Monthly Archives: July 2020

Tips to Hire a Commercial Real Estate Agent

If you don’t want to handle your relocation project or commercial lease renewal yourself, you can go to a commercial real estate agent. All you have to do is choose the right professional for your needs. Given below are 6 things you may want to consider during your evaluation. Read on.

Likability

A relocation or lease renewal is similar to a construction project. The difference is that it takes a bit longer than expected. So, it’s a good idea to go with someone who you like. This way you will enjoy throughout your journey and the process of negotiation may also go well.

Trust

Make sure the professional agent that you are going to hire can be trusted. It may be difficult to find out who can be trusted but it can be done during the interview. By asking a few relevant questions during the interview, you can get a pretty good idea as if they are trustworthy or not.

Conflicts of Interest

What does a conflict occurs? Actually, the conflict may occur when you go with an agent who already is a representative of many property owners in the same area. Now, the agent wants to serve you despite that the fact that they have given their word to the property owners that they will find a way to earn them the highest rate of rent possible. So, you may want to get a clear idea of the conflict severity and its importance for you.

Experience

Experience of the agent is of utmost importance as far as choosing the best professional is concerned. Ideally, it’s a good idea to go with a commercial real estate agent who has over 10 years of experience in the field. Their grey hair may be a sign that they have been in this business for years. You can ask about their experience during the interview.

Age

Age of the professional should not be taken as an evidence of their experience in the field. The million dollar question is how long have they been actively involved in the business. You need to keep in mind that commercial real estate is on the list of those businesses that people do part time. So, make sure you choose a professional who has been working full time as an agent. What matters is experience not the age of the agent. After all, age is just a number.

Specialization

Typically agents specialize in two ways. They can do it by industry vertical or location. As far as importance is concerned, location specialization carries more weight. An agent with location specialization has a pretty good idea of what is happening in the market. They know about the best deals and best property owners. Aside from this, their negotiation style is pretty impressive.

Long story short, if you have been thinking of hiring the services of the best commercial real estate agent, we suggest that you take these factors into consideration. This will help you choose the best service provider.

How to Get Ahead Financially By Investing in Commercial Property

Think of all the investment commercials you have heard and seen that admonish/encourage you to start saving money early in your working life. Messages like, “Take advantage of your company’s 401k program,” and “Start an IRA program,” are like investment mantras and there is a great deal of wisdom in those messages. But what also can be important is expanding your mindset to additional investment opportunities like investing in property.

Risk and challenge

Property investing is often described as “high-risk, high-reward.” It may not be the ideal investment plan for the faint of heart. But it can be a good match for the investor who:

• Likes a challenge.

• Has an enormous amount of patience.

• Can commit to a hands-on approach to managing the investment.

• Is willing to learn the business of investing in commercial real estate.

Reducing risk

The first “risk” to reduce is a lack of knowledge in commercial property investment:

• Learn all you can about the subject.

• Find a mentor to further your education.

• Consider partnering with a successful commercial property investor.

• Start conservatively.

Next, don’t try to invest without help from a commercial estate specialist. The person you work with should be a fiduciary (one who will be working in your best interest). Industry writers recommend that your broker should be a member of the National Association of Realtors and adhere to its code of ethics. Most important of all, your broker/realtor should represent only you – not the seller, or not you and the seller.

Making money on your investment

Getting ahead in commercial property investing is accomplished in several basic ways. Your investment can grow through income and appreciation/selling.

• Income generally comes from rent. It also can be generated if your tenants are required to pay fees for contractual options (like right of first refusal on an adjacent space).

• Appreciation is another investment/money-making option. This is where the adage, “Buy low, sell high,” applies. Experienced property investors will buy the property at a low price, put a finite amount of rehab work into the property, possibly redefine the property to a more marketable purpose, and sell at a higher price. These investors make their money on flipping the commercial property, not on rental income.

Types of commercial estates and income potential

The type of commercial property in which you choose to invest can affect your earning potential. Consider the income opportunities in these properties:

• Motels/hotels located in tourist or major business travel areas.

• New commercial construction can be highly profitable but requires serious knowledge of the industry (and significant financial backing).

• Small commercial properties like strip malls and small office buildings often have long-term tenants.

• Industrial properties include manufacturing sites, distribution centers, and warehouses. A financial plus here is that these tenants are usually responsible for most repairs and maintenance.

• NNN leases are often found in larger businesses and with stable tenant companies that lease long-term (like 30 years at a time). These tenants are responsible for all expenses, including property taxes and insurance.

There is money to be made for the commercial property investor who is willing to start slowly, become knowledgeable, be focused, act conservatively, exercise patience, and work hard.

Rarely will commercial property investment be your get-rich-quick ticket. But over time, it can significantly augment your retirement fund or provide you with the financial resources to fulfill other dreams and plans.

Handover Procedures in Commercial Property Leasing

In commercial property the handover of premises is a critical time to take note of important issues and matters requiring attention. These notes can later support the tenant or the landlord in any matters of debate or dispute. There is a handover and the beginning of occupancy and again at the end of the occupancy.

In all respects the occupancy of the tenant and the premises handover should be in accordance with the lease. This says that you as a property or leasing manager must read the lease and understand it. Even in a single property with many different tenants, the leases can be different and usually are. The ‘make good’ clauses and the ‘handover provisions’ of the lease are unique and should be understood relative to each tenancy.

Taking photos also is part of the documentation of premises at handover time. It is recommended that the photographs taken are date and time stamped in the camera, and the photographs are later saved as ‘gif’ files and not ‘jpg’. This is because ‘gif’ files are a more stable and fixed format that cannot be manipulated by software editing tools such as ‘Photoshop’. If you want the photograph to be evidence of something important, then the ‘gif’ format is a reliable choice.

Whilst every tenancy is unique, let’s set some rules to give you some benchmarks to work with at handover time. You can then add some other matters that may be applicable to the location or property that you work on.

  1. Take ‘gif’ format photographs as evidence of important things and levels of presentation
  2. When taking photographs it pays to put a scale reference such as a ruler into the picture
  3. Take notes of any comments or agreements from any parties to the lease
  4. Check all walls and painted surfaces for damage and or current condition, taking photographs as appropriate to record the current condition
  5. Check ceiling tiles and t-bars for ceiling presentation and integrity
  6. Look above ceilings for the satisfactory removal of any unnecessary cabling that should have been removed
  7. Check all floor coverings for any damage or deterioration beyond normal ‘wear and tear’
  8. Look for any floor or wall penetrations that exist or need to be remedied noting that any penetrations must be fire rated to the standards of the local building codes.
  9. Check air conditioning function and note any need for air conditioning balance due to fitout or altered or installed partitions in the leased space
  10. Check lights and light switches for function and safety. It may be necessary to replace all tubes in the light fittings as part of the make good provisions of the lease
  11. Check all doors and locks for safety and security. Do not overlook the need for doors and locks to comply with all building codes. All keys to the doors should be provided or returned as appropriate. If a master key system is installed in the building then check that the keys all comply with the master system
  12. Check windows for function, security, and safety
  13. Check electricity supply to the tenancy and any metering of consumed energy
  14. Check the installation and compliance of any signage for the premises and that such is in accordance with architectural rules set for the building.
  15. Look for any matters of change to the structural integrity to the building and the premises
  16. As part of the checking process it sometimes pays for the landlords contractors to inspect the premises and provide a full report of any complex or sensitive issues. This will support any later legal dispute over make good terms and conditions.

When keys are exchanged between the tenant and the landlord, or the landlord and the tenant, a receipt should be obtained as a record of handover of the keys. The real estate agents actions in the handover to any tenant should also be supported by notes. It is surprising how many disputes arise later when you least expect it; in such case your notes are invaluable.

Never hand back any bond money or bank guarantees to tenants until you are absolutely certain that all make good requirements of the lease have been satisfied. It is also of note that all make good must have been done at and before the expiry of the lease; it is not something that is done after lease expiry.

Efficient make good and handover procedures are a critical skill for the real estate agent to develop and implement on every lease situation.

Reasons For Due Diligence and Buying Commercial Property

If you have decided to get into the commercial property business, you may have been advised to practice due diligence. Though it sounds logical, you have no doubt wondered just what does due diligence actually mean. There is a lot more detail involved in due diligence than you might think.

No matter what kind of commercial property you want to buy, you will need to do your due diligence. It might be a giant mall property, or a smaller commercial business – but the process is the same. You need to know what kind of condition your property is in.

Why do due diligence?

You will want to do this not only to make a sound business investment but also to ensure that you know what your property needs so your tenants will be able to set up shop in a safe building free of any liabilities. You will also be investing in your business for a long time, so you need to be sure that there won’t be any long-term issues that end up reducing your return on investment.

Getting started

To start the process, visit the site with your commercial real estate broker and potentially even the seller. This will give you a good overview of what it is you are getting into, and what you are getting. You can develop a list of questions that you need answers to and points to follow up on.

Part of due diligence also means reading all of the documents carefully so you understand all of the terms and you know what kind of warranty regarding building condition is granted. Looking over all of the documents might take some time, but it can save a lot of frustration and expense down the road. Don’t be afraid to ask the seller for any documents from when he or she purchased the property.

This request can include any inspections or land surveys done by the current owner during the time he or she owned the property. You can also ask for a list of current tenants and how the property is being used. Is it a commercial building in an area being zoned for redevelopment? This will enable you to convert the property if you so wish. In many urban areas, abandoned warehouses have been turned into ultramodern condos. Imagine the possibilities!

Government document searches

You may also want to do a records search at the county or city records office. This search can include any inspections conducted by that government agency, any tax liens or other pending action on the property, and any environmental inspection reports.

It wouldn’t even be out of reach to pull up the original plans and specs for the building so you can see what modifications have been done over the years. The current seller might not know all of this, particularly if he or she bought it as a foreclosure or just didn’t do his or her own due diligence.

There are so many other things to look at when doing due diligence. It is a solid investment to consult a real estate attorney to assist you in the process so nothing gets missed. Due diligence can be time consuming to be sure, and potentially carry some costs, but it is very worth it in the end.

The Advantages Of Getting Commercial Property Management Firms

People who own a commercial property can get more than enough cash flow from their commercial property and definitely have guaranteed financial security for your future. Of course, both of these benefits do come with a price. One of these is the property has to be in good condition to maintain or increase its value. Otherwise, you will have to spend more money on maintenance and taxes.

Considering commercial property management firms is an excellent solution. Instead of you, and a handful of people you know, running your commercial property, you get another company to do the managing so it will be less hassle and stress-free. Check out some advantages that you can get from getting these services from professional property management experts.

– You will be able to provide the very best service to tenants. A commercial property firm will have the systems and the people in place to address every kind of tenant concern, from the smallest utility issue to the more serious security problems. Even though you own a fairly small commercial building, servicing tenants and making sure they are satisfied (and safe) can be time consuming as well as energy draining. Unless you have nothing else to do with your days, then you could better serve your tenants by hiring a business management firm to do the job for you.

– You can get better tenants for your commercial property. One of the ways to maintain profits is to get the best tenants. This means tenants who pay on time and who also take care of their leased spaces as their own. Delinquent tenants not only dissolve profits, but they also create a lot of stress.

– Property professionals have the experience to manage your property. From collecting rent to implementing maintenance work, these business managers can handle every aspect of running any building. They do the job for you so you don’t have to be stressed out or be hassled.

– A well-managed property will never fail to yield revenue. With expertise and experience at the helm of your business venture, you are sure to turn over a good profit every time. Some of the best leasing companies even assess your terms and make appropriate recommendations so that you not only reduce problems but also boost revenue.

– You need to relax and enjoy your investment. Finally, what good is a property investment if you can’t even find the time to relax and enjoy the profits you have earned? With the right management firm, you can do that now. Click here to know more.

Will Commercial Zoning Increase Your Property Value?

If you have the correct combination of items and you have a large enough pocketbook, this may be your ticket to retirement. But sometimes, it’s your ticket to the poor house.

I looked at a home that is zoned mixed use. In this area, this means that you can either use the residence as a home or use the residence as a commercial site. These types of sites are usually limited to low impact items such as office buildings, apartments, etc.

What’s the catch? Well, you’ll have to own a large enough parcel of land to make a commercial deal work. This is why you see five homes along a busy street all for sale at once and the zoning is commercial. This is because in order to be approved for commercial development, there must be a large enough parcel to make the commercial development work.

Usually, for mixed residential zoning, these areas are close to town or close to other apartments or business in the area. I’ve appraised several of these types of property. Many times, advertising the zoning as mixed use is enough to sell the home for more just because it may appeal to that specific buyer that wants to live in the same home and run a business out of the home. One home that I appraised offered a living area on the main level and a daylight basement offered office buildings that were rented out.

My understanding is that some banks that specialize in residential zoning will not loan money on mixed use properties. This, of course, is a downfall, if you’re trying to get a residential loan. Some buyers will not want to use their residential home for office use. This will limit the number of buyers that may want to buy your home.

So, will commercial zoning increase your property value? If your home is a residential home with the best use as a residential use, commercial zoning may decrease your home value and make it difficult to get a loan and make it difficult to sell, because you’ll be located on a busy street. If your home is residential use and the highest and best use is to build a commercial structure, most often, your land used as commercial use will be more valuable than your home used as residential use.

So, the moral of the story is to keep an open mind on these types of properties. I looked at some homes the other day where the home is an older residential home with a larger lot. The zoning can be switched from residential to commercial for $1500. Residential homes with larger lots with similar zoning were selling for $350,000 to $400,000. Residential homes that have been switched to commercial zoning were selling for $500,000 to $700,000. So for $1500 and some time, this would be a good investment for your money.