Transform an Office Building into a Home

Many people are transforming rooms in their homes into home offices, but some people are transforming commercial spaces into homes.

Unused and Vacant

Today, CNN reports that outdoor retailer REI is selling their newly finished unused 8-acre corporate campus in Bellevue, WA as they redefine their experience of “headquarters.” Their new model they say will make remote working the “normalized model” for headquarters employees and the future headquarters building will be instead multiple satellite campuses in the Seattle area.

Businesses all over the US are seeing what REI is seeing and adjusting their business models. Office building occupancies are going down in the downtown areas of large cities across the US primarily because of the effect of the coronavirus pandemic and its associated lockdowns. Businesses are either moving, transitioning to remote working, or closing altogether. Landlords of downtown office buildings in big cities are in danger of losing the income from their properties as companies move to small communities or have their staff work from home. If the landlord has a mortgage and cannot keep up with their payments, they could lose the building. These buildings are then left vacant.

According to STR, a global hospitality data and analytics firm, hotels are suffering as well. Their data show that a fifth of hotel properties are still closed and have been since March. Many of these hotels will not survive the pandemic.

This devastating business and economic situation may offer a sliver of optimism if we look at investing in converting office buildings and hotels into much needed housing.  

According to an article in realtor.com (https://www.realtor.com/news/trends/office-hotel-conversions-to-housing/) office buildings and hotels in urban downtowns are attractive for conversions to apartment housing because they have wifi and cable infrastructure in place, parking areas, and common areas. While offices will require more plumbing to provide bathrooms and perhaps kitchens to each apartment, hotels can be converted less expensively because they are already divided into individual spaces with individual bathrooms.

Creating Affordable Housing

One example of a hotel converted to apartments is Plato’s Cave at 3524 Keetor St. in Branson Missouri. Repvblik (pronounced Republic) LLC, a Los Angeles based firm, converted a vacant six-building Days Inn into multi-family or workforce housing. The complex includes studio apartments, renting for $495.00 a month, and one-bedroom apartments, renting for $695.00 a month. According to its website, https://www.platos-cave.com/pictures-of-units, the complex incudes a gym, commercial kitchen, large dining area, an outdoor pool and beach volleyball on the property. There is plenty of parking and it is right on the strip within walking distance to the jobs there. It is affordable housing that is so badly needed.

Living and working in crowded downtowns were very popular until the pandemic hit these communities so hard. It is not clear how many people will be willing to move back to crowded downtowns after the pandemic ends or if it lingers for years. It looks certain that there will be many vacant office buildings and hotels around by the end of 2021 or when long-term leases run out. Landlords will have to keep their prices in line with demand and it is too soon to tell what demand will be.

Too Early to Give Up

Clare Trapasso, the author of the article, “As the Pandemic Empties Office Buildings, Can Those Spaces Help Solve the Housing Crisis” says, “… it may be too early to write the obituary of urban office buildings and hotels, as many did in the wake of 9/11.”

However, development can drive what happens, so you might want to be thinking about a strategy to help cities, people in need of housing, and your own financial security by seriously studying the risks and rewards of converting vacant downtown office space and hotel space into affordable housing in your own city.

If you need funding, apply now. I am working online with the rest of you.

Patrick St. Cin

W – 512-213-2271

M – 505-239-3026

Patrick@REICapital.cash

http://www.reicapital.cash/

References

Trapasso, Clare, Realtor,com, As the Pandemic Empties Office Buildings, Can Those Spaces Help Solve the Housing Crisis, August 12, 2020. com (https://www.realtor.com/news/trends/office-hotel-conversions-to-housing/)

CNN,  Leah Asmelash and Alison Kosik, August 13, 2020. https://www.msn.com/en-us/news/us/outdoor-retailer-rei-to-sell-sprawling-new-and-unused-headquarters-to-shift-to-remote-work/ar-BB17VDuG?ocid=msedgdhp

Platos Cave website: https://www.platos-cave.com/property-tour

Picture of downtown, USEPA Environmental-Protection-Agency / Public domain

Deferment Fog

Although real estate agents are seeing increases in inquiries about homes in the suburbs compared to the same period last year and house sales are up slightly in the second-home market, consumers are not applying for as many loans and banks are not lending as much.

Millions of Americans, 29 million, filed for unemployment last week for the first time according to Investopedia.com, slightly more people than expected, but less than the previous week.

As they lost their jobs or were forced to close their businesses, homeowners who could not make their mortgage payments asked their mortgage servicers for permission to pause their payments. Once a rare occurrence, the number of accounts in deferment, forbearance, or some other form of relief rose to 100 million between March 1 and the end of May according to today’s Wall Street Journal article by Anna Maria Andriotis.

For lenders and borrowers, these are difficult times because the coronavirus stimulus package includes a provision that says lenders that allow borrowers to defer their debt payments cannot report these payments as late to the credit reporting companies, making credit scores an unreliable marker of how a borrower is doing paying their loans back.

Banks are pulling back on credit because lenders are having a difficult time determining if applicants’ credit scores and credit reports reflect their true levels of risk. Not only do they not know who to lend to, but they cannot tell how much their loan losses will be if the economy remains a mess.

Across the board, lending standards have been tightened. Even mailed credit card solicitations fell from 316 million in February to 74 million in May. (Wsj.com)

It takes more work to find borrowers who will pay their loans back. A lender will have to sort through more data. Some lenders are asking borrowers for permission to look at their payment history on accounts not appearing in their credit report and to analyze their banking accounts.

If you need funding, apply now. I am working online with the rest of you.

Patrick St. Cin

W – 512-213-2271

M – 505-239-3026

Patrick@REICapital.cash

http://www.reicapital.cash/

References

Andriotis, June 29, 2020, Flying Blind Into a Credit Storm’: Widespread Deferrals Mean Banks Can’t Tell Who is Creditworthy, available online at https://www.wsj.com/articles/flying-blind-into-a-credit-storm-widespread-deferrals-mean-banks-cant-tell-whos-creditworthy-11593423001?mod=hp_lead_pos5

Migration Boom

People are moving. Single-family houses in the suburbs are opportunities real estate investors should consider.

According to an article in Mansion Global, apartment living in densely populated urban areas is already losing its appeal to Americans as they process their experiences during the coronavirus pandemic. Many people are eyeing options for relocating to the suburbs and a single-family home after facing the challenges of coming into contact with infected individuals in apartment building common areas and restrictions on their use of outdoor spaces like pools and game rooms.

Buyers crave —ROOM— living space, outdoor space, privacy, flexibility, and safety.

When you are researching a purchase of a rental property, evaluate:

  1. Is there room for an office in the house?
  2. Does the house have a good-sized yard?
  3. Is there a pool in the backyard?
  4. Is there a deck or porch that offers a sheltered option to living indoors?
  5. Is the neighborhood safe to walk around in at night?
  6. Is there a neighborhood association and is it restrictive?
  7. Did local authorities try to restrict people’s use of their yard during the pandemic?
  8. Consider taxes. People are richer in states where taxes are lower.
  9. Big or tiny, single family homes in suburbs near major cities offer good opportunities for people to escape living in densely populated apartment buildings where entrances and recreation space is shared and access is restricted. If you need funding, apply now. I am working online with the rest of you.

Patrick St.Cin

W – 512-213-2271

M – 505-239-3026

Patrick@REICapital.cash

http://www.reicapital.cash/

graphic:tsca / CC BY-SA (http://creativecommons.org/licenses/by-sa/3.0/)

Waking Up

Real Estate is waking up. U.S. mortgage applications to purchase a home 🏠 rose 9% last week from the previous week and from a year earlier, according to the Mortgage Bankers Association’s seasonally adjusted index. It was the sixth straight week of gains and a 54% recovery since early April. Investopedia.com.

Photo by Pixabay on Pexels.com

This is despite the sobering news from the Labor Dept. Weekly pay fell 11% in April from the prior month. That was the biggest drop on record, but it will likely be broken in May. Investopedia.com This, plus historically high unemployment, will be immense hurdles for people buying homes but might be incentive to start a business fixing and flipping homes to add to your own income and to provide homes, maybe small homes, to young and old consumers alike. Both want to get out of community living and out of big mortgages. I have the funds to help you fill this void in housing.

Real estate agents are using more virtual tours to showcase their homes. You might be able to use a video 🎥 to showcase your remodeling experience on a loan application for a private money loan for your next project.

I am working online with the rest of you. If you need funding, fill out the BLN application at   http://reicapital.blnsoftware.com/ or send my an e-mail or give me a call.

Patrick St.Cin

W – 512-213-2271

M – 505-239-3026

Patrick@REICapital.cash

www.REICapital.cash

No-Handshake Survival

I have had to really watch myself with this social distancing thing.  I am a toucher. I lean into hugs, always shake hands, pat shoulders. I soak up touch. When I’m talking, I find myself creeping closer to the person I am talking to as if I can’t see them or hear them well enough at a distance. 

I am certain this economy will recover. People still need homes and loans, but we still may not be able to shake hands for a long time.

In some American states, selling real estate is still an essential occupation as is banking. When we are selling homes or signing loan papers, we are working with others in small groups, but we may be working with people from other states or countries and need to keep ourselves and our families safe during this Covid-19 pandemic.

FIRST & IN THE FUTURE

Use only appointment-only open house formats this way you know who is coming when and you are not surprised. But advertise this new situation on the door so people don’t come in unannounced. This will help you assure that only one group is walking through a house at a time.

Use social media to make virtual tours, even if people will want to see a property before they buy. They can spend more time exploring the house online and visit the website multiple times without having to worry about personal protection equipment.

Fill out the BLN application at   http://reicapital.blnsoftware.com/ or send my an e-mail or give me a call.

YOUR DAILY PREP

Prepare business cards and signs to reflect appointment-only restriction.

Place a separate set of clothes and shoes for home just inside the door to your home or in your mudroom if you have one.

Remove your wedding ring.

Stop using a purse or briefcase and instead use a plastic or washable cloth bag for business cards, open- house guest books and pens.

Place a fresh set of business cards and other items in 6 or 7 bags and label them for each day. Take a fresh bag of supplies with you to an open house or to the office every day.

Equip yourself with gloves, face mask, face shield, and booties for your shoes (For open house).

AT THE OPEN HOUSE

Spend time cleaning doorknobs and surfaces before and after a showing, A glossy kitchen counter can be a magnet for a tactile person. They just have to run their hands over the surface. Windowsills might also need some disinfectant. If your store is out of prepared disinfectant use original unflavored Listerine in a spray bottle.

Wash your hands before and after a showing.

Invite your potential buyer to wash their hands before and after touring the house. And, provide a hand sanitizer.

Remind everyone to be aware of where they set down their mobile phone so they don’t set it down on counters or in the bathroom or on other shared surfaces.

Stay alert to what is touched during a showing so you can be sure to clean these surfaces with extra attention after the showing.

You can wear gloves but know how to take them off and dispose of them correctly without contaminating your hands and everything around you when you take them off. Peel them off before you touch your car, turn them inside out and place them in a plastic bag and tie it shut. Put the plastic bag in the trunk of your car for later disposal if there is no trashcan nearby.

Keep your distance from each other. This is the best way to prevent the spread of a respiratory disease.

Wearing a mask will protect you and your client. While wearing a mask, smile more, wink and speak so you are sure to acknowledge people even if you keep your distance and do not touch.

coronavirus covid-2019 girl in mask – stop pandemic

COMING HOME

Hang up the bag of supplies you return with near the door, spray it with disinfectant and Let the bags hang unused for a week to 9 days so the virus will have time to die out before you use the bag again.

Strip out of your outside or work clothes and shoes near the doorway or in the mudroom.

Wash your hands.

If you are wearing gloves, dispose of them before touching your clean clothes. If you want to reuse them, place them in a plastic bag so you can disinfect them later.

Dress in your indoor clothes.

With gloves on, bag us your work clothes and wash them immediately.

Let jackets and hard items rest for a week or 9 days at room temperature before using them again to give the virus time to die out.


An open house is not as dangerous as a concert or a basketball game. Usually there are 3 people involved and they are usually adults.  Perhaps sometimes parents bring their children, but that is something that can be avoided right now.

Unlike a family, the 3 people involved in the showing usually do not know each other intimately.  The buyer does not know where the realtor had been recently and neither know where the homeowner has been recently if they are still living in the home being shown. Precautions need to be taken so you don’t catch the coronavirus or bring it home to your family.

I hope that I can be of help to you this month. I can be reached at

Patrick@REICapital.cash

512-213-2271

Austin, Texas

July 4th Is a Break for Investors

U.S. stocks markets are closed Thursday in observance of Independence Day and will close early at 1 p.m. ET on Wednesday. 

Foreign financial markets will be open on Thursday, July 4. 

The New York Stock Exchange and the Nasdaq will resume normal trading hours on Friday.

The Securities Industry and Financial Markets Association also recommended the U.S. bond market to close early at 2 p.m. on Wednesday and close altogether on Thursday.

The next market holiday is Labor Day, which falls on Sept. 2.

Happy Fourth of July

Pat StCin

Levin on Trade Wars and Commercial REI

According to a very interesting post written by Jeff Levin in the Forbes Community Voice, trade wars are affecting commercial real estate investing.

Jeff Levin has 3 decades of experience in the real estate arena and what he has to say makes a lot of sense to me. Of course, it should. He is a senior-level executive of the Forbes Real Estate Council and this is his area of expertise.

I want to summarize the points in his post for you here because they are so relevant to us as private money lenders and investors.

Scarce Funding Will Bring More Opportunities to Private Lenders

He first points out that the trade war between the US and China presents opportunities for those in the business of private lending because as Chinese investment decreases in the US commercial real estate market for new projects, funding is scarcer.

Levin suggests that tracking where the Chinese investment was the heaviest is where to look for projects that might need capital.

China is Selling Assets Bringing Down Prices

Beijing has apparently also mandated a sell off of asset portfolios. This is lowering prices for some types of commercial real estate.  According to Levin, “For sectors like office buildings, excess supply is depressing absorption rates, increasing vacancies and competition for tenants and squeezing rent growth.”

Levin advises that multifamily borrowers and office project borrowers refinance after construction is complete with a bank rather than relying on leasing income or sales to retire the debt.

Construction Prices Are Going Up

Construction prices are going up because the price of materials is going up due to tariffs on steel, lumber, aluminum and other materials from international suppliers.

Levin advise that borrowers put in contingency clauses that spread any unexpected risk due to the volatility of material prices among the investors.

Construction Delays

Construction delays are being caused by the tight labor market, but also because of the lead time required to obtain building materials.  Because delays increase overall risk, the number of new commercial real estate project starts are declining.

Levin says that despite more deals coming to private lenders because of the difficulty of securing financing, “Private lenders must stay on top of the collateral value in the cases where borrowers might not survive unforeseen project delays.”

I really encourage you to read this article on your own at https://www.forbes.com/sites/forbesrealestatecouncil/2019/06/04/four-ways-the-trade-wars-are-undermining-commercial-real-estate/#1c047a706957

REI Capital Resources works closely with its clients to determine the best path to take for an investment project that needs funding.  As a lender originating loans myself, I have more and improved funding solutions at my fingertips. 

Contact me at 
Patrick@REICapital.cash
512-213-2271 funding

References

Levin, J. Four ways the trade wars are undermining commercial real estate. June 4, 2019. Post at https://www.forbes.com/sites/forbesrealestatecouncil/2019/06/04/four-ways-the-trade-wars-are-undermining-commercial-real-estate/#1c047a706957ways-the-trade-wars-are-undermining-commercial-real-estate/#1c047a706957