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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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Should Landlords be Licensed?

  Denver says landlords should be licensed.   In early May, the city of Denver passed a law that requires all long term rentals to be licensed. The justification is that it will improve professionalism and hold landlords to a higher standard.  Specifically, City Counsel President Stacie Gilmore is quoted as saying, “This policy will help stabilize housing and neighborhoods.”   Lofty goals, for sure, and they may well be achieved with help from this policy. What seems to have been left relatively unexamined is the fact that any licensing system brings costs in addition to the potential benefits. Licensing fees ($50/unit for small properties, as little as $2/unit for large properties) are not huge, but are just a part of the cost.  There will also be periodic inspections, which will likely cost between $300 and $1,000.   In a market with average rents of about $1,700, that $350-$1,050 cost is a material increase to the cost of doing business, not to mention a significant additional compliance activity. How will this change the Denver rental market? What impacts - good or bad - will this have on the Denver rental market?   The Analogue Happily for us, licensing systems are very well studied and have been a hot topic of debate in academic and policy circles for many years.  Research is widely available from organizations like Brookings, Columbia University and the Bureau of Labor Statistics. In the U.S., there are many professional licensing systems, and almost all of them accomplish a few goals: Licensing set......
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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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The Evolution of CRE Agents and Lead Generation on Social Platforms

The Evolution of CRE Agents and Lead Generation on Social Platforms
COFFEE IS FOR CLOSERS!  Glengarry Glen Ross was spot on for that time, cold call, cold call, cold call. When asking many CRE Agents how they choose to market themselves many say they focus on cold calling, they don’t see the value in utilizing social platforms. However, the modern-day CRE agent has so many more options to generate leads that it’s almost overwhelming.  With so many new social platforms, email programs, CRMs, referrals, cold calling, blog writing it’s almost too daunting to figure which is best for you to utilize.   Sales agents often forget about long-term lead generation, and how social platforms can impact them. The long history of outbound lead generation has proven to be successful but like any marketing tactics it’s designed to create relationships for the long term, that can easily be done on social platforms and create blogs and a good email campaign. The evolution of any business is critical to its success and CRE is quickly evolving thanks to social networks and APPS.   Most brokerages have their social platforms, email marketing campaigns, and sometimes blogs, which are all good except many companies are not showing their agents how powerful of communication tools these have become, and how they can exponentially increase their leads. I am a firm believer in an agent creating their own identity in the marketplace, and social marketing helps to create that personal.   Cold calling everyone if your community can be difficult, plus many other agents are making the same calls to the same pe......
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Which Commercial Real Estate Sectors Are Approaching Oversupply?

2020 and the years ahead won't come without difficulties for the commercial real estate market. In the United States, certain Commercial Real Estate sectors may be affected by oversupply. the Urban Land Institute states that construction during the current cycle has been below historical trends, but as the cycle matures, we need to look at whether markets are becoming overbuilt. Oversupply may be around the corner for these Commercial Real Estate Sectors: We expect to see some risk of oversupply in Class A multifamily and industrial properties, but the changes that have heightened the demand compared to historical norms should lessen the material impact on fundamentals, which are expected to stay solid. Please NOTE:    This is a general overview of the market sectors across the nation, your specific sub-market may be having substantially different experiences, please consult with a professional commercial real estate agent in your specific sub-market for more details. Industrial Real Estate Sector Industrial real estate also shows signs of overbuilding. Demand stays ahead of supply in both Europe and the U.S, leading to lower vacancy rates. However, as consumers continue to shift toward e-commerce, companies still have to adapt their supply chain strategies and drive the demand for well-located and high-quality logistics facilities. The industrial real estate sector is also heading for slower growth, according to a forecast by the Deloitte Center for Financial Services. The sector, which includes warehouses, flex spaces, distribution centers, and other industrial properties with storage facilities, has been facing sustained demand over......
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Benefits of investing in Real Estate over the Stock Market

Investors often turn to the stock market as a place to invest their dollars. However, not everyone knows that real estate is also considered a form of investment. In fact, real estate can yield higher returns, be lower risk, and offer better diversification. Start by comparing the benefits of real estate investment and buying stocks. Market stability The stock market can experience extreme ups and downs. It may even cause you to lose all your money if the company you invested in goes under. Even big international companies can crash overnight. However, the real estate market is much more predictable since it is hard for a real estate business to fail. Property can always be sold to keep a real estate company afloat during economic difficulties.  Asset management You can physically check the property you are investing in and decide if you want to buy it or not. This means it’s harder to be defrauded. On the other hand, stocks are non-physical assets, and you have fewer options. When you choose a company to invest in, you cannot choose which stocks you want, because all stocks are the same. Another one of the benefits of real estate investments is that you are the owner of your property. When you buy stocks, you depend on other people’s management. Cash flow The cash flow from rental properties in real estate acts as a monthly income that you can live on. On the other hand, you will not see any cash until you sell you......
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Best Tips for Finding the Right Assets in an Emerging Market

I constantly hear of people that want to invest in an emerging market, the proverbial golden goose of the real estate industry. I believe much of this has been stoked by the somewhat recent opportunity zones that many are trying to invest in. To find the right area, there are many factors to take into consideration. Some of these are time-proven techniques that developers have used for decades to forecast rent growth and desirability to a neighborhood, others are more common sense, and straight economics.   1) Risk Appetite - Being part of the first wave into a new market can be daunting, you will need to be prepared for the long haul.  Are you willing to be the first trailblazer into a sub-market, where you may get the lowest cost, but also potentially the longest time to see the change, if at all? 2) Look for City programs - Most cities are seeking ways to drive business to these communities, check with your city to see what programs are in place to drive business to this community, there are cities that have programs that incentivize non-profits to help turn an emerging community around. 3) Has there been a dramatic change in the demographics for the immediate neighborhood? Is there new residential construction that is driving higher prices, and denser neighborhoods? If so, it is likely that the commercial market will follow within a few short years. 4) Check the affordability - Can the community afford higher rents at this time, if......
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Finding The Best Rate Of Return On Your Commercial Property

Capitalization rate, or cap rate for short, is a measurement used by all real estate investors, whether they are commercial or residential investors. It shows them the potential rate of return on a property. Knowing the cap rate is advantageous in deciding whether or not a property is worth investing in or purchasing.  In this article, we wanted to go deeper into everything you need to know about the cap rate and what a good one is. How the Cap Rate Works and Why It Matters The cap rate is a formula, and a very simple one as well:             Cap rate = net operating income / current property value The rate is based on a one-year period, and this simple measurement is usually enough for most investors to determine how valuable a property is. Naturally, something so simple can’t always be enough for determining the value of a building. For that reason, we highly advise you to use the cap rate together with a few other evaluation tools. By doing that, you can get a more clear picture of how valuable a property truly is. We advise this because the cap rate is based on annual returns, which can't always reflect the actual value of a property. Sometimes they only have a single good year, and you can end up investing in a property without the full picture. Plus, cap rates don’t take into account things like mortgage payments, lender fees, closing costs, and more.  Des......
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Critical Steps Too Becoming A Top Commercial Real Estate Agent

The steps I am about to give you are time tested and proven over the years by many successful commercial real estate agents. These steps are a great way for you to build your business.  These steps are worthless if you don’t create a structure that allows you to execute these steps on a regular basis. Find a quality CRM, put your head down and get to work. 1) Cold Calls - I recommend 100 calls per morning to a targeted group- either to an area or to a specific asset class, with every call you need to bring value…tell them something about the market in their area or a specific asset they may have interest in hearing about. Do not call and just leave a voicemail to call you back.  If you don’t have their emails be sure to ask for them and immediately but them into your CRM to add to your email list; 2) Social Networks - Most commercial agents frown on this, however, it’s a critical part to your branding. Create posts twice per week that have critical information about your market (create value for yourself).  Don’t just post about business though, also mix in some personal posts.  After all, people like to do business with people they know and like; 3) Sphere of influence - You need to reach out to friends, family, past coworkers and clients on a regular basis, there is no worse feeling than sitting next to a friend and having them say “we just ......
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Multifamily Renters Trend | How Today’s Moving Trends Will Affect Multifamily in 2014

Multifamily Renters Trend | How Today’s Moving Trends Will Affect Multifamily in 2014
According to a press release that the U.S. Census Bureau shared late last month, 11.7% or 35.9 million U.S. residents moved their primary residence in the 2012-2013 year. This translates to a drop of about 12% compared to this same time period from the year prior. When comparing the data found in the Geographical Mobility report published in 2013, these statistics show 2013’s numbers to be very similar to the 11.6% reported in 2011. Researchers found that 48% of Americans claimed that the move was housing-related, 30.2% was a result of family, and 19.4% said their move was fueled by employment-related reasons. What do these moving trends mean for multifamily? We have three solid years in which moving trends have remained steady or improved nationally, with certain specific metropolitan areas seeing enough growth to maintain the averages for their whole region. At 13.4%, the Western region of the United States has actually seen the highest percentage of all movers. This is followed by the South, who received 12.8% of our nation’s movers, and the Midwest who turned in an even 11%. The region with the lowest mover rate is the Northeast, who had 7.8% in the last year. According to these trends, industry professionals can expect to see at least these same percentages with a slight improvement being the most likely result of all the new activity planned for 2014. Multifamily News identified that two-thirds of today’s movers are staying within their same county of origin. In addition, 40% of these movers are staying within 50 miles......
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