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Commercial Real Estate Pro Network

Commercial Real Estate Professionals who work with Investors, Buyers and Sellers of Commercial Real Estate. We discuss todays opportunities, problems & solutions in Commercial Real Estate.
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Now displaying: 2017
Aug 10, 2017

The 1031 Exchange is a section in the IRS tax code that allows investors to defer paying capital gains taxes.  If your are a real estate investor, this is a great opportunity to keep your gains when investing in a like investment property.

 

Bill Exeter with Exeter 1031 Exchange has been working with investors as a qualified intermediary for over thirty-four years.  He provides specific steps and useful information for investors considering an exchange.  

 

FREE A Guide to 1031 Exchanges click here

 

How a 1031 Exchange Works

The seller contracts with a qualified intermediary prior to the sale of an investment property closing.  The intermediary receives the money from the sale on the seller’s behalf.  This keeps the seller from constructive receipt, which is a taxable event.  

 

The intermediary applies the money to the new property.

 

You have 45 days to identify a replacement property and another 135 days to complete the purchase of the replacement property.  The sale and purchase of the two properties must be completed in 180 days to avoid a taxable event.

 

You should contact a qualified intermediary during the sales negotiation when the sale seems likely to be completed.

Keys to a Successful 1031 Exchange

The key to a successful 1031 exchange is planning.  It takes coordination with all of the interested parties; lender, broker, title agent, qualified intermediary, attorney, accountant, etc.

If you can Identify and tie up the replacement property prior to selling your property, the process tends to go much smoother.

Reverse 1031 Exchange

Can you purchase the replacement property before you sell your property?  The 1031 Exchange can work in reverse.  You will contract with the qualified intermediary to act as the buyer of the new property.  When you sell your first property within the 180 days of the new purchase, the proceeds will go through the qualified intermediary and be applied to the replacement property.  

 

How Much Does a 1031 Exchange Cost?

The price varies among qualified intermediaries.  The full cost of the service ranges from $700 - $5,000 depending on the degree of difficulty and the service provider.  

For more information go to:

http://www.exeter1031.com/default.aspx

Call: (619)239-3091

Aug 3, 2017

A new client of mine is the focus of this case study.  The situation is one that reminded me of the challenge property owners face when looking shopping for insurance for old buildings.  

The particular property is like many in the Portland downtown.  It is a 9,000 square foot one story brick building with wood trusses built in 1927.  The tenant is a retail business with a showroom.  The building is wide open with a small mezzanine and a small area walled off for some storage.  There is one bathroom, and a small break room with a sink.  There are two perimeter walls visible to the sidewalk and busy city street which are showroom windows.  The other two walls are solid brick, with no openings.  

The estimated replacement cost estimate generated by a replacement cost estimator used by insurance companies.  $1,332,780.00.

The current rents are $12,000/ month, $144,000 annually.

Building systems:  It is widely held belief that building systems have a limited life expectancy.  Therefore, insurance companies require that systems, roof, electrical, plumbing & heating and cooling systems be replaced every twentyfive to forty years.  If not replaced, a carrier will require an inspection from a licensed contractor stating the condition of the system is sound.

Current code does not require the building to be sprinklered based on square footage and occupancy.

Updates:

  • Roof: 1990 the roof was replaced prior to when the owner purchased the building.  The owner has the roof cleaned regularly, removing all of the leaves from around the drains to prevent pooling of water, and staining of the roof.  The roof has been inspected in the recent past, and the roofing contractor said it is sound and with regular care could last another fifteen years.
  • Electrical: In 2001, the new tenant needed some electrical updates to provide for lighting in the showroom windows.  All electrical panels are circuit breakers, and electrical wiring is housed in conduit.   
  • Plumbing: There is limited plumbing as described above.  The updates are limited to new fixtures.
  • Heating & Cooling (HVAC): The building has a gas fired furnace that hangs from the ceiling.  This is a common style of heater for warehouse, large showroom’s.  In 2004, a newer ductless heat & air conditioner unit was installed to provide air conditioning.

The owner received a notice from his insurance company notifying him that they would not be offering renewal due to the age of the building.  When he contacted his agent, the agent, said there was nothing he could do.

I discussed with the building owner the history, and prepared applications in order to tell the story of the building to potentially willing carriers.  

CLICK HERE to get the complete results:

Jul 27, 2017

CREPN #102 - Should You Lease or Own a Commercial Building with Allen Buchanan

 

How do you know if you should Lease or Own a Commercial Building for your business needs?

 

The economy is growing, rents are rising, and commercial real estate space is more difficult to find.  

 

So what questions should you answer to know if you should lease or own a commercial building for your business needs ?

 

Allen Buchanan is a principal with Lee & Associates in Orange County, CA and a true commercial real estate pro.  He has specialized in industrial space sales and leasing since 1984 and provides the following tips for business owners considering purchasing a commercial building.  

 

Questions to ask before buying commercial real estate

 

Market

Where is the market in the cycle? Commercial real estate is very cyclical.  It is important to consider what is the current state of the market.  Is space plentiful or limited?  Are capital markets willing to lend with favorable terms?  Is there an expected growing demand for space like you need?



Who are You?

What type of company is yours?  What are the space needs for your business?  Do you expect to outgrow your space in the next three years?  Are you making money?  A lender will look for a favorable track record including, have you been in business for at least five years?  

 

If you are stable, have a proven track record, and anticipate the continuation of your business and have the time to benefit from long term appreciation, buying might fit be for you.

 

What are the Steps to Buying Commercial Real Estate?

If you have been in business for a while, you likely have received numerous calls from commercial real estate brokers.  If you are thinking about buying, interview a couple of theses brokers and find out if they can potentially be a resource for the time it takes to find a property.

 

Find out if you are eligible for financing.  The commercial real estate broker can point you to a potential lender.  Typically SBA loans and brokers provide some

 

How long will it take?  To be successful, you should plan on one to two years before you are moving into a new property.  The lengthy process includes:

  • Search
  • Potential misfire
  • Loan underwriting
  • Physical inspection
  • Appraisal
  • Build out
  • Permitted usage question and answer with city

 

What are the Benefits to Ownership?

Long term, for the right situation, you can benefit significantly through:

  • Appreciation: rent increases and demand will push the value of the building up over time.  Provided you have the time, this is a huge opportunity.
  • Depreciation: for the owner of the building, the purchase price or the structure can be expensed over 39.5 years.
  • Cost stability: when you own a building, you can more easily control the cost of space for your business needs.



For more goto:

www.allencbuchanan.com

https://www.youtube.com/user/abuchanan100

Jul 20, 2017

How do you transition from investing in Single Family Rentals to Commercial Real Estate?

 

Most people recognize single family properties because they live in one.  It’s recognizable and comfortable.  The barrier to entry is low.  Banks are willing to lend on the borrower’s credit score, job history and the property appraisal.

 

Many investors start in single family residential, and never consider commercial real estate.  While single family rentals is an investment strategy, the most significant increase in wealth consistently comes from investing in commercial real estate.

 

For investors who are stuck in single family or just getting started, and possibly afraid of larger properties, here are the steps needed to get into commercial real estate.



The Steps to Transition

 

Get the Knowledge

You need to make some connections with a few key professionals.  

  1. A Commercial Lender who is willing to meet with you and help you determine the lending parameters they can lend on.  It will be useful if you know the following terms:
    1. Net Operating Income; NOI
    2. Capitalization Rate; Cap Rate
    3. Cover Ratio
  2. Meet a Commercial Real Estate Broker who will help narrow your search to a property type, size and location that can meet your needs.  The broker will help you understand the ins & outs of commercial real estate and figure out why you want to pursue an opportunity in commercial real estate.

 

You need to have a clear understanding of who you are and what you are looking for.  Explain your “why” to the broker and ask for input from the broker to gain confirmation you are on the right path, or learn what might be a better option for you.




Ask to See Some Opportunities

Now that you have an understanding of what is required, and a level of investment you feel comfortable pursuing.  It’s time to analyze some opportunities.  Ask a broker to show you some deals.

 

Look at potential deals and even deals that have already closed and run the numbers.  The more you do this the more comfortable you will become, and you will be able to recognize a good opportunity when it presents itself.

 

Analyze as many deals as you can.  



Pull the Trigger

You will never know everything about real estate investing.  Each investment will teach you something new.  Your  team will help you make a good decision.  In fact, the larger the deal, the more help you will get.  Why?  Because the bank will not let you make an investment into a property if the numbers do not work.  



For more go to:

Robert Creamer

Email: creamer@cmocre.com

Phone: 214.564.8909

Jul 13, 2017

Three Steps to Financial Freedom.  Can it be so easy?  

 

Financial freedom is the goal for every working adult around the world.  So why do so many people struggle to get there?

 

Tim Rhode has come full circle.  He was a poor student, part time grocery clerk and found his passion and created financial freedom through real estate.  

 

Before you can invest, you have to be aware of your ABC’s of your personal finances.

 

  • How much is coming in?
  • How much is going out?  What am I spending my money on each month?
  • What’s left to invest?

 

 

Once you have money to invest, you can pursue Financial Freedom.

 

The three steps to Financial Freedom:

 

Step 1: Awareness

It all starts with awareness.  This includes getting educated about your surroundings and the people in it and where the path of progress going.

 

With some basic awareness, you have to jump in because you can’t win the game if you aren’t in the game.

 

Now you have to be willing to grind and focus.  

 

Step 2: Become a Master

The grinding starts to pay off after you have some experience.  You will start to recognize the next level of the game and how you can play it.  

 

Step 3:

Exchange into bigger opportunities.  In real estate, the 1031 Exchange is a vehicle for deferring the taxes from a real estate sale.  Because you still have the would be taxes to invest, you are able to leverage up into properties that are more easy to operate.  

 

It takes time

Quit looking for the shortcut to getting rich.  Everyone has heard a story about the overnight success.  But the reality is that true success takes time.  If you are willing to invest in yourself and your time, doing what works, over time, you will have success.

 

Remember, education is a lifelong pursuit.  You have to commit to continuously educating yourself.  

 

For more goto:

Email: tim@timrhode.com

Website: 1lifefullylived.org

 

Special Offer for CREPN Listeners

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To receive your Discount: click here

Jul 6, 2017

Buy and Hold Investing is the standard for most Canadian real estate investors.  

 

Jesse Fragale bought his first rental when he was at college.  Recognizing a good thing, he grew his student housing portfolio with multiple single family and condo rentals.

 

You might think student housing equals keg parties and irresponsible tenants.  While this may be true, it was a guaranteed way to push market rents in a rent controlled market.

 

Jesse is a Commercial Real Estate broker in Toronto, where the rent control policy caps rent growth to a maximum of 1.8%.  The only time a landlord can increase rent by more is after a tenant moves out, which is frequent in student housing.

 

Rent Control

Interestingly, the policies meant to help tenants gain affordable housing, has prevented investors from entering the market to build more units.  It is estimated that over ninety percent of all apartment housing in Canada was built prior to 1970.  

 

Instead of building new apartments, investors have purchased condominium units and placed into rental.  Until now, condos have evaded rent control.  Ontario has proposed changes to rental housing policy to close the loophole and bring condos under rent control.  Ontario’s 16 new housing measures

 

Jesse and a partner recently purchased an eleven unit property.  Two vacancies allowed for market rate rent increases.  Also, there is a possibility of creating an additional unit from a large laundry room.  These measures will dramatically increase the value of the property.

 

Buy and Hold for the long run

The 1031 Exchange available in the USA, allows the investor an option to defer paying capital gains tax when a seller buys a larger property.  No such option exists in Canada.  Due to the lack of a 1031 exchange, most Canadian investors buy and hold focusing on the long .  

 

Jesse would like to grow the portfolio substantially in the next five years.  However, given the challenges in Canada, he is considering his options in the US.  

 

For more, contact Jesse Fragale at:

jessefragale@gmail.com

Jun 29, 2017

Where are the Multifamily Market Opportunities?  

Find a market with jobs, low rental housing supply and rents that are affordable.

The Multifamily market has been cooking for several years as the demand for rental housing created by the crash and millennials who choose to live in cities.   

As the cycle continues, investors begin to ask, “how long can this last?”

If you are a developer or investor, the ability to look at a specific market and identify the characteristics in play are critical to your success.  Firms like firms like Axiometrics, acquired by RealPage, specialize in providing monthly multifamily market data.

Primary markets with the most demand and development, are showing signs of oversupply in the class A units.  In these markets, free rent concessions have begun to show up and rent growth has slowed.

Say goodbye to rent growth of 12, 14 and 16% year over year is no more in most markets.  The healthy markets for the near future suggest 2 - 3 % annual rent increases.  

 

Are there still multifamily market opportunities?

While primary markets ability to absorb all of the new units has begun to cool, the secondary and tertiary markets still show signs of opportunity for investors and developers.

What’s the key?  The fundamentals of opportunity remain the same.  Where are the jobs?  Where is supply tight, and rent is still affordable.

Tech jobs pay well and drive up the demand for high end housing.  

 

Things to watch?

The cost of construction is rising based on the tight labor market.  This has not slowed development, but it is driving the cost of developing new units and repositioning older units.   

Millennials continue to want to live downtown, are not getting married and do not want to move to the suburbs.  Until then, multifamily demand should remain strong.



For more go to:

www.realpage.com

ryan.kimura@realpage.com

Jun 22, 2017

A local real estate investor can grow big, and gain efficiencies not available to investors who spread their portfolio over multiple markets.  

 

Brian Murray, founder of Washington Street Properties shares how he moved from his position as a college professor to a full time real estate investor in Watertown, NY.   His focus on local real estate has created multiple opportunities for growth and the ability to contain expenses.  

 

Advantages to investing in local real estate

There is no substitute to seeing your portfolio daily.  If you find something is not right, you can address it immediately.  This nips the problem in the bud and can reduce the cost of the fix.

 

Local knowledge provides you the real time ability to know if your rents are too high or too low, and to make adjustments accordingly.  This helps maximize income.

 

Opportunities for growth

When you are visible in the community, brokers, owners and potential tenants know who you are.  Brokers and Property owners looking for a buyer will contact you first because they know what you have done and that you can close.  

 

When you have more properties in a single market, you can accommodate tenants needs for more or less space  

 

Contracts for service.  

Many investors focus on just one asset class which supports the notion of specialization.  However, if you specialize in one local market, you can gain pricing advantages from vendors not otherwise available.  The same service provider for roofing, electrical, parking lots, plumbing, carpet cleaning, lawn care, etc. can service multiple properties for you.  When vendors have the opportunity to do more work for you, they are willing to provide a discount.

 

For more go to:

http://www.washingtonstreetproperties.com/

 

Brian’s B ook:  Crushing It in Apartments and Commercial Real Estate: How a Small Investor Can Make It Big

Jun 15, 2017

It is said that the First Multifamily Deal is the hardest.  For Jason & Pili Yarusi, they realized that there are efficiencies in multifamily are greater than what you can get with smaller properties.

Once they decided to move forward with multifamily, the question turned to where?

Jason & Pili are residents of New Jersey, where real estate prices are prohibitive for investing due to compressed cap rates and tenant laws do not favor landlords.

First, they set their Multifamily investing criteria:

  • Number of units, more than 100 and less than 200
  • Market Population stability or growth
  • Stable employment
  • Areas they were familiar with

The markets they found to support their criteria:

  • San Antonio
  • North Carolina
  • Kentucky
Then they built their multifamily team.  

The first member of the team in was property management firm.  The criteria for selecting a property management firm:

  • Not too small
  • Experienced
  • Real time software that provided access for their investors
  • Ability to provide onsite management and maintenance
  • Extensive market knowledge

 How did you find the property?

Their property manager led them to a property that had been on the market previously.  They believed it had some value add potential.  They analyzed the deal, and made an offer.  The seller countered, but quickly they realized they were too far apart.

After six months of a continued search, they circled back, and made a second offer to the seller.  This time, they provided numbers to back up their offer and explained the reasons for their offer.  The seller came down $600,000 and requested that the buyers pay their brokers commission.  

After analyzing hundreds of deals, making multiple offers, and always being disciplined, their efforts paid off.   

 

For more go to:

Podcast: The REI Foundation Podcast with Jason and Pili

WWW.OAKCAPPARTNERS.COM

INFO@OAKCAPPARTNERS.COM

WWW.WABUILDINGMOVERS.COM

Jun 8, 2017

Retail Commercial Real Estate is NOT DEAD!  Despite of what you’ve heard about how Amazon killed retail, it is fake news.  

The Amazon effect has made it challenging for older stores and malls that attempt to continue operating as they did twenty years ago.  However, this challenged subset of retail is not reflective of the whole asset class.   The rest of the class is doing great!

My guest, Commercial Real Estate Broker, John Crossman with Crossman & Company, discusses the retail sector and provides an overview for what is working.  

What are the types of retail commercial real estate?

There are multiple types of retail real estate, including: strip mall, neighborhood shopping center, community center, power center, lifestyle center and enclosed malls.

Since the beginning, healthy retail has relied on the surrounding two miles of residents for support.  This continues to be true today.  If a community has jobs, and a minimum of 10,000 residents, you can have a healthy retail center.

What are the characteristics of a successful retail center?

Successful retail centers have a component of civic purpose.  Centers that have been architecturally designed, without function continue to fail.  People want and need connection with others.  A successful retail experience provides this both a connection and a sense of community.  A good example of a center is a grocery store.

Evolve and survive!

The rules have changed.  You cannot limit your search to a big box retailer to fill an empty big box space.  You have to get creative and look towards non traditional tenants such as; healthcare, education, office, church, and gyms.  

The upside for these tenants is, less expensive rent than downtown, easy parking and access to retail shops & entertainment.

Tenant space requirements have changed.  Space in the range of 800 - 1500 square feet is always in demand.  Space that is larger than 1600 square feet is more difficult to lease.  

For more go to:

Website: http://www.crossmanco.com/

Email: jcrossman@crossmanco.com

Linkedin https://www.linkedin.com/in/jcrossman/

Book: Career Killers Career Builders:

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