Timing the Commercial Real Estate Market

December 21, 2008 by Admin · Leave a Comment
Filed under: Commercial Real Estate 

This article is probably not what you think it is about.  Most people think about timing a particular market, hoping to buy at the very low and sell at the very high.  However, in commercial real estate investing, the most successful investors haven’t timed the market -they simply became the market and held on.

During the 1990’s real estate recession Sam Zell was famous for saying: “stay alive til ‘95″

Meaning don’t sell, but simply hang on!  Most commercial real estate investors are not that worried about market price gyrations as they are cash flow.  Obviously cash flow can be extremely volatile when you are talking about properties that are extremely cyclical like a mall or a hotel.  However, there are other properties that are not cyclical and offer very stable cash flow, with escalation policies in the long-term lease contracts.

Don’t you find it interesting that you never see a member of the Forbes 400 under the Real Estate Category swinging a hammer, refinishing hardwood floors, mowing the grass.  More importantly, they didn’t do those things to get to where they are.  They spent their time wisely and hired these services out, so they could properly scale their business.

My business partner and I developed a course called 3 Net Lease Profits, that let’s beginner investors take advantage of this opportunity.

We believe cash flow should be the main focus in commercial real estate investing.  Some people have used the strategies we outline in the course to build multi-million dollar publicly traded companies.  Others have simply used the strategy to buy one property and spend more time with their family without worrying about retirement or the stability of their job.

In summary, we believe that if you have an opportunity to educate yourself on investing in commercial real estate to add cash flow and stability into your financial future you should do it.

To boot, we also think the quality of the education is important.  Rather than hunting and pecking through a million web-sites, we have a consolidated course with interviews from real estate professionals, case studies of actual deals, editable excel worksheets, course book, and another guidebook for all of your real estate investing needs.

The workbooks are also valuable because they give you a list of lenders that have experience in dealing with with unique commercial real estate deals.

I think its important to have a course rather than just a simple ebook from somebody who just wants to make a quick buck.

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The Basics of Commercial Real Estate Investing

December 18, 2008 by Admin · Leave a Comment
Filed under: Commercial Real Estate 

Heard about the huge gains ready to be made in commercial real estate investing, but wary of the risks? You’re right to be cautious. While the potential for high profits does exist, real estate investing isn’t something you want to jump into without knowing a fair amount about the potential pit falls. Even if you have experience buying and selling residential properties, you still have some things to learn about working with commercial properties.

The first thing to understand before you get in too deeply involved is commercial real estate isn’t suited to every investor. Investors who do best have considerable understanding of one specific industry or can pay advisors to conduct research for them.

Once you’ve chosen an industry, the next thing you’ll have to learn is how to evaluate commercial real estate. Naturally, since you already have a good idea on the property values in the industry you specialize in, you can probably sniff out a few valuable properties without too much effort. Still, there are certain things that factor into a property’s value that affect investors differently than those buying or renting the property for their own business.

If you really want to learn the ins and outs of commercial real estate investing, one of the best things you can do to start off is read through a good real estate investing handbook. This will introduce you to both the financial, legal, and commercial aspects of the field. Ideally, the handbook will also provide you with a good step-by-step plan for getting started, give you tips for increasing your profits and decreasing your workload, and point out any dangers you might run into along the way.

Keep in mind that every investor has their own strategies and tricks for finding good investments and making them pay off. While a lot of handbooks claim the strategies could work for anyone, the reality is that not everyone will have the personality to work with that particular strategy. That is, while the strategy itself might be sound, it may not work so well for someone who just doesn’t have the personality traits needed to implement it correctly. That’s why before you choose a commercial real estate investing handbook, it’s a good idea to learn a little about the author to get a sense of whether their strategy is something you could really do yourself.

Once you’ve read through a couple of good, thorough handbooks and think you’ve got the gist of things, you might want to consider joining a commercial real estate investing club. This will give you a chance to discuss anything you might not understand with other investors and get precise answers to your questions. Don’t think you have to be a full-time investor to join, either. While some clubs do have certain entry requirements, many accept all levels of investors.

Investing in commercial real estate carries certain risk venture, but once you get a handle on the basics of commercial real estate investing, you’ll be able to decide for yourself whether or not the risks are worth the rewards.

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How to Get Real Estate Investing Financing

December 4, 2008 by Admin · Leave a Comment
Filed under: Commercial Real Estate 

If you’re just getting started in real estate and wondering how to get real estate investing financing, you’re not alone. As the saying goes, “It takes money to make money,” and in the field of real estate investing-where large sums of money change hands with each purchase-many people assume that saying is doubly true. The fact is, though, with a little insight into the ways of professional real estate investors and a little smart thinking, you can make money in real estate investing even without a huge bank account to tap into.

Many people new to real estate investing place their hopes on getting a personal or business loan from a bank to finance their foray into this field. Unfortunately, though, even if you would normally qualify for a loan, your chances of convincing a bank to loan you money to buy and/or fix up real estate you intend to sell are slim to none. Don’t start worrying yet, though, because there are a few other sources of financing available that are very realistic.

Your best option is to seek out mortgage lenders. First of all, these lenders are already involved in the real estate market and won’t be put off by your “risky venture.” They’re very well aware of how they stand to profit from lending to smart, skilled investors. Another advantage is they usually offer more flexibility than most commercial banks. After all, they’re used to lending out fairly large sums of money, which often means negotiating with customers to find workable interest rates and payment terms.

That said, they are still businesses lending for a profit and many take a dim view of some types of real estate investing. That’s why if you’re going to try to get a loan from a mortgage lender, it’s best to look for those lenders that specifically advertise their willingness to work with unconventional borrowers or those with bad credit. This goes even if you have perfect credit. It just signifies that the mortgage company is ready and able to consider lending to people besides traditional home-buyers, which is ultimately what you’re looking for.

Another option you might consider is that of  working with a private mortgage lender. These individuals do essentially the same thing for you that a commercial mortgage lender would. You can often find these people via commercial mortgage lenders and real estate agencies.

While these sources of financing are easier to work with than commercial banks, there are some drawbacks. Number one is the interest rates, which can be shockingly high. That’s why you only want to take out one of these loans if you’re sure you can get the property rehabbed and sold within a short period of time.

If you’re new to real estate investing, there’s one piece of advice you need right now. Maybe you’ve found a great, cheap fixer-upper you’re sure you can sell for a profit, but before you start making deals with the seller and signing contracts, make sure you have your financing lined up first.

Getting financing for real estate investing may not be the easiest part of this business, but it can be done. Once you know how to get financing for real estate investing, the rest is a matter of knowing which properties to buy and how to get them earning quickly.

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An Introduction to Commercial Real Estate Financing Basics

November 30, 2008 by Admin · Leave a Comment
Filed under: Commercial Real Estate 

Want to try your hand at investing in non-residential properties, but wondering where you can turn to get commercial real estate financing for your new business venture? While finding this type of financing isn’t always easy for the beginning investor, once you know the steps to take, getting financing for your commercial investments becomes a lot easier.

Before you get your hopes up too high, though, you should be aware that the majority of those plans to get make a million overnight by grabbing up commercial real estate for no money down are nothing but scams dreamt up by people trying to sell you something. Getting some serious financing to help you in your plans is absolutely possible, but your chances of becoming a commercial real estate investor for free are slim to none.

In this field, the next best thing to a free lunch is owner financing. This is where the seller keeps up a second mortgage so you won’t have to invest any of your own money. As you might have guessed, though, getting this type of financing is extremely rare. We’re talking unicorns and hen’s teeth, here. Even in cases where you can get a deal like this, the seller is ultimately getting a better deal and making a profit off you.

So what’s the most realistic option? If you need financing for commercial real estate purchase, your best bet is to go through a mortgage lender. The average commercial bank just won’t take the risk of lending money to commercial real estate investors, but mortgage lenders are a little more used to high risk loans. In particular, look for a lender that specifically mentions its willingness to work with unconventional borrowers or those with bad credit. This will help you find those lenders that are open to taking on a little risk.

Don’t be fooled into thinking you can easily get a loan to cover all your expenses, though. For one thing, most commercial real estate financing loans won’t cover more than 75% of the property’s appraised value. The rest of the money you’ll have to come up with yourself. You’ll also need to put a fair amount of effort into proving that the property has enough debt-repayment potential.

If you don’t think a commercial mortgage lender is for you, you can always look for a private mortgage lender. These individuals, often called angel investors, offer financing for property with a good chance of high returns despite a high risk. Unfortunately, they’re not too easy to find.  First talk to a commercial mortgage lender about your chances of obtaining financing and while you’re there, ask if they can connect with any private mortgage lenders.

Obtaining commercial real estate financing isn’t so easy to get if you just jump in and expect someone to throw your dreams a “no money down” life preserver. If, however, you’re skilled at choosing investment properties with low risks, but the potential for high returns, you shouldn’t have much trouble getting financing through a mortgage lender.

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How to Choose a Sample Triple Net Lease: What you don’t know can hurt you

November 1, 2008 by Admin · Leave a Comment
Filed under: Commercial Real Estate 

So you’re searching online for a sample triple net lease to find out what this type of lease is all about and maybe use the sample in your own investment plans. While an online search for a sample triple net lease may sound like a logical thing to do, there are two problems with this strategy. First of all samples of this type of lease is as rare as hen’s teeth on the Internet. Now that’s not really a huge problem. If you’re willing to do a little hunting around, you’ll eventually track down a few. And that’s when the problems arise. How do you know the samples you’ve found accurately represent what a triple net lease should contain? Moreover, how can you be sure that what’s in the sample lease covers everything you’ll need in your own lease agreement?

Unless you’re already an expert at dealing with the triple net lease (in which case, you probably wouldn’t be looking online for samples), there are a lot of elements in a sample lease that can trip you up. To avoid trouble in the future, the wording of financial obligations must be clear and precise.

Keep in mind that a triple net lease obliges the lessee to pay all costs associated with the building. That includes things like utility bills and building repairs, which can vary dramatically depending on how the property is being used. Now if you end up with a loop-hole in your lease that lets the lessee off the hook for, say, certain kinds of building repairs, can you imagine what could happen?  It’s not so bad if you’re the one leasing the property. If you’re the owner, though, you could be in for a major hit to your bank balance.

Needless to say, a lease document isn’t something you want to cut corners on. A single error could cost you thousands in various fees, not to mention the headaches and hassle that go along with trying to get misunderstandings ironed out and rewrite the lease so that all parties involved are satisfied with then new wording.

Quite often, it’s not particularly safe to depend on the Internet for getting correctly worded legal forms. There are too many people out there who build sites just for the money and have no concern for whether you get accurate lease forms or not. That fact that you could lose serious money because of an error they left in their sample form is of no concern to them.

That doesn’t mean there aren’t any good places where you can find a sample triple net lease online, though. If this is your goal, seek out high quality sites specifically designed to help commercial real estate investors, the business sites of a commercial real estate agencies, or the personal Web sites of a commercial real estate investors. All these places can be excellent sources of forms because the people behind the sites truly understand real estate investing and, because they’re trying to run a business online, it’s in their best interest to make sure you get a quality product.

A sample triple net lease is hard to find online and a good one is even hard to find. If you need a quality sample triple net lease, though, check the Web sites of commercial real estate agents and sites for real estate investors and you’ll be able to find a sample you can use.

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