Prescribing Real Estate

Masaki Oishi

• Publisher: Marketspace Capital
• Year: 2021
• eBook ISBN: 9780578847610
• Edition: 1
• Topic: Business
• Subtopic: Real Estate
• Index: Business

It is a well-known fact that most physicians have a substantial earning capacity, whether they are general practitioners, orthopedics, or neurosurgeons. However, generating a 6-figure income does not always translate into the creation of substantial wealth. Nor does it give physicians the freedom to reduce their workload or to focus on retirement.

While studying and practicing medicine, Dr. Oishi has continuously "invested strategically" and has a long and successful history of seeking out, performing due diligence and investing in commercial real estate. Having learned from his struggles and adventures in real estate investing, Dr. Oishi is now a full-time real estate investor by day... and part-time neurosurgeon by night.

In this book, Dr. Oishi will share how you can take your income and invest in real estate to generate substantial alternative income from these investments. After reading this book, you too will be armed with the tools and confidence to purchase your first commercial real estate investment.

Chapter Four

Evaluating Real Estate Investment Opportunities

“Games are won by players who focus on the playing field—not by those whose eyes are on the scoreboard. If you instead focus on the prospective price change of a contemplated purchase, you are speculating. There is nothing improper about that. I know, however, that I am unable to speculate successfully, and I am skeptical of those who claim sustained success at doing so.”

Warren Buffett, billionaire investor

“Apart from my first home, which had an abysmal investment return, every single real estate investment I have made has been profitable. I have never faced a situation where we lost money on a deal. Yes, some have taken longer than anticipated to sell the property and some where we had to renegotiate terms of finance. Yet by surrounding myself with a team of professionals, we are able to structure the investment and understand the market, economics and timing of cycles. After all, real estate is a fixed asset, and in the end, it can stay in place until the market cycles come back to equilibrium.”

Dr. Masaki Oishi, Real Estate Investor

Let’s take a trip further down the rabbit hole and talk about other strategic approaches you can use to evaluate investment opportunities and perform your due diligence to reach various real estate investing decisions.

Defining Value-add, Development, and Stabilized Properties

One way you can look at risk in a real estate deal relates to the amount of work a property requires before you can realize expected gains either in the form of rental income or profits from a sale.

Generally, the more work a property requires, the higher the perceived risk in the situation. That’s because it requires time, effort, and money to make all those critical adjustments, and, as you can imagine, a lot could go wrong when taking such corrective steps.

Now, based on this premise alone, we can come up with three ways to classify properties, as follows:

1: Value-add properties

Value-add properties are the first class of properties. Value-add properties are properties believed to be performing below their true market potential due to any number of factors.

With these properties, the steps that an investor has to take to reposition these property types in the market is the primary challenge.

Some issues common to value-add property are:

• Bad management
• Capital repairs
• Low occupancy rate
• Low lease rates
• Less than satisfactory facilities
• Minor design flaws

The basic idea is to improve the property’s image to prospective tenants, thereby increasing its revenue potential.

Value-add properties are an excellent fit for investors who have a medium-level risk appetite and looking for above-average returns.

2: Development properties

• These property types are sometimes also called opportunistic or green-field properties. They involve a lot more work than value-add properties, and because of it, many property investors consider them the riskiest form of investment.
• Usually, development properties involve a substantial amount of construction, therefore, not only do you have the traditional market risk, you also have development and lease-up risk.
• Therefore, these kinds of projects favor professionals because they usually involve a myriad of issues. Some of these issues include:
• Obtaining permits and entitlements from relevant government authorities
• Securing labor and required materials cheaply
• Obtaining loans from financial institutions to fund construction work
• Projecting the income level to be generated once construction completes and the building gets leased, or the possible resale value.

As you can imagine, returns from development properties are pretty substantial.

However, given the complicated nature of your involvement with these properties, I would never recommend that passive investors pursue these kinds of projects. Investing in development properties is nothing short of speculation. As I mentioned earlier, speculation is a business that needs active handling, using a hands-on manner, with particular attention paid to detail.

The only exception I can think of is a situation where you can partner up with an experienced professional who will agree to take care of the hard work involved.

At MarketSpace Capital, we can afford to take on these projects because we have a team of specialists at our disposal and the relevant experience. If you’re determined to invest in developmental properties, you are better off getting involved with an experienced company and team.

3: Stabilized, core properties

Last, we have core properties.

This property class involves the least amount of work, if any at all, and for this reason, many investors consider it the safest bet.

In many cases, you will find that a stabilized property has a near-100 percent occupancy rate. Also, with these properties, physical or o...

Table of contents

• Why Real Estate Investing?
• Real Estate Economics
• Understanding the Different Real Estate Markets
• Evaluating Real Estate Investment Opportunities
• Network Building 101 How to Identify and Build Relationships with Third-Party Contractors
• Structuring the Deal
• Modern Forms of Architecture That Improve Land Use
• Current and Future Technology Trends