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Investing in commercial real estate / dollar stores
Posted on 1/6/17 at 10:28 am
Posted on 1/6/17 at 10:28 am
I didn't want to drive the million dollar investment thread further off topic.
To those of you who are involved in real estate/ commercial real estate.
Do you think the dollar general type stores are becoming saturated, which could affect future market value?
I mean, we have like damn near 10 of them in St Bernard, which is like 1 for every 4000 people. They hardly ever seem to have more than 1-2 people in them at a time. I get that their operating costs are probably very low, but I still think they are overbuilt.
If the company goes under, what happens? Or more likely, if the company closes some stores... is the company itself still going to make good on the lease payments? Or do you end up with an empty crappy building?
To those of you who are involved in real estate/ commercial real estate.
Do you think the dollar general type stores are becoming saturated, which could affect future market value?
I mean, we have like damn near 10 of them in St Bernard, which is like 1 for every 4000 people. They hardly ever seem to have more than 1-2 people in them at a time. I get that their operating costs are probably very low, but I still think they are overbuilt.
If the company goes under, what happens? Or more likely, if the company closes some stores... is the company itself still going to make good on the lease payments? Or do you end up with an empty crappy building?
This post was edited on 1/6/17 at 12:37 pm
Posted on 1/6/17 at 10:32 am to LSUFanHouston
quote:
If the company goes under, what happens?
The value owed to you from their lease is tossed into their bankruptcy filing.
quote:
Or more likely, if the company closes some stores... is the company itself still going to make good on the lease payments?
They offer you a lump sum to forgive the remainder of the lease.
This post was edited on 1/6/17 at 10:45 am
Posted on 1/6/17 at 10:36 am to stout
Walmart has put a lot of your smaller grocery stores out of business. So we are stuck with Walmart, specialty grocery stores, and then DG type of convenience stores. I think most people go about once a week to Walmarx or their grocery store and then to a place like DG or a specialty store to pick up smaller amounts when needed. Obviously they'll be a saturation point but I don't have a clue where that will be. I don't see the DG model going bankrupt any time soon though, if anything it will be like a Starbucks where they close some stores down. But without a bankruptcy they'll still owe on the lease.
Posted on 1/6/17 at 10:38 am to LSUFanHouston
I know people that own dozens of Dollar General, Family Dollar, & US Post Office buildings. On paper they appear to be filthy rich, but I wonder what happens when the DGs and FDs become over saturated, they have one about every 10 miles on the main highway that runs N & S of me.
Posted on 1/6/17 at 10:44 am to ConfusedHawgInMO
quote:
I know people that own dozens of Dollar General, Family Dollar, & US Post Office buildings
Yea there's a family from Arkansas that owns a ton of DG buildings in Louisiana. Probably the people you're speaking of.
Posted on 1/6/17 at 10:51 am to LSUFanHouston
I am an investor in a partnership that invests solely in commercial real estate. We were in talks with a $ store for a site in Texas and after researching their leasing practices we found that they are quick to abandon failing stores and quick to build bigger stores near successful ones leaving the owners with empty buildings.
We have focused mostly on 5+ unit strip centers and have done fairly well. Our biggest venture is into large 10+ unit centers with a large anchor tenant such as a restaurant or large grocer. Its a bigger risk than what we are use to but its going well thus far.
We have focused mostly on 5+ unit strip centers and have done fairly well. Our biggest venture is into large 10+ unit centers with a large anchor tenant such as a restaurant or large grocer. Its a bigger risk than what we are use to but its going well thus far.
This post was edited on 1/6/17 at 11:06 am
Posted on 1/6/17 at 11:03 am to stout
Well I'm talking about Missouri folks in this case, but I do think a lot of them are in the south. Miss, Bama, LA. Post Office buildings all over the eastern 1/2 of the US. I was amazed when I found this out. I had no idea such a thing existed I guess. I'm just sitting here collecting a salary & hoping I manage put enough away to retire before I meet my demise. My high school careers teacher did a shitty job...
Posted on 1/6/17 at 11:10 am to LSUFanHouston
Those stores will continue to proliferate because as Walmart has become more expensive these companies have come in to fill the void of selling goods for less expensive prices than Walmart. The margins for those stores are pretty good and you build them in areas where you have high unemployment or a lower wages because that's their target audience.
They are good investments if you stick with the major national or regional chains. Bankruptcy is a factor in commercial leasing so you either take the risk or go buy baseball cards.
They are good investments if you stick with the major national or regional chains. Bankruptcy is a factor in commercial leasing so you either take the risk or go buy baseball cards.
Posted on 1/6/17 at 11:11 am to ConfusedHawgInMO
Dollar Store builders often keep the cream and sell the ones that are 'iffy.'
The leases renew every 5 years or so.
Most have 'preferred developers' and they keep the best ones themselves. If the store goes under, you are screwed.
The leases renew every 5 years or so.
Most have 'preferred developers' and they keep the best ones themselves. If the store goes under, you are screwed.
Posted on 1/6/17 at 11:22 am to LSUFanHouston
smart people writing commercial lease docs will include termination options. for example, may sign a 5 year lease with an option to terminate after 3. will also include option to sublease. both could keep a tenant from paying bank in the event of closure. real estate strategy brah.
Posted on 1/6/17 at 12:05 pm to LSUFanHouston
quote:
Or do you end up with an empty crappy building?
You've now got a leased crappy building, eh?
Posted on 1/6/17 at 12:46 pm to LSUFanHouston
I'm into storage facilities right now and doing okay with them. Two are 100% leased, each with over 75 units, and one is 65% leased with over 100 units but we just remodeled that one (from an old elementary school property we purchased) in 2014.
They are money making machines.
I'd stay away from dollar stores and stick with residential rental properties and storage facilities ... that's my advice, fwiw.
Remember the rule to residential property investment. Stick with Section 2 subsidized stuff so the money goes directly into your LLC. Don't think about making a bunch of monthly income on those - learn to manage them so that you stay ahead of maintenance and taxes long enough to turn the property for a profit down the road. Each property is different but choose your geography well ... stick with the country, stay out of the cities unless it is multifamily housing preferably on a college campus ... and avoid fraternities like the plague.
They are money making machines.
I'd stay away from dollar stores and stick with residential rental properties and storage facilities ... that's my advice, fwiw.
Remember the rule to residential property investment. Stick with Section 2 subsidized stuff so the money goes directly into your LLC. Don't think about making a bunch of monthly income on those - learn to manage them so that you stay ahead of maintenance and taxes long enough to turn the property for a profit down the road. Each property is different but choose your geography well ... stick with the country, stay out of the cities unless it is multifamily housing preferably on a college campus ... and avoid fraternities like the plague.
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