S.E.C. Real Estate Observer

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Would Your Real Estate World be a Success without a Process or a Formula?

Mark A. Johnson, S.E.C., CCIM

We often do not think about the formulas of life or what it takes to succeed in today’s real estate market. When you woke up this morning, what was the first thing you did? Make or get a cup of coffee to jump-start your day? Without fail, most people have a routine or a set of steps they follow every day. You wake up, get coffee, shower, dress, and make it to work by a specific time. Is that a process or a formula? Think about it—would you start your day without any one of those steps? If one step was missing, would you have a successful day? You could still have an enjoyable day, but it probably would seem all out of sorts and, at the end of the day, you would be extremely happy to see the day end. Tomorrow is a new day.

If you buy investment real estate for your own account, when was the last time you asked yourself, “What formula do I use the most? Which formula has worked best for me over the years, and why?” Perhaps you are one of the lucky few who can pay cash for everything. Did that really provide you the best set of benefits for every purchase? Is the greatest formula of all; PAY CASH? Do you still have worries or concerns when paying cash? Most of us cannot pay cash for every deal, and in most cases the transaction has a twist or two that require additional thoughts and actions. What if it has negative cash flow? What if it has vacancy? What if the seller is older and wants to reduce the tax burden? What if you do not have any cash, but it is a great buy? Ultimately, there is a formula for every situation, for every motivation, for every Seller and for every Buyer.

Consider what happened to me last week. The following opportunity was brought back into my sights. Here are the facts for an office building we will call 209.

Address:          209 Brownsville, TX

Size:                4,765 SF

Suites:             2 – 1 @ 2,965 SF and 1 @ 1,600 SF (includes a 500 SF garage)

Location:         B+

Condition:       Good – $15K in deferred – 100% finished

Building Occ:  0%

Market Occ:    90%

Parking:           20+/-

Market Rent:   $1.00 $1.25 NNN

NNN Costs:    $21,000 or $0.37 P/SF

Debt:               $500,000 Blanket Mortgage for two office buildings of similar size and condition

Listing:            Building has been listed for almost three years at $425,000, reduced to $350,000, and now the owner has motivation and says please sell!!!

Offers:             My previous offer of $275,000 was rejected 2.5+ years ago

Owner:            A real estate Broker who lives 30 miles away and is wanting to retire; approximate age, 70 years old

Now that you know what I know, how do you buy this property? Would you buy this property?

What formula(s) would you use to buy this property?

Please send your ideas or thoughts regarding this transaction or about your favorite formula to

mark@borderpropertiesinc.com, or call me at 956.266.9121 to give me your ideas. With your permission, I will write another article explaining if and/or how we purchased this building and what the Seller accepted. I will identify the formulas used and why each formula was used.

Thank you for your participation!
Mark A. Johnson