Nathan Johnson May 26, 2016 No Comments

How to Break Into the World of Commercial Real Estate

Commercial real estate is a very lucrative field. Unfortunately, it’s also very expensive, but if you can afford it, or if you have access to credit, all you need to be successful is knowledge and a little luck. While no one can help you with the luck, there are a number of sources for information and assistance, whether you’re an experienced investor trying to learn even more, or a beginner just getting started. Here are a few of the best ways to learn about the world of commercial real estate investing.

 

Read books

This is a great place to start, especially for beginners. There are so many books available on real estate, even commercial real estate specifically, that you’d never be able to read all of them. The best part is that it doesn’t have to cost you anything. Take a trip to your library and see what they have on the subject. Of course, you might find a few books that are such great references that you want to buy a copy. Books are often forgotten as educational resources, but they are such a great resource for anyone learning about commercial real estate, or anything else for that matter.

3 Books to check out are

  • How to Succeed in Commercial Real Estate Review
  • The Fundamentals of Listing and Selling Commercial Real Estate Review
  • Commercial Real Estate Investing For Dummies Review

 

The internet

The internet also has a wealth of ideas and knowledge that will be helpful to you. Remember, of course, that information found on the internet is not always as trustworthy as what you would find in a book, but you can still learn a lot, as long as you check the background and legitimacy of the articles you read. There is also a lot more information to be found on the internet than in books, because it is so much easier to publish to, and it’s easier for you to access as well. All you need is a couch and an internet connection.

Some great resources include:

 

Find a mentor

Although finding a mentor will take much more effort and time than reading a book or searching the internet, it’s worth it. Find someone, or better yet, several people, who are experts at what they do, and ask to be a part of it. Real estate investors tend to be very busy, but if you offer to help them out, or even pay them, they may be more likely to help you in return. Being able to watch someone do what you want to do and ask questions when you don’t understand will be incredibly beneficial as you learn the process. Maybe, one day, you’ll have enough experience to take on your own mentee.

A great professional resource is a Certified Commercial Investment Member or CCIM

Find A CCIM near you

In the Tampa Bay Area we also our own expert mentors the Florida Gulfcoast Commercial Association of Realtors or FGCAR

 

Research the area you’re interested in

Learn as much as you can about the market you’re interested in. Focus on the area in which you want to buy, but also the size, price range, and type of property you like. The best way to do this is to pretend that you are already an investor looking to purchase property. Find available properties in the area and contact sellers about them. Of course, you don’t want to take too much of their time or commit to anything, but they’ll expect people to ask for information without necessarily buying the property.

 

Study past investors and their choices

Look into expert investors’ histories. Read about where they started and how they built their fortunes. Analyze their choices and take note of which ones were beneficial and which ones weren’t. Try to emulate their good decisions, and avoid their bad decisions, but don’t forget to add your personality to their style.

Looking for more help breaking into the world of commercial real estate? Contact us. We’re experts in the field, and we’re happy to help you with anything that you need.

Nathan Johnson May 19, 2016 No Comments

How Important is Location to Real Estate Investments?

If you’ve been looking at real estate that is for sale, you may have noticed that the price varies greatly depending on the location of the property. If anything, this is even more true when it comes to commercial properties than residential properties. You may be wondering if one location is really worth more than another location. The truth is that real estate property really does go up in value as the location gets better, and for good reason. Of course, this doesn’t mean you should always buy the absolute best location, especially if it’s the most expensive. Here are a few of the reasons that real estate property in a good location might sell for more.

Attract more customers

One of the main reasons that a commercial property with a great location carries so much value is because a better location generally leads to more customers. Customers are, of course, more likely to do business somewhere that is convenient for them. They’ll also only shop in places they know exist, obviously, so a location that can be found by accident is very desirable. In fact, a prime location can actually lead to a huge savings when it comes to marketing. While a business that is hidden outside of town will be forced to spend lots of money, making sure people know it is there, the business right in the middle of town might not have to do any more than put up a sign over their door.

Ease of access

Of course, customers are not the only people who will be traveling to this business. You’ll also have a number of employees who have to commute to and from work every day. Believe it or not, being able to get to work easily and quickly is a benefit. Applicants may not think of it that way, but an employee who has an easy 10 minute drive into work is likely to be pretty happy, while a job that comes with an hour-long commute along a busy highway will probably draw fewer and less qualified applicants, unless you offer more money for the position. It’s also important to consider everyone else who might stop by, from salespeople, to deliveries, to the company that maintains your internet connection. Although this may be less important than your customers, it’s still preferable to be able to offer a convenient location.

Higher rent

So what if you don’t own a business? What if you’re only purchasing the commercial property as an investment? In actuality, all of the same principles apply. Because of this, another company will be much more interested in a property in a great location, and they’ll be willing to pay for it. On the other hand, if you attempt to rent out a property in a less desirable location, you’ll still probably be able to rent it out, but in most cases, you’ll get considerably less for it.

Higher resale value

Whether you own or run a company that is looking for a building to operate out of, or you’re searching for the best investment property, you’ll eventually want to sell the building. All of the concepts listed above will still be true decades from now. Although values change based on an endless number of variables, a property in a good location will always be worth more than the same property in a bad location.

Still a little confused? Contact us. Just because a property is in a great location doesn’t mean it’s worth the asking price, and a property that is in a poor location still may be worth considering. Be sure to consider all of the factors when looking for your property. Good luck!

Nathan Johnson May 12, 2016 1 Comment

First Time In Commercial Real Estate? 6 Tips For Successful Investing

     Investors who choose commercial real estate as the vehicle to grow and preserve profits and wealth are generally on a wise financial path.  From a near-certain increase in value over time to a potentially hands-off investment if entrusted to a competent management company, the benefits that a commercial real estate investment hold over other options are plenty and proven.  Nonetheless, for every new endeavor there is a learning curve, and the more quickly it is overcome, the more fruitful the project.  Luckily, where commercial real estate investing is concerned, even first timers can avoid common missteps if the right precautions from those that have gone before are heeded. Below are 6 tips for those dipping their toes into commercial real estate for the first time. Need advice?  Look no further.

1.  Invest rather than accumulate.  It can be tempting for a first time investor to get ahead of himself or herself, purchasing several properties right away before waiting to see if the first produces a profit.  While is certainly possible for this strategy to pay off, a more prudent move is to wait and see if one property makes money before purchasing another.  This helps the investor to determine whether any tweaks or changes are needed to make subsequent investment properties more successful than the first.

2.  Understand that no property is immortal.  When investing in new construction this piece of advice may not apply a strictly, although attention should still be paid to the quality of construction and any concerns about the land it is built on.  For any other commercial real estate investment, however, it is essential that the investor realize that over the lifetime of a property it is inevitable that he or she will have to spend some money on upkeep.  From a new roof to an updated wiring, there will definitely be phases where investing in the investment will be necessary.  Make a long-term financial plan for these expenses rather than being surprised each time one arises and the property will continue to bless rather than burden.

3.  Invest in one type of property at a time.  Focusing on the success of one type of property before purchasing another allows an investor to become the master of one trade rather than the jack, or even joker, of many.  The strategy of purchasing only one type of property at a time until that type has proven successful means that fewer of the same type of property can end up netting the same profit as many of several different types would net, and for a small investment of time and money.

4. Pay attention to environmental concerns when purchasing a property.  A surprising number of commercial real estate investors fail to realize upon purchase that property owners assume primary legal responsibility for cleaning up or otherwise fixing any hazardous waste problems that the property ever faces, even after it has been sold to another owner.  The cost for clean-ups can run into the millions depending on the degree of damage.  To avoid a potential financial devastation in the future, obtain an environmental report as part of due diligence, employing an environmental assessment company if necessary.

5.  Enlist a mentor’s guidance.  When it comes to financial matters, no one wants to make mistakes.  Once an investor has erred in the past and learned from it, however, he or she is often eager to share the lesson with someone newer to the game, in hopes of saving someone else the same trouble or financial loss.  A resourceful first time commercial real estate investor will use this fact to his or her advantage, finding a mentor who has successfully invested in similar types of properties.  In addition to offering experience-based advice, such a mentor can connect a new investor with resources that he or she may not otherwise have had such immediate access to.

6.  Ensure that investments and assets are sufficiently protected.  Life happens.  In the world of commercial real estate lawsuits happen along the way.  Rather than being caught by surprise, prepare for the unexpected before it happens by making sure investments and personal assets are properly protected and insured.  In addition to purchasing the correct insurance coverage for every investment and asset, speak to a lawyer to make sure each investment is separate from the others.  This can prevent a law suit involving one property from endangering the others.

     To talk more about the best insurance coverage to protect any commercial real estate investment, please contact us.  Thank you.    

Nathan Johnson May 9, 2016 No Comments

What Does It Mean to be Bonded and Insured?

When a person or company is marketing themselves and their services, many will promote themselves as “bonded and insured.” However, many consumers are often unsure what this actually means. We all seem to know this is important, but why? What does it mean to be bonded and insured?

Those who are not bonded and insured are often cheaper. However, did you know using these individuals and companies means you are accepting all the liability if something goes wrong? That is right. You are on the hook for everything from property damage to an injured worker.

The main distinction between bonds and liability insurance is who becomes financially restored in case of a claim. In basic terms, insurance protects the company or individual doing the work from loss, and a bond protects those having the work done if there is a failure to fulfill obligations.

If a contractor has equipment damages or worker injuries, an insurance policy makes sure they are compensated for that cost. There are only two parties involved: the insured and the insurer. On the other hand, a bond protects those in which an obligation is owed (the obligee) if the company providing the work or service (the obligor or principal) causes them a loss. Imagine along the lines of a contractor causing damage to one’s home, worker theft, or a failure to complete work.

Bonded

  • A contract that guarantees the bonding company will pay the obligee if the principal (i.e. the contractor) does not meet their obligations.
  • A bond protects the consumer.
  • A bond’s premium guarantees the principal fulfills their obligation.
  • Bonds are issued to individuals or companies whose projects requires a guarantee.
  • Bonds are a form of credit and the principal is ultimately responsible for repaying the claim.

Being bonded means a bonding company will protect the consumer if they have a valid claim against a company. These claims can include things like property damage to theft by a company’s workers. If there is an issue, one would file a claim against the company. The bonding company (or surety) will investigate and will pay out using the bond if the claim is valid.

Insured

  • A risk management contract between the insurance company and the insured.
  • The contract (or policy) guarantees the insurance company will compensate the insured if there is a loss.
  • An insurance policy protects the insured.
  • An insurance policy protects from possible losses.
  • The insured does not typically repay the insurance company if there is a claim.

Most of us are more familiar with insurance. If a worker is hurt on the job, or a piece of equipment is damaged, the company files a claim for the loss. As an example, imagine a remodeling company is installing new siding on your home, and a worker falls off a ladder and gets hurt. If the remodeling company is not insured, a claim is placed on your homeowner insurance policy. If the remodeling company is insured, the claim is on their own policy.

Summary

The phrase “bonded and insured” is something we see all the time from many different kinds of businesses, from contractors to cleaning services. Many of us know that a bonded and insured company is a good thing, but we don’t know why. We hope this article has helped to clear up any misunderstandings.

When a company is bonded and insured, the ultimate benefit goes to the consumer. Being bonded ensures the consumer is made whole if a company does not fulfill their obligations. Insurance insulates the consumer from liability if the company receives a loss while performing work.

The primary difference between the two is who becomes financially restored. Claims on a bond are paid to the consumer to cover their losses. Insurance will pay the company for their losses while performing their work or service. Make sense?

For more information or if you have questions about how to become bonded and insured, please contact us.

Nathan Johnson April 28, 2016 No Comments

What Are Easy Mistakes to Make When Writing a Real Estate Contract?

Real estate contracts are long and complicated documents. However, a correctly written real estate sales agreement is essential to avoid mistakes and misunderstandings that can cost you money. Today, we want to help answer the question, “What are easy mistakes to make when writing a real estate contract?

A real estate contract is a written agreement and commitment for the conveyance, sale, or exchange of real property. These agreements clearly identify all parties involved, the real estate / property, and the specific terms such as sale price. Who writes these contracts?

  • Realtor Associations — These are “one size fits most” forms used by many real estate licensees who are members of a Realtor Association.
  • Real Estate Brokers — Many national and regional real estate brokerage firms develop their own fill-in-the-blank forms.
  • For Sale By Owner — Generic real estate forms are available from office supply stores and other companies.
  • Attorneys — A real estate attorney will negotiate and write a completely customized real estate contract that conforms to state and federal law.

Of course, while not recommended, individuals representing themselves in a transaction can write their own contract. However, lawyers are the only professionals authorized to write contracts, even the forms used by real estate licensees. A contract is a legal document, and writing one is practicing law. Real estate agents are only authorized to help one fill out fill-in-the-blank contract forms, but lawyers actually write them.

Here is a list of easy mistakes in real estate contracts:

Attorneys

While the “one size fits most” real estate contract forms, used by brokers and salespersons, work in the vast majority of situations, many people make the mistake of not using an attorney when they should. Estate sales, short sales, bank owned and company owned property sales should all have contracts written or reviewed by legal counsel.

Parties

Real estate contracts identify all parties involved in the transaction. It is an easy mistake to not use the full name of the buyer and seller. Double-check the spelling of names, and include the mailing address of each. Errors can affect and slow financing, and cause issues at closing.

Property

It may go without saying one should provide the correct address of the property involved in the transaction. Is it “700 5th Ave,” “700 W. 5th Ave, ” or “700 Fifth Ave?” It is possible all are correct. More important is the legal description of the property: Tax ID, Parcel Number, Deed Book, et al.

Relationships

One should identify the relationship of each party with each licensed real estate broker involved, and include the actual licensee representing each. There are several types of relationships:

  • Seller Agent — The broker and all their agents represent the seller alone.
  • Buyer Agent — The broker and all their agents represent the buyer.
  • Dual Agent — A single broker and their agents represent both the buyer and seller.
  • Designated Agent — The broker is acting as a dual agent, but has designated certain agents to represent buyer and seller separately.
  • Transactional Licensee — Broker and agents assist with the transaction but are not acting as an advocate for either party.

Correct Math

An agreement for the sale of real estate includes the sale price and deposits. It may also include a  mortgage contingency, which the buyer states they will only buy the property if they receive financing with a certain loan amount. One must ensure that the sale price, deposit, down payment, and required financing amount are correct and balance.

  • Purchase Price — The total amount of the sale price.
  • Deposit — Ernest money or good-faith payment offered by the buyer to the seller. This is not the downpayment and appears as a credit at closing.
  • Downpayment — Cash payment offsetting the amount financed.
  • Loan Amount — The financed portion of the sale price using one or more mortgages.

Leaving Blanks

It is tempting to leave blanks on forms when many include default language. For example, there is an option to state how many days, from the execution date of the agreement,  one has to complete inspections. However, if not specified, the form may default to something like 10 days. When the real estate contract states “days,” unless specified, it means calendar days, not business days. Consciously filling in the form helps avoid confusion.

Counter Offers

It is common buyers will provide a completed real estate sales agreement as the offer to purchase. If the seller signs the agreement as-is, they accept the offer. Many times, parties make counter offers by lining out items and writing in changes. If the buyer finds the changes acceptable, they sign and date them. If the buyer disagrees, they can walk away or make a counter offer of their own. This can happen several times.

While this is acceptable and occurs often, it is not a best practice. In order to avoid confusion, misunderstandings, or liabilities from mistakes, do not make handwritten changes to the contract. A clean and typed form, as the final signed contract, protects everyone.

For more information or to talk about mistakes made when writing a real estate contract, please contact us.