Miami Real Estate Properties » Commercial

Pricing Commercial Property

Real-Estate — Mon, 15 Feb 2010 19:00:23 +0000

We will be placing an industrial building on the market shortly. What is the best way to establish the right selling price?

Setting an asking price is more art than science, but certainly the first step is to establish the market value of the property. The real estate appraisal process considers three means of establishing value: the cost approach, the income approach and the market approach. The cost approach establishes the cost of constructing the building in today’s dollars, and then subtracts accumulated depreciation. The income approach uses an existing or predicted income flow to establish value by means of a capitalization rate. The market approach analyzes market sales for similar properties, making the necessary adjustments for features, condition and date of sale. The most persuasive approach in your case, and for most industrial properties on Long Island, is the market approach. This method will give you the best indicator of the worth of your own property. For the more sophisticated or expensive properties, I recommend a full demonstration appraisal. Yes, I know real estate brokers can provide you with comparable sales. However, a licensed appraiser familiar with industrial properties will not only document those comparables, but will also help you assemble all the information that will be necessary in marketing the property. The appraisal may also catch some items that need addressing before the marketing commences. Once you have established a market value, which is the price that you should be able to achieve in the open marketplace, you can give some thought to an asking price. This is an area where an experienced and active broker can best assist you. The theory is to establish a price that is high enough to allow for negotiation, but not so high that potential buyers refuse to view the property. There is no magic formula.

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Commercial Property Lease

Real-Estate — Mon, 15 Feb 2010 05:00:08 +0000

Renting office space is an important decision in the life of every business. It is a decision most businesses do not relish and make only a few times, if indeed they do so more than once. There are a myriad of reasons why businesses are faced with the consideration of what to do prior to committing to a commercial property lease. What began as a home business may have expanded beyond home and require office space for lease. It may just be an issue of space or an issue of staffing, equipment and space. It may be a business outgrowing its current premises or maybe even downsizing in the current economic times. Whatever the reason commercial property leases are an important decision that should be carefully considered. Most businesses don’t want to move once let alone think about doing it all again because their first choice was a poor one long term. Over time there have been so many changes within offices. Consider the changes to equipment size. Gone are the days of monstrous, bulky equipment. Beyond the equipment there have been changes to the ergonomic and functional design of office furniture. Offices now have many options to consider and combine for functionality. Even the humble desktop computer now requires significantly less space than even five years ago. It is important to take stock and think through a few issues involved in commercial office space decisions before setting your sights on a property. The first for most businesses is cost. Don’t be fooled by straight dollar savings however. For example property becomes more expensive the closer it is to the centre of town. Choosing an office on the outskirts of town may save your rent savings but may be costing your business significantly more than you are saving. Think about your customers and staff. Is it easy and accessible? Is it in a location conducive to happy and productive staff or located somewhere that ensures they all leave by 5, no matter what, because they don’t want to be left there after dark. Likewise for customers it is too far to travel to, or too difficult to get to, or located where customers are not comfortable going. Losing or changing staff and losing customers due to changes in location can create enormous costs for your business that most likely outweigh any cheaper rental saving.

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Commercial Investment Property

Real-Estate — Fri, 12 Feb 2010 19:00:32 +0000

Commercial investment property investors look for successful investment opportunity to build wealth. Commercial real estate investors are no different than other types of investors. Finding the potential for successful acquisitions keeps an investor searching for additional ways to create passive income. The keys to becoming a successful investor in commercial investment property are FOCUS (education) . . . and finding a property in the right market phase of opportunity. Where does an investor begin a professional education in commercial investment property? Make your decision to begin where you are right now. FOCUS on the type of investor role fits your goals , . . active, passive or a combination of the two . . . then FOCUS on an investment time frame that meets your goals: long term, short term or a combination. What are the three types of Commercial Property Investors: find properties, secure the right to the purchase and sale agreement and can syndicate the deal by bringing in partners for equity capital when using OPM (other peoples money) or do the deal on their own to complete the acquisition.Active investors: provide equity capital to active investors, an Investment Company, or Institutional Fund once an accurate Pro Forma is provided that satisfies the passive investor about the properties potential for return on investment (The Pro Forma will match the investment criteria the passive investor has decided is their investment strategy.) Passive investors: provide equity capital to active investors, an Investment Company, or Institutional Fund once a current Pro Forma is provided that satisfies the passive investor about the properties potential for return on investment (The Pro Forma will match the investment criteria the passive investor has decided is their investment strategy.) The combination of both passive and active roles . . . is the third way to invest in commercial investment property and can take the legal form of a Joint Venture Partnership (JVP). This entity may provide deal analysis, contracting, acquisition, asset and physical property management and funding for the commercial property by an active investor, or entity with a single passive investor or group of investors.

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Commercial Real Estate Investing

Real-Estate — Fri, 12 Feb 2010 18:59:32 +0000

The main value indicator of commercial real estate is based on how much net income it produces. The key word in this statement is ‘net income.’ An investor is not looking for revenue of $25,000 in rent each month only to find that the expenses amount to $30,000 – this is just a money-losing property. A buyer is looking for a property with a solid income and a good rate of return. Increasing the net income of a commercial property can be achieved in two main ways. The most obvious way to increase the value of a commercial property is to increase the base rent of each unit. Of course, this does not make a landlord a well-liked individual; however, one does not need to add sharp increases to add significant value to the property. Take for example a 10 unit apartment building with rent set at $800 per unit per month. With a total rent of approximately $8,000 per month or $96,000 per year and expenses at $65,000 per year, the net income would be approximately $31,000 per year. Based on a 9% expected return on investment (ROI) this property would be worth $344,444 to a buyer. If the rent on each unit can be raised by only 2.5% ($20) the net income would rise to $33,400 and the building would now be worth $371,111. That’s a $26,666 increase in value for only $20 per month! While the rents are the easiest place to add both cash flow and value to a building, this is not always the best option. By raising rents a landlord will run the risk of having people leave the building, thus creating vacancies in the process – a key consideration in any rental market. Another great way to increase property value, and does not directly affect the tenants, is to decrease monthly expenses. This is an often-overlooked item because it is much harder to accomplish than simply writing a rent adjustment letter and distributing it throughout the building. Decreasing costs should be an ongoing duty of the property manager and building owner. To begin this option, utilize the help of a Certified Professional Accountant. A professional accountant can usually uncover additional ways to successful cut costs, taxes and fees in your operation. They will also help you look at all outgoing expenses and determine which could be reduced or eliminated.

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Investing in Commercial Property

Real-Estate — Fri, 12 Feb 2010 03:58:51 +0000

Whether you own a commercial property, or are looking to invest in one, now is a great time to shop. The economy may be down, but exciting new prospects are one way that it is going to recover, and with commercial property costs at an all-time low, there has never been a better opportunity to invest. The idea of buying a commercial property is to turn a profit from it. Therefore, you want to invest, not collect. Don’t buy something that you don’t have a plan for, as it will just sit around unused, costing you money. However, if you see a good deal on a commercial property and think you can make something of it, now is a great time to purchase that building. Some things to keep in mind if you have a plan for a business is to scope out the area for how similar business are faring, set aside money for any problems that might arise, and have a back-up plan for the future. Decide what you will do if, in a year, the investment is just not making any profitable returns. Shop online. There are literally hundreds of websites available at your disposal. Compile all of the listings that interest you, and being researching them. Try to find as much information as you can about the buildings, including what they were used for and what the area is like. Then, you can contact their listing agents for a showing. While it is true that lots of commercial properties and buildings are sitting empty and unused all across the United States, that does not mean that your listing has no chance of selling. In fact, there are lots of things you can do to boost interest in your commercial property and not feel like a dead duck. The first thing to do is to gather up all of the available information about your property. Know all there is to know about the building including its age, whether repairs or updates have been made, and any problems with it. Include any relevant information that you think will help sell the property. Get a good agent to help you sell your commercial property. You don’t have to settle on the first one you find. Read online reviews and choose the agent who has the best track record of selling properties that are similar to yours.

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Commercial Property Leases

Real-Estate — Wed, 10 Feb 2010 04:20:53 +0000

Some clients will overlook the essential terms of the lease and think that any lease will do. This narrow view is wrong and must be shaped to encourage good lease and tenant placement outcomes. Good tenant placements are supported by great leases. Underpinning this is a good solicitor who knows how to write a good lease that suits the needs of the property and its future for the client. First and foremost, if the Solicitors that are responsible for doing the leases for the property are not fully aware of the property in reasonable detail, it is wise to encourage them to inspect the property with you and the client so that all key issues and potential problems are identified for the client allowing the lease to be designed to suit. A great property and tenancy mix are supported by a great lease. Generic leases do not suit the purpose well because they do not relate to the special issues that the individual property needs or creates. A final word on generic leases is that they are commonly used where the landlord (client) is trying to save money on legal costs. This is not a positive practice. A good lease matches the property and the clients investment model. It then makes it easier for the Agent to undertake the leasing process and the tenant mix. All the key issues of occupancy are already on paper in the lease. Details of physical and other features of properties should be noted in your inspections so that you can build on the opportunities and positive aspects of the property with potential new tenants. All the information gained should be included on an appropriate and organised listing form and recorded as both hard copy and as part of a computerised listing package. Ultimately you will be producing a leasing brochure and information package to present to potential tenants. All positive aspects of the property should therefore be well understood and documented. All investors and owners of commercial property have differing investment and ownership needs. They could want the property to produce certain levels of growth or stability for their investment needs. They could also want to hold the property for a period of time. These issues then lead to the core decisions that they will make when you locate a tenant or adjust the tenancy mix. It could be that the client has a preference to hold the property for a short period of time and then undertake a redevelopment or expansion of the property. This will have significant impact on how you would construct the tenancy mix and lease profile for the property. You may need redevelopment clauses or relocation clauses in the lease to give the client flexibility. To handle these facts you will fully interview the client and discuss the investors property requirements before proceeding with any part of the professional leasing and tenancy services that comes with commercial real estate. You must match your leasing and tenancy services to their needs. Your skill is in assessing the potential leasing and tenant balance of the property and then shaping the leases to support the rental income needs is essential.

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Commercial Property

Real-Estate — Tue, 09 Feb 2010 05:05:41 +0000

If you are not familiar with the growth patterns, ask an experienced real estate agent, talk to an active real estate appraiser, or visit the Chamber of Commerce. Make sure you concentrate on an area that is growing. You do not want to buy land and have to hang on to it. Of course, if you use the techniques in this book, you can tie up a piece of property and see if it will resell before you actually close on it. In order to find property that can be bought for a reasonable price and provide a good profit margin, you will normally look on the outskirts of the city. When looking for a tract, first make sure you are in a county that will not prevent your subdividing activities. Then as you are looking for land in a particular area, notice if there are fire hydrants or manhole covers in place. And look for land with a for sale sign on it, preferably by the owner. To locate owners, first visit some of the neighbors in the area and ask if they know who owns the property. If you can’t determine the owner and their address, go to the County Tax Assessor’s office. At the Tax Assessor’s office you can locate the property on their tax maps and they can provide you with the name and address of the owner. By looking at the tax map you can determine how many acres the people own and how it lies. This could give you very important information on the approximate road frontage and whether the road is public or private. And whether the tract is so deep that a road would have to be built or shallow enough so that it would be perfect for slicing up. Analyzing the tax map could cause you to loose interest in that particular piece of land or could get you very excited. These maps will also indicate any easements that have been recorded on the property. Also while you are there, if it looks as though you want to pursue this piece of land, ask if they have aerial maps of the area.

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Commercial Property

Real-Estate — Mon, 08 Feb 2010 09:00:14 +0000

When you consider investing in commercial real estate, it is very necessary that a commercial property analysis has been conducted on the site you wish to use. Incomplete or shallow research can break the deal on any prospective location. Such analyses are performed by professionals who know what to look for. In commercial property investment, there are many factors that influence the decision as to whether or not a lender grants a loan. Those factors range from local zoning laws governing the area to the socio-economic composition of the community surrounding the location. All of these considerations are made with an eye towards a successful deal. Knowing how your business contributes to the cultural, social and environmental area is the first step to securing a profitable deal. The necessity of knowing all about a business before it is established at a location is critical. Commercial property analysis professionals will evaluate a multitude of influencing factors for you so that you can decide whether or not to pursue a loan for that particular site. Time and effort are valuable commodities in real estate transactions. Time is, quite honestly, money. You should be confident that your time is being well spent when you contact your sellers, lenders and/or brokers concerning a site that you are interested in. Wading through the analysis information is time consuming and may cost you the deal if the investigation is not done thoroughly. Securing your loan is a critical goal if you are going to have a successful career in commercial property investment. A thorough analysis of the property you desire contributes to a successful transaction with your lender. During these financial considerations, a mortgage broker can also be as beneficial as your community property analysis. A mortgage broker is familiar with the lender and borrower relationship and does his or her best to see that your application for a loan gets to the right hands. Still, without an accurate accounting of the target location, your broker will have difficulty securing your loan.

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Commercial Real Estate Transactions

Real-Estate — Mon, 08 Feb 2010 06:00:22 +0000

You’ve agreed on the loan terms or purchase price. Now the really treacherous part of the trip begins – meeting all the requirements of the lender, seller or buyer. Experience helps. Companies that don’t routinely invest in real estate are the most likely to trip up because, basically, they don’t get it. “They don’t get” why a document is needed or how information is to be used. Without that understanding, the documents and information may be incorrect or misleading if not just wrong. A few big picture ways to prevent this are:
-Discover and report as much as possible on the history of a property at the outset to avoid tenth hour discoveries. For example, tell where the dry cleaner rented at a shopping center even if it closed or moved 10 years ago. An on-site dry cleaner always sets off alarms for buyers or lenders who may wind up owning their ground water pollution. Old dry cleaners are especially scary because they operated before tight regulations on the chemicals used and their disposal. One of my loans was near closing when we discovered that the dry cleaner had moved from its original location some 12 years before. The old space was now under the newly expanded supermarket. Sections of the store’s sales floor had to be roped off so that the environmental engineer could drill down for soil samples. Finally, several months past the originally planned date and at considerable extra expense to the borrower, the loan closing went through.
-Ask why a document is needed. One owner of a well-located shopping center originally developed by his family 50 years earlier arranged for new financing to update the center and pull out equity. As the loan closing date neared, the owner submitted the required “certified rent roll”, signed by the CFO. Only, it overstated the center’s rental income as compared to operating statements. It turns out the borrower was honestly listing all the tenants and their contract rent, except, not all the tenants were actually paying their rent. The rent was not collected from some of the longstanding tenants while the center was disrupted by the construction work. The CFO did not realize that by certifying the rent roll he was certifying the income earned. Ultimately, the loan closed but with the amount lowered to allow sufficient coverage by the actual income.
-Question and verify the information you receive and do your own file digging if you are the buyer. As head of acquisitions for a company, I was provided data on a property by the seller that showed an anchor tenant paid its share of real estate taxes in addition to base rent. But, the lease said this expense was excluded. A review of the tenant’s file showed the taxes were being charged and paid by the (temporarily) unwitting tenant. But, we were buying the lease as written, not the income from a mistake. The seller reduced the price.

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Commercial Real Estate Investing

Real-Estate — Sat, 06 Feb 2010 03:00:12 +0000

The financial industry greats will be the first to tell you that real estate investing has the potential to bring in serious profits. They will also gleefully inform you that the risks in some cases far outweigh the potential, especially if they are among the more cautious investors in the industry. Those who have made their fortunes in real estate however will tell you that investing in real estate is worth every ounce of risk when you manage to work through the rough patches and find your way to real estate investing fortunes. Commercial real estate is somewhat unique among real estate investment types. This is the type of real estate that requires a high investment to get into the game, much higher than most residential property and poses equally great risks depending on what you plan to do with your commercial real estate investment. Of course you will also find more than a few options for your commercial real estate investment that many investors find appealing. Most investors find leasing office or building space to be the safest route to take when it comes to real estate investing is the path of leasing office space or warehouse space to businesses. They feel that this is a relatively steady source of income because most businesses prefer to keep their locations as long as possible. Smart business owners are well aware that customers, clients, and vendors need to be able to find them in order to do business with them and for this reason, prefer to keep their business in the same location whenever possible rather than reestablishing themselves in different locations year after year. Commercial real estate investing is a bit of a different animal than traditional residential real estate that many of us are more familiar or comfortable with. You will need to do a lot of research before jumping in with both feet with this particular sort of real estate investment. Commercial real estate investments can take on many forms. From strip malls and outright shopping malls to business and industrial complexes to sky scrapers and high rise condos you will find all manner of commercial real estate interests. Whether your interests lie in business or personal types of commercial real estate there are significant profits that stand to be made.

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