Real Estate In Miami Florida is Our Business!

“Why should I invest in Commercial Real Estate?,” someone recently asked me. With the well-publicized drop in residential prices in some areas of the country, it might seem prudent to be avoiding real estate right now. But commercial real estate is a different animal altogether: First, commercial real estate is strictly property for businesses, i.e., retail centers, office buildings, warehouses, manufacturing sites, apartments, and land. Second, there is less of it than homes. Third, commercial real estate is either for the use of a business or for producing an investment return, as opposed to a house you and your family may live in. So, why invest in this area? Some of the great fortunes in the U.S. have been based on real estate. Investing in the stock market, where you can see the hour-by-hour and day-by-day gyrations of your portfolio can be stomach wrenching. Real estate trades hands infrequently, so the valuations are less subject to daily events and more governed by yearly trends of supply and demand. Putting a 5% to 15% portion of your investment portfolio in property is a very prudent thing to do. This will help stabilize your overall returns and real estate may often move in the opposite direction of the stock market. For instance, commercial real estate, as measured by the index of equity real estate investment trusts over the past 10 years, returned a total of 12.4% versus the SP-500 returns of just under 10%. Income: Commercial investment properties will be leased to tenants, like businesses, and retail stores. These leases produce rental income for the owner which should create positive cash flow after the mortgage and expenses are paid. This may produce an income of 5% to 10% per year of the amount you invested. Depreciation: Also called cost recovery, this tax write-off shelters some or all of your income from the expense of taxes. You write off the cost of the building and some of the building components, but not the land it sits on. Equity build up: Because you can use your rental income produced by your tenants to pay your mortgage, then the part of your mortgage that is principal – but not interest expense – reduces the amount of your loan and thus builds up your equity in the property.
Appreciation: The property becomes worth more money 1) as the rent income goes up, 2) as the market puts a higher value on the rents and 3) as the land value goes up. Additionally, the value usually goes up somewhat in proportion to inflation so that property is a good hedge against inflation.

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Buying commercial real estate is much different than buying a single home. Because it is commercial real estate and you are apartment building investing, you can use a due diligence period to get the best deal possible. During the due diligence period, the buyer, at the buyers expense, has the right to enter the property together with anyone they choose in order to inspect the property. Tests such as those for environmental problems, the soil, the air quality, hydrocarbon, toxic chemicals, carbon, asbestos, lead based paint and any other tests the buyer may deem necessary for the commercial real estate property are then conducted. Apartment investing is something that needs to be thoroughly checked out before the sale so there are no surprises that will end with the loss of tenants and money because the structure isn’t habitable. Due diligence is a way for the commercial real estate investor to be certain there are no hidden problems. The process should be taken full advantage of every time a commercial real estate building is being considered. If you are a wise apartment building investor, you will be prepared for this and have experts to check for problems in the building. When one is found, the selling price may be lowered or you can request that the seller make the corrections prior to the sale. This is similar to purchasing a used automobile. If you haven’t taken the time to have a mechanic look it over prior to purchase, you may find out too late that there are major problems with it. The same thing can be said for apartment building investing. This due diligence is a time given for just this purpose, and it’s crucial that it be used as such. There can be many unseen problems when buying commercial real estate. A seemingly small problem such as lead paint can mean that until this paint is removed by professionals who are licensed to handle such a job, no tenants will be allowed to live in the building. This means that investing in a building such as this, unless it’s at a price that reflects the problem, should be considered carefully. The apartment investing situation should be one in which the buyer is aware of all of the problems and can get a price that reflects the need to do the remodeling work on the units. When that is completed, the units can then be rented at a higher rate than previously. A good real estate investor will have had this planned out from the beginning.

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If the idea of investing in Commercial Real Estate appeals to you, then maybe you can take the first step towards doing so – by investing in your education. You see, to understand the value of the Commercial Real Estate around you, you need to know the ins and outs of Commercial Real Estate and real estate investment. This will help you avoid money pit investing so that you wind up with a quality Commercial Real Estate investment that will appreciate in worth over time. The first thing you really have to understand about investing correctly is that it is really possible to do so. Despite what many naysayers may have been telling you, Commercial Real Estate investment is a good one. Even in today’s declining US housing market, or residential properties, the commercial market has not seen the decline in value that the residential market has. Commercial investors are typically smarter and don’t make the ‘emotional’ moves that a residential investor might make. So as a result, the investment did not experience the false appreciation that housing saw. Second, don’t let fear get in the way of sound Commercial investing. Once you have been educated in what you have to look for in quality structures, use your inner voice to let you know which ones are good to buy within your investment budget. Then combine that inner voice with good, sound research. Quality research can help show you which investments are more likely to be winners, which ones are just so-so, and which ones will never amount to anything unless you tear them down and start over.

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The Miami-Dade industrial market surprisingly has continued the healthy pattern of leasing and sales activity in the fourth quarter of 2007, much like how it performed in the previous quarter. More than 1million square foot of industrial space was leased in the fourth quarter. Availability and vacancy rates remained under 6%, which is still below the national average of about 10%. The fourth quarter of 2007 basically performed the same as the third in activity and pricing,however it lacked the panic that happened during the summer’s credit crunch. The Miami-Dade commercial real estate market experienced small corrections and the re-pricing of certain assets, however the general effect was not as negative as many had predicted. Despite current economic difficulties, and uncertainty hovering the credit markets as well as the specter of an upcoming recession and the residential fallout, Miami-Dade County continues to remain a viable destination for both local and international traders and investors. Industrial Vacancy Rates Go Up, The vacancy rates for the commercial and industrial sector have steadily gone up by 1.6 percent from the 4.2% rate recorded in the same period last year. Bulk space saw an 1.8 percent increase while flex space also saw a rise of 2.9 percent from the rate recorded during fourth quarter of 2006. Miami-Dade’s availability levels also went up from 5.6% in the fourth quarter of 2006, to 7.8% in the fourth quarter of 2007. Some commercial real estate analysts are also forecasting asking rates to stabilize with limited future increases. One of the main reasons why asking rates could stabilize is the adding of more space, which is expected to enter the market this 2008. These factors have attributed to continuing tight market conditions despite the increase in vacancy levels, and the negative absorption levels recorded.

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Applying for commercial real estate financing is a big step. It’s not easy to get commercial property loans, especially if you are a first-time borrower. Before you apply, there are some things you should think about in order to be fully prepared. Commercial real estate financing is different from residential real estate in a big way, according to the lender. With residential real estate, they are looking at how much the property is worth, and not overly concerned with how much it will make in the future. Residential property generally appreciates over time. With commercial real estate, however, they’ll be looking at future profits. This means that they will be concerned less with the current worth, and more with the possible worth. As a result of this, they will be very concerned with what sort of profits the venture will generate. This is why it is very important for you to sit down and do the math. How much do you think it will make? This means also that you should be clear on how you will use the property. What kind of business will this be? Is it going to be all for one business, or are you going to rent out units? These will be major considerations for the lender, so make sure you have a detailed plan all set out. The actual geography of the property will also be a factor in determining whether you get your loan or not. Look at the location of the property and how that will effect the business. You will have more trouble getting financing for a place located way out in the sticks than a place on a highway off-ramp. The size and type of the property will also be factors. You will want to look at the history of the place and make sure there aren’t any minor details that might cause trouble, like environmental problems. Risk is the most important consideration to lenders. They will be looking at the future of the venture and, in particular, at possible things that could go wrong with the business. A big part of this is the condition of the overall market. You can save yourself trouble later with your commercial real estate financing by studying the market and understanding its current trends. This is what your potential lender will be looking at, so it’s good for you to understand it as well. If the future is uncertain for the type of property you are trying to buy, they may be worried about making back the loan. Before the deal closes, they will send you a “commitment letter.” This is a notification from the lender letting you know officially that you have been approved. More importantly for the lender, the commitment letter will have the terms and conditions of the loan. In other words, these are the rules.

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Investing in commercial real estate can be a daunting, and if done incorrectly, very expensive process. The good news is you don’t need years of training to be successful at it. First-time buyers who take the time to do their homework find real estate investing to be financially and personally rewarding. This article gives newbies the practical advice they need before jumping in. First, here are a few differences between residential and commercial real estate (CRE) investments that you should know before buying anything. Commercial properties
-are valued differently. CRE income is directly related to its usable square footage, which isn’t always the case with residential properties.
-often see greater cash flow. On an initial investment basis, the yield is often higher per square foot than in residential. A leased or rented multi-unit commercial property generates more income than a single-family dwelling.
-have longer leases. A longer lease length helps stabilize cash flow.
-help diversify risk. What this means is if, for example, you own an apartment building and you lose one of your ten tenants, only one-tenth of the income for that property is lost. In a single-family house a lost tenant means the entire rent is lost.
-are valued differently by the bank; find one that works with commercial real estate, and know that it will want a higher down payment than with residential investments, usually 30 percent or more.
One important similarity to keep in mind between these two types of property investment is that commercial real estate does go into foreclosure. Banks apply the same methods here as in residential properties. Now that you’re a little more familiar with the ins and outs of commercial real estate, the next step is to do some research. The worst possible thing to do is to jump right into before getting all the facts. It is important to educate yourself as much as possible to keep from making a financial blunder. Read as many books on the subject as you can. Learn the market for your geographic area.

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Like the traditional real estate investing model, short sale investing is based around the idea of finding and buying properties at a discount. Moreover, buying right is also important in the short sale business. The primary difference between the two models concerns the holding time and exit strategy used to profit on the deal. The most common exit strategy in the short sale business is a back-to-back closing where a property is bought and sold in the same day. This reduces the need to buy at 65 percent of the as-is value because there are no rehab or holding costs. This gives investors more options that can be pursued and a greater opportunity to generate more business. In the example below, the subject property is in foreclosure and the mortgages are equal to or close to the ARV. Despite the recent interest in short sale investing, competition is still low. Many investors will not touch a property that is fully leveraged or over-leveraged and in foreclosure. For those investors that will, many do not have the complete understanding of the process necessary to make the short sale transaction work. A short sale deal involves several moving parts and requires a working knowledge of how these parts fit together. For those willing to take the extra time to really learn all facets of the residential real estate business, the results are rewarding, almost overwhelming. One attractive aspect of short sales is the limited exposure they offer the investor in the terms of risk. In learning how to successfully complete a back-to-back transaction involving a short sale, the investor greatly reduces risk while increasing profit potential. The quick-turn eliminates holding costs and the uncertainty of buying a property with the hopes of selling for a profit. If structured correctly a short sale property can be acquired, negotiated and sold in such a way that the investors risk level is minimal, almost eliminated entirely. In essence, a property is bought only when it’s already being sold. Traditionally, investors looked for properties with equity to be bought at a steep discount, rehabbed and sold. Properties that are candidates for short sales are in foreclosure and have no equity and thus most investors do not pursue them. The opportunity to buy and sell properties in foreclosure through short sale negotiations is huge. With the collapse of sub-prime lending, the possibility of finding houses to buy using the short sale method have never been more plentiful. For this reason short sales have become a buzzword in the real estate industry. Take away the risks associated with traditional investing the holding costs, contractors, rehab, financing and add to it the ability to quick-turn properties and it’s no surprise that short sales have become so rewarding.

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If you have a business, you will need to settle various aspects that can affect the income that you can generate from it. With this, you will also have to remember that one of the most important factors would be the commercial real estate property that you might want to rent or buy. This is a big factor that it can affect your actual profit in the long run. This is an important decision that you will have to make so you can simply choose amongst the commercial real estate properties that are available and decide when you are sure of the option that you have. You cannot afford to have a mistake so it would be better if you are going to spend just enough time before making any kind of deal. There are various opportunities in the commercial real estate market. It can be the right place for your business but you should also consider that there are other things that might affect your profit. You will only have to remember that the property that you will buy will have an impact so you should be wary of your choices and the decisions that you will have to do. You should also know that there are various types of commercial real estate properties available. To be able to get the best one, you will have to know each time. When you learn about the qualities of each type of property, you can assess the different kinds that are available and you will be able to check if there is a type that suits the needs of your business. Just remember that the property has to have the right location, size and reach to the people that you can cater to. This will be the qualities that you will need to watch out. Once you know the different commercial real estate properties, you can now decide if there is a kind that you can really want and it can be a perfect match for your business.

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In commercial real estate it pays to have a basic plan that allows you to focus on and refine your closing procedures. Far too many people in the industry start to close when they think that the time is right and then use a random process. They do not close well. They are not practiced and they are not refined to the requirement of closure. You always know when you are dealing with a real professional in the industry. They are professionally direct and helpful in the way in which they interact with the other party. Their dialogue is selective and focused. They are very skilled. To achieve this level of performance it requires sometimes years in the industry, although you can fast track the process with simple practice.
What we have done here now is to give you a solid process of closure and performance that can be utilised for sales, leasing, and other commercial property matters. This list can be practised and can be improved to suit your market and your business style.
-Put out feelers early in the conversation to understand what the other person is thinking. Take notes if this is your way of capturing key elements of the conversation.
-Note body language of the other party in the conversation. It is surprising what you can see in the actions and posture of the other person. They invariably let out visual hints regards their thoughts and feelings on the property and the discussion. It is not so much what they say but what they show in the process of conversation that you want to interpret. As you chat with them it is the big picture of response that you get including the body and the posture that you need to assess.
-Closing starts from the initial meeting. Once a person is qualified and becomes the attention of your conversation, then you should always then be closing in small conversational ways that are in reality a series of small acknowledgments. It has been shown that the major sale is in fact a series of smaller selected decisions that the client or prospect is taken through. This can be done with subtlety.
-Make the other party feel confident in your ability to help them by displaying market knowledge and property performance awareness. Talk about the market and what you have seen recently of interest to the other party. Make the conversation a balanced dialogue of questions, answers, and opinions. In the world of professional negotiation this is called ‘pacing’ and infers that your conversation is moving with the other person. Remember that the conversation is about them and not about you.
-Talk about other recent deals and properties of relevance in the precinct. Most particularly tell stories of importance. It has been shown that stories of the commercial real estate market are more compelling to the other party than just facts and figures. The person you talk to will remember and listen to a story far more than the numbers that you give. If you can put yourself and your business in the story in a productive way then all the better for your conversation, negotiation and closure.

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In today’s market, nothing is to be considered a safe bet. Over the last few years the safe bet in residential real estate has turned into a nightmare for many individuals. Well, as we look ahead we will find the same now holds true for many of the commercial investors. Many properties purchased in the last few years will experience balloon payments coming due. The expectation to just refinance the property with few hassles has gone by the wayside. The problems listed above can happen with any type of commercial property, but some may be more problematic than others. When you consider what type of commercial property to invest in considering the economic climate today, you might find yourself drawn to apartment complexes. Apartment complexes can be a safer investment today, for example, than a shopping center with no national tenants. The smaller, or mom and pop, businesses are usually the first ones to feel the impact of economic contraction. With that said, let us be realistic. Everyone still needs a place to live. Apartments are not going anywhere! The real question is can you purchase an apartment complex today and have positive cash flow.

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