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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: September, 2017
Sep 28, 2017

A good Commercial Real Estate Mentor can teach you the lessons they have learned and give you the shortcut to building real wealth.  

 

There are many different segments of commercial real estate to choose from.  Commercial Real Estate investment strategies work best when they are focused.  Your mentor will help you focus and develop your strategy.

 

You can search online, listen to podcast, watch videos, read books, and get all the answers.  If you act, you will likely have some success.  But, in order to get over the hump and grow exponentially, you need guidance from someone who has mastered the the skill.

 

Real Estate is a people business.  You need to have people in your network that you can go to when you have questions.  Peter Harris is a successful commercial real estate investor who has been mentoring commercial real estate investors since 2003.

What to Look in a Commercial Real Estate Mentor

 

Track Record: Is the mentor successful in commercial real estate?  Does the mentor own commercial real estate?   An active investor will readily recognize potential challenges and help you find the answers.  The real estate market is always moving through the cycle.  An experienced mentor can help you prepare for the difficult times so you can prosper when others are struggling.

 

Available:  Real estate Investing is full of deadlines and short windows of opportunity.  There will be questions that need answers right away.  Will your mentor be regularly available to answer your questions.  Will they be there after the sale?  

 

Income:  Where does the majority of the mentor’s income come from?  Is it from selling seminars, books and student fees?  Look for a mentor who makes the majority of their income from their own commercial real estate investments.  

 

Teacher:  Are they a good teacher?  Can they listen to your questions and effectively communicate the answers?  If they only tell you what to do and never answer your questions, you will struggle.  

 

Invested: Is the mentor invested in your success?  If they only sell you the course, what is their motivation to guarantee your success?  Don’t be afraid to share the gain of your deal with the mentor that helped you get it.

 

Complete: Can the mentor help you all the way through the process to the operation of the property?  The real value is created by improving the net operating income, NOI.  If the mentor relationship stops once you buy the property, you can miss out on the potential to solidify your future.

 

For more go to:

commercialpropertyadvisors.com

Sep 21, 2017

Is your real estate investment strategy evolving?  Learn how Nabeel Mahmud has progressed from single family to Multifamily.

Since his youth, Nabeel has been an entrepreneur.  In grade school, he sold his extra halloween candy.  In junior high, he developed an internet bulletin board and sold access to his friend.  Today, he is growing his real estate portfolio while working a corporate job.

His progression is impressive.  He started with a single family, added a duplex, then a quad plex and now an 18 unit multifamily property.  

He credits his ability to grow in multiples to applying the systems he learned in his corporate to his real estate investments.  He developed a template and systems for his real estate and continues to improve and use with each successive deal.  

His long term goal is to acquire enough income from real estate to replace his corporate job and win the time flexibility not afforded from a corporate job.  

Real Estate Strategy Provides Ability for Larger Properties

Most recently, Nabeel entered into a contract to purchase an 18 unit apartment.   

Rather that call on the old listings, Nabeel reversed the process.  

He first  identified a property he wanted.  The property was desirable because of its location and the well kept grounds and exterior.  Recognizing the high level of care on the outside, he assumed it would carry to the interior.  

The building was not listed for sale, so he approached the owner to see if he was interested in selling.  The owner said, “no”.

A  year later, Nabeel followed up with the building owner.  To Nabeel’s surprise, this time, the owner said he was ready to sell.

After some brief conversations, they recognized that they were on the same page regarding price.  Next, the seller wanted confirmation of finances from Nabeel to proceed.  This was reasonable, and Nabeel provided the requested information.

The due diligence period ensued, with inspection, financing, and confirmation of the seller records.  

When we recorded this conversation, they were two weeks away from closing.  

For more contact Nabeel at:Nabeel@ayatpropertygroup.com

Sep 14, 2017

Commercial Real Estate Investing involves many opportunities to make mistakes.  Here are 5 mistakes to avoid.

Mistake #1 - Analysis by Paralysis - Getting bogged down in the minutia.

This type of investor believes that the more information they get on the property, the better will be their purchasing decision. Unfortunately, in most instances, that’s not the case.  As the saying goes these investors, “Can’t see the forest for the trees.”  They are too involved in the details of the purchase that they forget the big picture.  Savvy real estate investors don’t get caught up in the minutia.  They generally focus on a small subset of issues to get comfortable with, and this determines whether or not they’ll make an offer on a property.

Not only does the detailed oriented approach complicate the buying decision, it also lengthens the time necessary to come to a decision.  Many times, another buyer comes along while Mr. Analysis-by-Paralysis continues slogging through the details and “steals” the property away from him.  In reality, the seller is tired of all the nitpicky questions the original buyer has bombarded him with.  He is relieved someone else is swooping in to save him from the first buyer.

Mistake #2 - Doing only a cursory due diligence on the property.

The opposite of the first mistake is the investor who does only a cursory due diligence on the property. This usually takes two forms: the first mistake is not reviewing the historical operating statements and current rent roll carefully.  It’s not uncommon that a property’s Profit and Loss Statement is not transparent to the average reader.  Lots of important information can be hidden in the property’s operating statements.  They need to be teased out by asking the seller good, penetrating questions.  For example:

  • If it’s not obvious ask the seller what the vacancy rate has been over the last three years?  Surprisingly, there are many operating statements that don’t show vacancy.  
  • Why did a particular operating expense increase/decrease dramatically last year compared to previous years?
  • Are their one-time expenses in the operating statement that should be removed from the projected operating budget?

Those are a few questions that may be appropriate to ask.  

The second mistake is only doing a cursory physical inspection of the property.  If you’re buying apartments, you need to have your building inspector inspect every unit, the roofs, the laundry areas, the attics, the crawlspaces, etc.  Find a well- qualified inspector to represent you who will provide a detailed report of the physical condition of the property.

Mistake #3 - Not having a consensus among the investors about their investing strategy for the property.

If you are buying a property with a group of investors make sure that those who are in the investor group have the same goals and exit strategy as you do. It’s not uncommon to find out after it’s too late that individuals in the investor group have different motivations for owning the property than you do.

  • Some may want to fix and flip. Others may want to hold the property long term.
  • Some may want to have maximum leverage. Others may want to have modest leverage in order to maximize cash flow.
  • Some may want to refinance at the earliest possible opportunity to take cash out. Others may want to pay down the loan over time.

Before you decide to be in an investor group that is purchasing a property, have a meeting with the potential investors.  Ask the managing member of the LLC to outline his goals and exit strategy for the property. Also get a feel for whether you would want to be stuck with these investors over the investment life of the property.  If you don’t like what you hear from the managing member of the LLC or your gut tells you not to invest with one of the investors in the group because of their abrasive behavior, pass on the opportunity.  It’s better that you pass on it than regret it later.

Mistake #4 - Lack of cash reserves for unexpected expenses.

One of the biggest mistakes investors make is not having sufficient cash reserves available for unexpected expenses. This is especially true for multi-tenanted office and retail properties.  For example, an investor owns a multi-tenanted office building.  He’s owned the building for years and it has cash flowed beautifully.  But instead of putting some of the positive cash flow into a reserve account for future needs he puts it all into his back pocket.

Then one day one of his larger tenants moves out and the property no longer cash flows like it once did.  Now the owner has to contribute his own cash to keep the mortgage current.  He would like to get the vacant space market ready but to do the tenant improvements and pay a leasing commission will cost him more money than he has in his savings.  The space remains vacant because he tries to do the leasing himself to avoid paying a leasing commission.  And years pass with an under-performing property.

And the sad thing is, it didn’t need to. If the owner had established a reserve account for the eventual cost of tenant improvements and leasing commissions he would have had the funds to get his property re-tenanted.

Mistake #5 - Paying more than the property is worth to avoid capital gains taxes.

A 1031 exchange allows investors to defer their capital gains tax when they reinvest their equity into a like kind-exchange.  Deferring the payment of your capital gains taxes to a later date is a HUGE advantage to real estate investors.  But sometimes investors are so eager to not pay their capital gains taxes that they pay way too much for their exchange property.

If you can find an exchange property at a market price then do a 1031 exchange.  But first find out what the capital gains taxes would be if you didn’t do a 1031 exchange.  No one likes to pay the IRS if they don’t have to.  I get that.  But don’t over pay for the exchange property.  Sometimes it is better to pay your capital gains tax than to get stuck with a property that will never be a good investment because you paid too much for it.

These are the five mistakes I’ve observed over the years that real estate investors make when buying commercial real estate.  

For more go to:

www.marshallcf.com

Sep 7, 2017

Learn how a W2 employee’s real estate investment strategy has grown from an accidental landlord to a multifamily syndicator.

 

Lane Kawaoka is an engineer from Hawawii who followed the normal path.  He got a good education, a good job and saved to buy his first house.  Shortly after buying his home, he realized that he was so busy working that he was never there.  

 

Checkout Lane’s website and podcast: Simple Passive Cashflow

 

Lane realized he was paying a lot for a home he was never in.  That's when he made the decision to make his home a rental.  The result was a lot of extra beer money.

 

Lane continued to work hard as an engineer, and aggressively saving  for another down payment.  He was on his way.  As time went on, he was no longer able to find properties that could cashflow.  

 

As his real estate holdings continued to grow, so did his knowledge and experience.  He realized that appreciation was out of his control in single family rentals.  He needed to find cash flow and appreciation he could control.

 

A new real estate investment strategy

Recognizing the lack of control in single family is what Lane and most investors realize when they compare single family to mulitfamily real estate.  

 

Multifamily provides multiple benefits when compared to single family real estate.  You must get educated In order to recognize the difference.  This requires many hours spent analyzing deals to determine when a deal is a real opportunity. is  

 

Benefits include:

  • Cost sharing; The ability to spread your cost across multiple units.
  • Record keeping: The numbers for multifamiy are presented with complete financials to do a complete financial analysis.
  • Financing: Lenders look at the property’s ability to produce income and cover the expense load of a mortgage.  In single family, it is solely about you and your income to debt ratio.
  • Professional management:  Management is a built in operating expense.

 

To learn more go to: simplepassivecashflow.com

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