Key Factors For Evaluating Commercial Property For Sale

The secret of evaluating commercial property lies within a model where one property can independently be evaluated against another property.

The basis of any model is to ensure that proper calculations are made with regards to the sustainability of any property for sale in the market. This entails doing the calculations. If the calculations do not work then you should not make the investment.

Our model has the following attributes:

A Summary

The summary makes provision for the size of the property to be purchased expressed in gross lettable area (GLA). It also makes provision for the rent that can be obtained for the commercial property to rent. This is crucial since this will provide an indication whether you can compete with other similar properties in the same area. It makes provision for the nett rental income that is obtained from the property since this determines the value of the property.

Variables

The variables include the average interest rate over the past 20 years. It should also include the average inflation rate over the past 10 years which should be factored into the calculations. Annual rental increases should be factored in which will result in the yield to be obtained over into the future for at least a 10 year period. Provision for a vacancy rate is crucial when compiling your model. All expenses are captured in this section,

The Assessment

The assessment is the culmination of all the previous part into one view of the model. This will include the NAV (Nett Asset Value) determined on an annual basis. This will also include the gross rental income associated with the property with all escalations included. All expenses are reflected here inclusive of the monthly loan payments based on the average interest rate over the past 20 years. Calculating the gross rental income less all relevant expenses will result in the pre-tax cash flow on a monthly basis. From here all tax obligations can be calculated resulting in an after tax cash flow calculation. Determining your ROI (Return on Investment) is a direct result of these calculations. The IRR (Internal Rate of Return) is derived from these calculations making it a crucial tool to compare different properties.

Combining all the attributes of a model dedicated to evaluate commercial property for sale will ensure that you make the correct decision time and again. Most commercial property for sale are offered as commercial property to rent. It is therefore crucial to ensure that the correct investment decision is made based on pure calculations.

How to Find the Best Commercial Property for Sale

If you want to have a smooth experience in the real estate purchase, then it is highly essential that you look for a professional agent so that you get the finest deal. Nowadays with the growing popularity of various businesses, you will find a lot of commercial property for sale in the market. These commercial real agents will help you in buying or selling the property efficiently. They play a vital role in the success of any business.

In these tough economic times, it is necessary that you reexamine all the aspects so that you get the best deal. Purchasing a commercial property is not at all easy. You require making a sensible and careful decision. However, there are many organizations that overlook this aspect and then at the end, regret with their decision. A reputed agent will help you by providing the commercial property for sale listings. You can dedicate your time in going through the listings provided and then accordingly make an appropriate decision.

It does not really matter in what business you are involved in, you should consider commercial property for sale considerably. These listings help people to select the most suitable size and location for their business. There are commercial estate agents who are experts in their field and help you in taking the right decision. Moreover, they will make sure that you get the best deal from which you will be able to gain profits for your businesses. These professional commercial estate agents play a handy role in determining the price of the property in the open market.

The best part in hiring these commercial agents is that they are mostly aware of latest happenings in the commercial property for sale. They help you in the dealings so that you get what you desire. They will make sure that their property gains the highest profits. Commercial property for sale listings will give you an opportunity to get your dream house. However, it is highly essential that you look out for the agent who will satisfy all your needs. You can check their past work so that you get an idea about what to expect from them.

Once you get the proper agent for your commercial property of sale, the chances of getting good deals are high. However, while searching for the agent you can even think of checking their qualifications. It will help you in taking the right decision of hiring. It is always advisable to select an agent who has good knowledge about the field so that he will help you considerably. Good commercial estate agents will make sure to satisfy their clients considerably. You can even consider touring the web as there are many service providers available online. Some sites offer online forms, which you can fill online thereby saving time. It is necessary to take a careful decision before for make your choice. Simply search for a relevant website and grab the benefits.

Commercial Property Investment Mistakes and How to Avoid Them

You’ve probably heard about the commercial real estate bubble, here’s the ugly truth that lenders and other insiders don’t want you to know. Despite all the hype, not every commercial property is in trouble. The key for you as an investor is to avoid certain pitfalls and learn from other investor’s mistakes.

Before the economic and credit boom that has led into the recent downturn, conventional lenders capped loan amounts at 65 percent of the value of the property. This means that your $10 million commercial property would qualify for a maximum loan of $6.5 million. The current problems with commercial property investments started when hedge funds and private equity lenders began offering much higher loan to value ratios, meaning they would lend against your investment property with as much as 80 percent of the value of the real estate.

Mistakes Made by Commercial Investors

Some investors decided to refinance their $10 million commercial property for $8 million and get $1.5 million out tax-free! What seemed like a great deal at the time has come back to ruin the typical commercial property investment. The problem was that these loans needed to be refinanced after five years. Owners who pulled money out of their investments like this began down a path that has led to the troubles we are seeing now.

Fast forward from then to now and you’ll see that the entire economic climate has changed. Most sources of financing for commercial real estate have dried up. Owners with a property that needs to be refinanced are finding that unless the LTV ratio is 65% or less and the property is performing perfectly, it’s almost impossible to get refinancing for their commercial property investment.

You can’t tap into those hedge funds and private equity firms because many of them have gone out of business. So you are left with two options:

1) Create a workout with the existing lender where they refrain from foreclosing against your property in exchange for a slight increase in the interest rate, or other benefit that you can give the lender. In some cases the benefit to the lender is that they don’t need to take your property back. The truth is that the lender really doesn’t want to take back your property if they can avoid it.

2) Bring other investors into your deal by offering them a decent rate of return on their investment along with giving them a chunk of your equity. Make sure to contact a commercial property investment attorney who can help make sure that you meet all of the SEC guidelines if this is the path that you choose to go down.

What Makes a Safe Commercial Property Investment

The problem with many owners of commercial properties today is that they got into a deal with a bigger loan than they should have. Now, these commercial property owners can’t ride out the recession because the loans are coming due and they’re short, or worse, upside-down.

Investment rule #1

-Leave the equity in your property.

· Successful property owners don’t pull out their equity at the top of an up cycle; they leave the equity in their commercial property investment so they can ride out the downturns. The “commercial meltdown” doesn’t apply to property owners who left their equity untouched. While it’s true that the commercial property values have come down from a high peak. The typical commercial real estate investment is far more valuable today than it was 10 or 15 years ago.

Investment rule #2

-Stick with conventional lenders.

· By taking a short term hard money loan commercial owners placed themselves at the mercy of the fickle market. A conventional lender would not have financed more than 65 percent of the property value, allowing the owner with a cushion against fluctuating property values.

When structured correctly, your real estate investment may not provide you with an overabundance of excitement, but during times like these, a stable, performing real estate investment is just fine.