glater-Mund communicates through primarily text messages and the occasional phone calls.

Financing

By definition a lender is a private, public, or institutional entity which makes funds available to others to borrow. However, post mortgage meltdown, lenders strict guidelines are not designed to make funds available for both existing, new construction mixed use office, and retail commercial real estate projects. The majority of lenders that our group contacted offered undesirable terms. 

We had the pleasure of meeting with Leslie Houston from Wells Fargo. Ms. Houston made it clear that all appliations would be combed and scruitinized by underwriters. All loans would require high capital reserves and borrowers would be held personally liable. Residential property types remain the easiest to finance. Ms. Houston also mentioned that the SBA has a few great programs, and made note of FHA. Many argue that FHA programs are loaded with red tape and some requiring 6 to 12 months to complete.

Based on todays terms boot strapping opportunists must think outside of the box to make ends meet. This includes creating joint ventures, subleases partners, assuming properties, owner financing, and most importantly finding ways raise capital independently. 

        

   

Mary Mund & Cody Payne

Jerod's wife Mary Mund paid us a visit to discuss how she markets property in the Near Southside. Her team primarily seeks young professionals, and young doctors. They place ads in the Ft. Worth Magazine, Ft. Worth Weekly, 360 West, Fort Worth Business Press, and the new Ft. Worth South. To save money they also focus online social media which saves them money. Mary & Co. are no strangers to putting in a little sweat equity posting fliers in and around hospitals. Marketing budgets on larger developments can range from $5k-$10k which in general is funded by the developer. 

Cody Payne,  Senior Associate with Dominus Commercial,  was more than happy to discuss his experiences with leasing properties. He stated that landlords who do not take care of their properties in general can eventually find themselves with C non-performing properties. Payne stated that he's seen some properties sit dark for 5 years. The largest concession he seen given was for 13 months which was spread over the term. However this is not an unusual practice in today's market as smaller business start ups are not as prevalent.  

When questioned about the flexible space Cody Payne stated that it would be best used for office and retail as opposed to residential. Cody also stated that the property would require tenant improvement. Mary Mund said she would not feel comfortable/safe using the property for her personal residential use. She said there would be to many other people near her home and low privacy. I stated that the property would be more suited in a different city such as Austin.  

Roller Coasters & Musical Chairs

The real estate market sky rocketed between 1999 through 2006 and tapered off in 2007 before completely melting down in 2008. During this time the Near Southside area flourished with a complete face lift. The Fairmont  Historic District benefited from the boom like all other areas as it was full of promise. Investors some more savvy then others jumped in early and purchased real estate at much lower prices. Some to the point that they are in a position in which they can dictate large sections of the market.

However the investors that entered the market late and paid higher prices can not receive decent returns. Today's market rents simply can not support these properties that were purchased at the height of the market. Landowners refuse to look at what is occurring in the economy and  are dead set on getting what they put into the property. In some cases land owners are not only seeking to break even but make a profit. Although persistence is a good quality one must heed the words of country crooner Kenny Rogers "You have to know when to hold 'em,  know when to fold em, know when to walk away, and know when to run."

On many occasions the Allen Glater Mund group found ourselves running in search  of properties that wouldn't cause us to be immediately underwater from the word go. The investors that need to free up some capital will eventually take their losses. Others may hold out for many years to come only to ultimately break even or lose money due to property taxes, low property appreciation, and other maintenance expenditures over time. The new census bureau may show that the area can no longer receive NEZ incentives due to the large amounts of income that now exist in the area.