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What Challenges Can I Expect When Buying CRE?

What Challenges Can I Expect When Buying CRE?
Buying commercial real estate can be an exciting opportunity if you are venturing into the CRE scene. There are a few challenges that you may encounter, such as qualifications for a loan, financing issues like amortizations, down payments, and interest rates. We will be discussing these challenges below.   Qualifications for a Loan Start with making sure that you have a good credit score before venturing out into any business. Though there are cases where many choose not to loan from a bank, you may still need to go through some bank assistance if the property owner requires that the payment goes through bank financing. It is also always best to be prepared in case you may need a loan in the future. If you decide to get a loan, you will need to make sure it is clear what it is for and how it will be used -- the bank will ask these questions. It is also advisable to do as much research as you can moving forward and due diligence on the area where the property is standing. Besides a good credit score, you will also need to convince the leader that you will pay back the CRE loan.  The next step is to have the requirements to qualify for a commercial real estate loan. You will need different applications and supporting documents such as a business plan, personal tax returns, and other legal documents. If you already have other businesses, they may ask to see your business......
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Why You Should Market for Your Property

All too often I receive inquiries from a potential seller that is looking to “Get the Highest Price” for their property, but does not want to list it, or market the property.  This seems counter intuitive as the basic law of economics is supply and demand.    Although there is not much an average seller can do to affect the supply line, they can create demand by using a good agent.  I started my career in real estate auctions in the late 80’s through the mid 90’s.  During that time, I was at first surprised when properties we took to auction (a method that was deemed as a “fire sale”) consistently sold for higher prices than neighboring properties, and in many cases sold at higher prices than what they were previously listed before going to auction.  As I thought about it, it really did make sense, my economics classes in college explained exactly what was going on.  The supply chain didn’t change, but by marketing the property, and creating a pent up demand the chances for a sale greatly increased.  We’ve seen this over and over the last few years in this current “Sellers” market.  Almost to the point where we now receive as many calls from investors saying they only want to look at “off market” deals, believing they will get a better price without other competing investors.  So it seems pretty easy… If a seller wants the highest price, they need to make sure the property is actively exposed to as many people as might be intere......
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Difference between Commercial and Residential Real Estate Management

Difference between Commercial and Residential Real Estate Management
If you have ever owned a house or duplex that you have rented out and you feel like you are ready to move to the next level I have a few guidelines to help you get started. First and foremost, you’ll need to decide what asset class you would like your next investment to be in. Here are a few different types of assets that you can focus on:   1. Office  2. Industrial  3. Retail  4. Multifamily  5. Hospitality   The Commercial Leases  You will find the commercial lease is a lot longer and much more detailed than your residential lease and it will spell out common area maintenance fees, increases in rental amounts at certain dates, concessions, tenant improvement work, and just about everything else. Even in the same building, the terms negotiated on a commercial lease can substantially vary from one tenant to the next. There is a good chance that your tenant will have an attorney review all lease documents and you will have a few revisions before the lease is actually executed. Commercial leases are either a gross lease (the owner pays all the utilities, taxes, and insurance), a net lease, or a modified gross lease. There are several types of net lease, but the one you’ll hear about most often is a triple-net lease where the tenant pays their proportional share for everything (taxes, insurance,utilities maintenance, repairs and capital improvements) on the building. A modified gross lease is where a tenant may pay their share of ......
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Things a Successful Commercial Real Estate Agent Should Keep in Mind

Things a Successful Commercial Real Estate Agent Should Keep in Mind
In the past, the main role of a CRE Agent was to help their client find a property. This sounds quite straight forward and it typically was.  An agent would first utilize their market knowledge to see if they knew of any spaces/properties that might meet the criteria of their client, and if not, begin to reach out to all of their contacts to see if they had anything, or if there was anything new coming out. If all else failed, they would resort to sign chasing, driving the areas their clients were interested in, and call on the signs on buildings to see what, if anything, was available.  Along came the internet which dramatically changed how this works now.  The control of information no longer flowed just through the agent. Unfortunately, many agents didn’t adapt to the change and continued to see their role as just finding a property for their client. Many clients also kept this mentality, thinking that an agent's role was just to find a property. This, of course, led to many clients thinking they only needed an agent to find a property and if they could find one then they wouldn’t need an agent and could get a better deal on their own.  Good agents realize that finding a property for their clients is just a small part of what they do. Finding the right property is a bigger role, and their most value lies in negotiating the best deal for their client.  Finding the right pro......
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How to Start Investing in Real Estate: Beginner's Guide

How to Start Investing in Real Estate: Beginner's Guide
Being a real estate investor is one of the leading wealth creators in the United States so many of us want to know how to become the next great real estate investor. Some have bought books and watched videos on how people have made their fortune in the industry, others have applied what they know to works in their business towards real estate. We have learned over the years that there truly is no better way to learn the real estate industry than simply going and being part of a property management team. PLUS…. you are getting paid to learn!  By being part of a property management team you can learn everything you should know from marketing, maintenance, leasing and operations. When you find a company that you feel is a good fit for you sit down with the management and tell them that you want to learn everything from top to bottom about real estate investing from them and if they seem receptive to your idea then jump in and prepare to learn. We would recommend you start at the bottom and work you way up.  In their leasing department, learn how a vacant unit is prepared for market. Price the unit and then learn how to advertise the unit to the right individuals. After you have spent enough time in leasing look into moving to an assist manager position, while in this position learn the ins and outs of the daily operations of the property and how you can i......
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Believe in your successful real estate entrepreneur skills but never stop improving

Believe in your successful real estate entrepreneur skills but never stop improving
Real Estate Entrepreneurs Without This Trait Have a Much Lower Chance of Success If you truly break down the top real estate executives that have really strong, highly effective teams that love to work together you will find their leader will be, tenacious, have vision, forward thinking, team leader, good communicator but first and foremost they will have emotional maturity. If you are without an awareness of your own emotions and the ability to manage them, you won’t be able to manage other people or your business effectively. What is emotional maturity?  Emotional maturity is when someone can manage their emotions no matter their circumstances. They know how to respond to tough situations and still keep their cool. It's a skill set they can consistently work on over time. Here’s a good example- an employee makes a mistake, your immediate response might be to correct the mistake and move on. An emotionally mature leader would notice that impulse, then decide if it may be better to listen to why the team member made the mistake and walk them through the thought process and see if there is a possibility there could be a more effective method for long-term success.  Building a strong team is easier with emotional maturity.  Today more than ever your organization achieves its goals through a series of zoom calls, conference calls, daily conversations, interactions and decisions. These interactions involve humans, and the more emotionally intelligent we are, the more effective your team will be on all levels. Inv......
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Common Metrics/Terms an Investor Uses to Analyze Commercial Real Estate

Common Metrics/Terms an Investor Uses to Analyze Commercial Real Estate
It’s not a secret that numbers drive real estate investment decisions. But the real question is, which metrics are valid? Which metrics matter? Depending on your investment goals and property type, some metrics are more important than others. The following metrics/terms real estate investors commonly use when making portfolio decisions:  1. Capitalization Rate (Cap Rate)  Cap rate is mostly used for apartment complexes and commercial buildings. Capitalization rate can also be used for houses and small multifamily properties, but the flip side is that operating expenses are unpredictable with houses since you can’t know how often or how bad your turnovers may be. Cap rate allows you to compare properties in the same asset class with different characteristics that make direct comparison impossible. The disadvantage of the Cap rate is that it’s only a snapshot. It says nothing about the expected growth in expenses, rents, property value, and whether using leverage will increase your return.  2. Cash Flow  When evaluating rental properties, it’s vital to figure out your expected monthly cash flow. When determining total expenses, you should include:  Property taxes  Flood and hazard insurance  Water  Sewer  Garbage  Electricity  Property management  General maintenance and upkeep  Capital expenditures  Vacancy rate  3. Return on Investment (ROI)  RoI is helpful for analyzing how well a deal did in the past. This measurement is always good to have because you can’t adjust your future investing unless you know how your previous investments performed.  4. Internal Rate of Return (IRR)  The internal rate of return is used to m......
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Is Paying for a Cost Segregation Analysis Beneficial?

Is Paying for a Cost Segregation Analysis Beneficial?
If you were told as a real estate professional that there was a tax credit that could save you thousands in taxes, increase your cash, and allow you to allocate your funds for new investments. You would not only be asking the question: 'Is Paying for a Cost Segregation Analysis Beneficial?' but also 'Why have I not heard of this money-saving benefit?' Cost segregation has been around for some time. In 1997, the Hospital Corp of America and Walgreens Pharmacy appealed that shorter periods should be available, rather than waiting for 27 ½ to 39 years to get their tax returns. These schedules now follow a five-year, seven-year, 27 ½ years and 39 year depreciation time frame. Here is a breakdown of the classifications and depreciation periods. Breaking Down the Cost Segregation Classifications Classification 1 - Building and Personal includes the items added to the property, such as window treatments, moldings, wall coverings, and appliances. These have a five-year depreciation time frame.  Classification 2 - Site Work and Land Improvements include the work done before the foundation is laid down. These works include soil grading, removal, and all the work done around the construction site's surrounding areas. An example of what falls in this classification are driveways, irrigation systems, patios, and landscaping. These have a 15 year depreciation time frame.  Classification 3 - Building Structure includes the building, its foundation, roofing system, exterior facade, plumbing, windows, doors, and frames. These have a 27 ½ years depreciation time frame.  Reasons Why Paying fo......
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Can I Negotiate With Commercial Lenders for a New Loan?

Can I Negotiate With Commercial Lenders for a New Loan?
Commercial lenders include commercial banks, private lending institutions, hard money lenders, financial groups, and mutual companies. They are mostly used for commercial real estate acquisitions, short-term fundings or businesses that need resources to address seasonal orders or cater to sudden demand.   Their key responsibilities are handling prospective clients by identifying their needs, interpreting their financial statements, securing collateral, and gathering other required documents such as insurances and agreements. Once the borrower has submitted all the requirements, they can start negotiating the rates and terms of their commercial loan to lessen the burden that interest rates can incur.    What can be negotiated   Here are a few options on what can be negotiated:   1. Interest Rates   Interest rates will significantly impact their monthly payments. Negotiating the lowest possible interest rate will help their cash flow, especially at the beginning of their loan. During this time, renovations are still being completed for new businesses, and the cash flow is at the lowest. These rates may be set for 5 to 10 years, and if they can find lower rates now, they will be able to have more flexibility in the future.   2. Closing Costs   Negotiate that the seller covers some or all of the closing costs. These may include taxes, title fees, recording, and attorney fees. In some transactions, these fees are already included in the seller’s full asking price, and if not, they may be negotiable.   3. Quick Transaction   They can save time by n......
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Top Fastest Growing Metros in the US and Should I be Looking to Invest in Them?

Top Fastest Growing Metros in the US and Should I be Looking to Invest in Them?
Despite the coronavirus pandemic, many are deserting giant cities like New York City or San Francisco and looking to settle somewhere else. Rapid economic growth plays a vital part in what makes up-and-coming cities appealing landing spots as well as lucrative investments. Here is our list of the top five fastest-growing US metro areas and why you should invest in them: 1. Boise, Idaho In recent years, Boise has been experiencing substantial growth in its population and its home values. Just in the last ten years, its population rose by 12%. In the last five years, home values have risen by 75% on average, and just the last year alone, the average home value in Boise rose by $50,000. On top of that, the people migrating there are young professionals with money to spend. Boise also offers the perfect balance between rural access and an urban feel. Its economy is as robust as ever with plenty of available jobs. The city is a hub for many startups and is home to such giants as HP and Micron. Boise is also voted as the eighth safest city in the world.  2. Tacoma, Washington Homes are going fast in the Tacoma metro area, with 73.6% of houses sold in October 2020 going off the market in just two weeks. As a comparison, last year that number was only 51.3%. Tacoma offers better investment opportunities than for example the Seattle area, which can be pretty expensive. Cash flow opportunities are also better because the......
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