Archive for Commercial Real Estate
Jul
04
How to Determine the Value of Commercial Property
Investing in commercial real estate is quite lucrative if you are an intelligent investor, who has a property purchase plan from the beginning. Before you ever make a move to begin the purchase process, it is wise to take a look at the property to project the potential value of your investment.
Not all valuation methods are created equal
Before discussing the actual valuation of commercial property, it is prudent to know the different methods of real estate valuation. The first is the market valuation, or sales comparison method. Residential homes are usually valued using the sales comparison method since the value of a home is directly related to the price a buyer is willing to pay compared to the sales price of similar homes.
Another method is the Cost Valuation Method, which is simply land value plus an estimate of what a building or other improvements would cost to reproduce in today’s dollars.
And the last method, which is used most widely in commercial and investment real estate valuation, is the income capitalization method, or cap rate method. Using this method, commercial property is valued by determining the rate of return on an investment, or capitalization rate, divided by the average net operating income (NOI) for the property. NOI is the gross income for the property less expenses, but not including debt service or mortgage payments.
For instance, you as an investor find a nice retail strip center for sale. The current owner provides details of the previous 12 months net operating income, and you find that the average yearly NOI is $75,000. The capitalization rate for the area you are looking is about 10%. Therefore, by dividing $75,000 by 10%, you can figure that $750,000 is a good estimation of the value of the property.
Enlisting professional sidekicks for your commercial portfolio
Remember that this type of quick estimate is a ball park figure only. A true and accurate valuation can be performed by a licensed commercial real estate appraiser. Also, if you use a commercial mortgage broker to help finance an investment, the broker can provide a clearer estimated cap rate valuation because he has access to databases that provide critical information, such as accurate cap rates in the area of your potential investment, typical vacancy rates, and average rent per square foot for an area.
Keep in mind that the seller may provide financial statements and data that are overstated or exaggerated. For instance, he may indicate no vacancy contingency in his expenses. Or gross rents may be higher than the average for the area. It is wise to carefully analyze the income statement and use the experience and knowledge of a broker or appraiser to figure accurate numbers when calculating the potential NOI for a property.
Befriending the PPU for valuation
Another type of commercial real estate valuation is the price per unit or PPU. The PPU may be used on commercial property, such as apartment buildings, where excessive vacancies may skew the financial data and the final NOI cap rate. By using the sales comparable method mentioned above, a commercial real estate appraiser can more accurately determine the value of an apartment building by comparing the recent sales of similar apartments, and determining an average price per unit. Simply multiplying the PPU by the number of units in a potential investment can provide an accurate valuation.
It is helpful for an investor of commercial real estate to know the methods of valuation for a property. By knowing the methods and working with a team of experts, an investor can intelligently determine whether a commercial property will be a profitable investment.
Rent Back Fast
Jun
05
Trends and Problems of Commercial Real Estate Market Canada
Posted by: | CommentsOne of the most pressing issues for the market, of course, are the prices. According to the organizer of the roundtable, the company Business Analyst Group average sale price for April was:
office - 39 000 euro / sq.m.
Trade - 38 000 euro / sq.m.
industrial - 9 000 euro / sq.m.
the average rental rate offered on the open market in April was:
office - 747 euro / sqm / month.
Trade - 1218 euro / sqm / month.
industrial - 158 euro / sqm / month.
In 2006, in the Canada was put into operation 24 000 sq.m. space in the new shopping and leisure centers.
In 2007 he had already put 30 000 sq. m., until the end of 2007 plans to introduce a further 70 000 - 80 000 sq.m. trade area as a shopping and entertainment center.
In addition, over the next 3 years plans to build about 10 business centers and the same number of shopping centers. The rates of rent in the new sites is constantly increasing, the maximum rate for April 2007 reached 4500 euro / sqm / month. for commercial space and 1,770 euro / sqm / month. for the office.
Cost of sales 1 sq. m. in certain categories of commercial property increased over the year in 2-2,5 times, for example, industrial warehouses and administrative buildings.
Even in Moscow company today said that the market is overheating with us, the stakes are too high, the rent for our region is too high, and the purchasing power and throughput is still not at the level of major Russian cities. This reduces the attractiveness of shopping centers in the eyes of tenants - the start of discussions on Irina Fedchenko, director of consulting company Business Analyst Group, - for example, is very telling recent example of the opening TRK Greenwich for non-tenant commercial areas. In the past, the city of rumor, that the lease rates on commercial real estate collapse. And whoever invests in real estate, is now limbo: either invest or not. The timing of construction of new facilities or renovation of old protracted. The banks and leasing companies that lend to these deals, too, wonder: Does the alleged pay off dates announced for the construction projects. How long can increase rents and sale prices for commercial real estate in Canada?
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Agreed that the stakes really high, and Alexander Filatov, director of the Canada branch of the company AlyansRegionLizing, explaining it immaturity, youth of the market started its development in 2004 alone, and formed a deficit of commercial real estate. Investments in commercial real estate lease at this stage has its own risk, but, in the view of Alexander, such a fall in prices, to talk about the risks of non-means, in the next two years will not be. Companies seeking to regain its image, which is characterized, above all, the notion of ownership. Sitting in his room or rent the space to sit in a good business center, or to withdraw somewhere in the suburbs - this is a meaningful indicator for business. Therefore, price increases will continue, perhaps with a little break, but in the coming 2007-2008, prices will rise. We discussed some of our business partners to back leasing transactions when they rent their premises for rent. They form the most growth of 5-10%. This projection raise rental rates for next year . Paul Vysotsky, director of OOO KLP-Invest, also predicts a rise in the prices of 10% in the segment of office real estate, which is positioned at the level of class V. In this format, no problems with the rental of commercial real estate there, and I think that will never, as well as benchmark average, - said Paul.
According to Paul Seliverstov, head of the department for the management of commercial real estate company Kora-TK: Entering the new facilities on the market today is not much obrushit market prices prevailing at the date. If a shopping center will focus not on the market, but at prices that would like to see the investor, then yes, the problem may be, as in Greenwich. If the price will be set market, the commissioning of new facilities are not heavily affect the market, and napolnyaemostyu tenants will be all right According to Paul, in the near future even happen growth of the best sites. And this is related to entering federal players, and Moscow’s foreign trade companies. At the same time, graduation will be held at the premises of category A, A +, B, C and so forth, as in large cities. Prices for rooms with a good location to grow. The cost to other falls.
A similar opinion Natalia Korchuganova, Director Panacea, considers that the average rental rates for retail space down to 30% that is due to the fact that increases the number of shopping centers: Those facilities that will be introduced in this and the next two or three years, will be in demand and will find its customers, for rental rates and investment. However, already changing the requirements for office and retail space, the entrepreneurs want to Superior, more interesting environment. Here’s this new sites to developers, investors and worth paying attention .
The need for careful consideration of projects and said the team leader of investment operations branch VTB in Novosibirsk, Sergey Zemtsov and expressed confidence that everything will be fine and that any multipurpose facility for the Urals can pay off, provided that it would be quality. We believe - said Sergey - that can reduce their risks, even though now built many new facilities, if built conceptually clear shopping centers, with the Siberian or Moscow consulting firm. And another important point - there is nothing to sell, if it comes to shopping mall. Because, when at least five areas are sold, the management company having problems with the management. Moreover, the object which belongs to several owners, lower grade than the same object, but by one owner. If these conditions are met, it risks falling.
Opinions were roundtable on the prospects of the market divided, but with the concern of all power.
An important constraint on the market that encourage higher prices and increasing financial risks to the round table participants was named position of authority and bureaucracy. Alexander Filatov, Ltd. AlyansRegionLizing: When initially reviewed the transaction translation of non-residential floor space, turned to real estate agencies about assistance in this direction, and we called the timing about a year and two years. In Novosibirsk, when asked a similar question, saying: Week Three. Date of issue - it is not feasible! Such round tables should be conducted on the level of government. Because all are waiting. We have a project where land is not formalized, but we admit it, and the project involved the lessee, who said: Guys, the problems will not be because I have their relationship, so I have something I druzhu, and I pledge to completely make over half the land on you . We very much this development in the Kuzbass, relations are based on personal interests and personal tie. We are ready to shift the risk to the lessee. But this problem must be addressed, and can only deal with the authorities themselves.
The same problem addressed and Sergei Zemtsov, OAO Vneshtorgbank branch in Novosibirsk: For us, both for the bank, it is important to reduce delays in obtaining permits documentation. In order to offer some advanced products need to get approvals cleared some attributed the timing and procedures for obvious . Many of the authorities accumulated and Andrew Verhoturova, director of Agency’s daily news: When they decide the issue with the administration? When they put 20 girls in the notorious Room 108, and there navedut order? When the work principle of one window, which is declared by the Management Committee of State property? Extends even to what is now the Committee for the Management of State property is not at all incoming documents, does not register, because the instruments need to keep as a policeman! That is, you have to bring a folder of documents that you have agreed for years, and you say: Leave a policeman!. What is the responsibility? What is included? When the answer? No one knows!
Closing roundtable discussion on what can be done to simplify and accelerate the design of mechanisms allowing documentation. Victor Gunin, Inc. “Mechanics growth Leasing officials said little interest in promoting the project: In the usual administration official sits, and he is not interested in the economy of the project and did not understand that there will be. Why him? Until today, there is a system of governance, the more uncertain the same risks, higher rates of financing . Alexander Filatov, Ltd. AlyansRegionLizing invited to connect Chamber of Commerce and Industry, both in Novosibirsk, where biznesroientirovannaya Chamber of Commerce and Industry to help solve business problems. On the basis of individual complaints - it may lead to nothing - said Alexander, - a need for such structures, which would communicate to the authorities, but even better would be the government. Chamber of Commerce and Industry should, and even obligated to do so because it was created for this purpose . Paul Vysotsky, Ltd. KLP-Invest suggested that begin with the fact that all major developers with experience in lending, including real estate agency and so on, based on his own experience, first wrote a mechanism as to simplify all these procedure. Because the bureaucrats themselves, they do it will never be.
Either way, but commercial real estate Sale is actively developing, and in spite of everything, in the next 3 years in our city a few new interesting projects, but in the meantime, perhaps the administration in the public sector will be established.
Quick Property Sale
Aug
12
Big Profits in Commercial Real Estate
Posted by: | CommentsReal estate is often known as the safest investment available. Because,real estate investing executed with correct evaluation of the property (and its true value), can result in good earnings. This is one reason how come a few people engage in real estate investing as their regular job. The dialogue of real property are broadly centered toward residential real estate; commercial real estate seems to be not as popular. All the same, commercial real estate also is a good alternative for investing in property.
Commercial real estate includes many various forms of properties. Most folks associate commercial realty with only office buildings, parks or manufacturers/ industrialized units. Even so, that’s not entirely all of commercial real estate. There’s more to commercial real estate. Health care centers, retail structures and storage warehouse are all good examples of commercial real estate. Even residential properties like apartments (or any property that comprises of more than 4 residential dwelling units) are considered commercial real estate. As a matter of fact, such commercial real estate is much sought after.
So, is commercial real estate really profitable? Well, if it were not Lucrative I wouldn’t of have been writing about commercial real estate at all. So, commercial real estate is productive for sure. The only matter with commercial real property is that acknowledging the opportunity is a little difficult as equated to residential real estate. But commercial real property profits can be real huge (in fact, much bigger than you would anticipate by residential real estate of the same proportion). You could take up commercial real estate for either reselling after appreciation or for letting out to, say retailers.
The commercial real estate development is as a matter of fact handled as the 1st sign for emergence of residential real estate. Once you acknowledge of the possibility of significant commercial growth in the area (either due to tax breaks or whatever), you had better begin assessing the potential for appreciation in the prices of commercial real estate and then go for it promptly (equally soon as you find a good deal). And you must really work towards getting a good deal.
If you find that commercial real estate, e.g. land, is available in large chunks which are too costly for you to purchase, you could look at forming a small investor group (with your friends) and purchase it collectively (and split the profits later). In some cases e.g. when a retail boom is expected in a region, you may determine it profitable to purchase a property that you can change into a warehouse for the intent of renting to small businesses.
So commercial real estate exhibits a whole plethora of investing chances, you just need to seize it.
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Quick Property Sale
Aug
01
Triple Net Lease For Sale As Related to Commercial Real Estate
Posted by: | CommentsIf you are considering an investment into commercial real estate, Houston is an excellent choice. Within this bustling city, there are numerous commercial investment options to choose from. Which one will be the best for you? Many find that a triple net lease for sale will bring them the greatest return on their dollar with the least amount of effort.
But a triple net lease is not right for everyone. If you are checking out the opportunities as a shopping center developer, Houston is known for having a lease that could suit your needs.
The first step in choosing your best investment opportunity is to understand precisely what a triple net lease is. In the case of this type of lease, the renter assumes the monetary responsibility for the maintenance, taxes and insurance in addition to the monthly rental amount.
This kind of lease is generally a very long term agreement, with some contracts going as long as 50 years. Because of this, it is very important that you weigh both the advantages and the disadvantages of a triple net lease for sale before you decide to make this type of investment in commercial real estate Houston.
The advantages of this kind of lease will benefit both the landlord and the tenant in many ways. The landlord can expect the maintenance of his property to be done by his tenant, leaving very little work on the part of the landlord for the upkeep of the site. In most cases, the renter will have a vested interest in keeping the property in good condition, since this will make his retail site more attractive to potential customers.
On the flip side, a tenant can enjoy many of the freedoms of ownership including regular repairs and updates to the property as he sees fit. However, he does not have the burden of the initial investment into commercial real estate Houston the way the owner of the property does.
There are risks involved in this kind of lease. A tenant may not provide proper upkeep, costing the owner of the property more money in the long run. There are steps that you, as the owner, can take to reduce many of these risks. If a triple net lease for sale sounds like a possibility, talk to a real estate agent and attorney today to see if this is the best choice for you.
Repossession
Jun
23
The Broker for Commercial Real Estate: Myths and Reality
Posted by: | CommentsThe professional brokerage services in the commercial real estate in canada have become relatively recently. Therefore, so far most people to question «What is the broker for commercial real estate?» Simply pozhmut shoulders. and even those who have already sdaval or rented premises with the help of agencies often do not have a clear understanding of the benefits of treatment with professionals do not know what can and should demand it. In this paper, we would like to razvenchat most common myths associated with the broker for commercial real estate.
Myth number 1: The more impressions, the better Commercial real estate broker?
There is widespread view that the broker must regularly show customers as many options for accommodation, and the more he does, the better the quality of his work. In fact, everything is accurate to the contrary. A specialist in Brokerage says that to find a place that meets all the requirements of the customer, it is very difficult. It is therefore too frequent views are likely to indicate that the broker inattentively listening to the customer and invites him options «random». Because such a broker-«guide» losers as the owner of land or a potential buyer, because they spend their valuable time without any result.
This pros listened carefully to your wishes, will explore all available on the market offers and choose the one that is the one that really suits you. Typically, to achieve the result it needed a maximum of 3-4 run.
Myth number 2: Professionals working in large agencies
Most people believe that the name loud and «scale» Commercial real estate agent are the guarantee of experience and professionalism of brokers. However, it is not always the case. First, imenitye company with a long history and so have no shortage of willing them to work, therefore, offer brokers a fairly low percentage of commission agency. At the same time, smaller companies, by contrast, are interested in attracting qualified staff and are ready to provide them with more favorable financial conditions. Secondly, the major agencies are working with their brokers (exclusive) targeted the company. That is, they do not need to perform the full range of work (searching the premises, negotiate with the owner, the conclusion of a treaty, etc.), their challenge - to find a buyer or lessee for the finished space. In the same small companies where its facilities are not a lot of brokers make the deal «zero». Accordingly, they are inherently requires a deeper market knowledge and understanding of customer needs.
Myth number 3: The private broker deal advantageous
How many people would not burn at the service of so-called «private brokers», still find someone who advise you to refer to what someone Ivan Ivanychu because it has a «cheap». Save you the truth, not at the cost of services as well as their own and tranquility, but one that you certainly will not be prevented. So for what is, in fact, «overpay» client, referring to the agency?
First, any self-respecting agency has a code of ethics, which clearly stated rules of conduct broker with a client. For example, according to the code, the broker has no right to give you incorrect information, he is obliged to protect your interests and provide you with all information on the transactions. Violation of these rules officer could lead to a very unpleasant consequences for him, up to and including dismissal.
Secondly, the agency all brokers are under the direct control of management. That is, if the broker makes a wrong step, it is always correct, will help the Council and, if necessary, transfer the customer to another specialist.
In the third, all the documents through the agency, must be checked by legal department, which simply did not miss a treaty, if it in any way harm the interests of the client.
At the same time, the private broker - his own boss. He chooses what information and voice as silence, which contract clauses to draw your attention, and what - to turn a blind eye. If later you have a claim to the quality of his work to bring him to justice will be very difficult, especially since most of these «mediators» never registered.
In other words, use the services of private brokers - the same as changing currency outside exchanger: the best rate, but no guarantees.
Myth number 4: Better to apply directly to several agencies
It would seem that logic is simple: the more agencies involved in the sale of your object, the faster will be the result. But it can talk only to people uncomfortable with the technology of the brokerage firms. There are quite a narrow range of print and online editions, in which the agency placed on their sites. Accordingly, if you go in, say, five agencies, the risk to see five different ads on your site in the same media. Not only that, this in itself gives questionable advertising, so more likely is that each agency will try a little «glossed» characteristics of the object, and as a result of the five ads will give contradictory information.
In fact, just one mention in a single edition, and the subject invariably enters the Realtor database. Most brokers use the same database, so eventually have the same information. In other words, referring to one agency, you are not at all does not diminish their chances of quickly and sell objects, and the main thing - you save it (the facility) reputation.
Another negative working with several agencies - not with one of nih.vy can not conclude an exclusive contract. But only an exclusive contract with the company, the broker will give you the most advantageous plan for moving your site and the best conditions of the transaction.
Myth number 5: Just look at base facilities - and is ready to deal
«Agencies huge database, so the broker is not working on specific criteria quickly find a suitable place …» Unfortunately, such statements have to hear quite often. But if everything was so simple, the deal would be for one day, but brokers do not have to go out of office. There is a logical question: why is this not happening?
Ironically, this sounds trite, but each case is individual, and in addition to the basic requirements for space, a lot of suggestions, «popup» already in the works. Someone is, you need a certain thickness of the walls and ceiling height, someone - large display cases without denying their trees, someone - the possibility of redevelopment … Yes, and the owner often has its own vision of the potential lessee: some are unwilling to «sit» state structures, others do not want the office was a large flow of visitors, still categorically against auditing firms … from the broker requires maximum patience and perseverance to find a solution that satisfies both sides. Is not enough just to work with the foundation: you have to go to watch, personally meet with the owners, always check the validity of the information, etc. That is why the «secondary» transaction usually takes two weeks to two months.
Myth number 6: Target broker - only to find a buyer
Many believe that when a potential buyer nods his head approvingly and said that it is suitable premises, the broker ends. However, in reality, at the end only the first stage - search - and begins the most difficult - to bring a deal before signing the contract. It would seem that this special? Did the seller and the buyer (owner and tenant) are not able to agree? But the reality is that of a very positive mood on both sides in 70% of cases prior to signing the deal just does not come!
Most disagreements arise when it comes to the payment schedule. Many sellers prefer not officially identify the real value of the site and receive a portion of cash through offshore companies or foreign banks. At the same time, not all buyers (especially integrity in such matters are foreign companies) are ready to go.
Another reason why the parties can not reach a common denominator - the desire of the owner of the premises set in the contract of any special conditions. For example, the landlord can set high fines for smoking in the office, taking over the territory of a business center pets … If at first glance, such claims can not raise specific complaints, it being documented, they are often greeted with a fundamental rejection of the tenant.
Thus, there is little to find a buyer. Craftsmanship broker is the ability to circumvent the acute angles, find the necessary compromises to bring the deal before signing the contract and help his client to conclude it in the most favorable terms.
Myth number 7: Broker gets huge money «for nothing?
And finally: Many believe that life is a broker - a paradise in which money is literally falling from the sky. In fact, it is not. This is hard work, and the result is until the last moment not in a position to predict one. The broker can work for months over the same transaction, and on the day of signing a treaty She sorvetsya. Or show room once, and it would thus «ideal» option. The customer can articulate demands, and perhaps did not know what the wants and reject good offers, one after another. This stress job that requires high concentration and absolute dedication. And again: we should not forget that the broker receives a commission only for results, so his income is directly proportional to the effort.
Information provided by «United Realty Group» (consulting, brokerage services, leases, buying and selling commercial real estate, legal support transactions). http://www.pro-bargainhunter.com
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