Let’s Do This Together

Commercial Investment Services is incredibly blessed to work with tenants, landlords and a vast array of businesses in our community, as well as throughout the region. As a commercial brokerage, we are fortunate to work with Buyers & Sellers of commercial properties and businesses, and have listened to the array of issues facing these principals, so many of which could never have been imagined. As a property management company, the conversations that we’ve had with our tenants that own businesses have been frank, raw, and at times, gut-wrenching. By and large, our landlord conversations have all been the same…let’s see where this goes before we make any decisions regarding rental payments, because, how do we know what this will look like next week? Next month? Three months from now?

Listen – this virus is scary and there is no doubt it must be taken seriously. The prescribed health measures are understandable. Those health providers on the front lines deserve accolades – truly, thank you for all you’ve done. The employees that are checking groceries, bringing meals to your car, operating offices from a six-foot distance or remote basis – they deserve recognition as well. There is a lot of fight against this unseen enemy and that is very heartening.

However, from the “front line” of working with so many businesses, the economic impact is also very real. Livelihoods are in the balance. We have had a tenant literally drop off keys, with a hand-written note, and remorsefully admit they’re done. Another letter from a decades-long tenant stating that at the end of the month, their doors will close, for good. Our salons, our massage therapists, our tattoo providers, some of our retailers – done (for now). Other retailers are trying to be as creative as possible to entice customers, all the while trying to be cognizant that many in their customer base have experienced loss of income as well. Countless other tenants have significantly abbreviated their operating hours, in an effort to simply make it through this. The stifling of our businesses cannot end soon enough. This. Is. Real.

Commercial Investments Services stands with all local businesses during these unfathomable times. We feel your pain and wholeheartedly support your efforts to battle, to survive, and to ultimately thrive. Together, friends & colleagues, let’s get through this. Let’s fight. Let’s create. Let’s foster ingenuity. Let’s do everything we can as a business community that’s at our disposal. Support local. Reach out to a friend. Stay strong. And, please, know that if we can help in any way, we want to do just that. We’re here, we’ll listen, and we’ll work with you and your business. Let’s do this, together. Let’s go!

The Future of Investments

The Future Of Investments

Which way is the right way in real estate investments in 2021? What is the future in these investments? An answer to these questions can be an interview with an interested professional real estate broker who can act as a real estate investment counselor. Each prospective investor can be interviewed in depth to find out specific needs in an income property. At the same time their needs are being evaluated, the broker will also communicate what benefits are available in various properties and how to identify them.

Some considerations should be given to the risk of loss for each age bracket of investor. Should an older investor purchase a property with the smallest down payment and highest leverage position? This will limit cash flow and may cause the property to have a “negative” cash flow. Is this what they want-or do they want cash flow from the property?

How about the younger investors? Are their objectives for long-range estate building or for current cash flow? Would they be more willing to take chances with a marginal investment that might bring big returns later?

Each investor must decide these answers for himself or herself. But, only after enough information has been furnished so that an intelligent decision can be made.

When a new investor has a better idea of the type of property that will do the right job for him/her, or them, then and only then should they be exposed to the market place and shown specific properties. Now the investor or investors can evaluate the various benefits and risks for the information shown on each property and apply the information to their own situation.

What is right for you? A new rental unit? A strip center? A one hundred-unit apartment property? Perhaps you should have five or six apartments or commercial properties in scattered locations. Real estate counseling can show you that you can choose which is right for you and know the reasons why it is right!

WE ARE HIRING!!

JOB DESCRIPTION – Financial Supervisor of Section 8 Properties

The Financial / Department Supervisor is responsible for all aspects of this Department. The foremost portion of this job deals with accounting duties, A/R, A/P, payroll, financial reporting and other related duties. This position involves the direct supervision of all related Staff, including: Financial Staff; Support Staff and On-Site Managers. The Supervisor is responsible for assuring program compliance, updating policies, training for all related staff and overseeing the daily operation of this department. In addition, this person will assist with various office tasks within Commercial Investment Services. The Supervisor reports directly to the Business Ownership. This is a salaried position for 40+ hours per week.  Bachelor’s Degree in Accounting or Business Administration and/or a minimum of three years’ experience in these areas. Previous Section 8/LIHTC experience is a plus.

Qualifications include strong computer and accounting skills, excellent written/oral communication, strong leadership with managerial skills in supervising staff and programs, the ability to work independently, be self-motivated with good organizational skills and be very detail-oriented. Candidate must have a working knowledge of GAAP and experience with same.

AN EQUAL OPPORTUNITY EMPLOYER

Please complete the application located on this website available under the “Learning” tab and include a resume that states your education, experience and availability.

Karen Meade, Office Manager 308-532-1332

😊

Lease Negotiations With Large Corporations

Lease Negotiations With Large Corporations
A few years ago, senior corporate managers were able to make major real estate decisions by themselves. Now, a negotiating team will negotiate leases. This team may consist of legal counsel, finance department representatives, outside specialists such as real estate brokers or tenant representatives, design and engineering consultants, and others.
In today’s market, corporate tenants with high credit ratings, who are willing to make long-term lease commitments negotiate from a strong position. Therefore, corporations that formerly treated real estate transactions in a casual way have now developed detailed real estate negotiating strategies. The corporate tenant sees these negotiations as a way to cut costs within the company (whether upsizing or downsizing).
Landlords, developers, and brokers must be aware of this new style of negotiation. While the real estate executive plays a key role in developing the strategy, the other parties must be ready to respond quickly to requests for information and be prepared to discuss issues that rarely if ever arose in the past.
Request For Proposal
The document that best illustrates the new negotiating process is the Request For Proposal (RFP), sent to property owners. The RFP incorporates the specification for rental rates, free rent, up fitting, operating expenses, options, cash incentives and other “money clauses” that the corporation intends to negotiate. A short list of prospective sites or buildings is then prepared based on the initial responses to the RFP. The corporate real estate executive (often with the aid of a real estate broker) will negotiate to obtain the best deal with the prospective landlords.
The RFP usually contains a number of items that are nonnegotiable–for example, amount of usable square feet, geographic area, lease term, expansion option, parking facilities, and security. On the other hand, many items remain negotiable, such as rent rate, concessions, rent escalations, cash inducements, and amenities. The parties should understand from the outset that failure to obtain a non-negotiable term could kill the deal for the tenant. Other items may be “throwaways” that could be modified or omitted from the lease.
Example: A corporate tenant may lack the capital funds to improve the leased premises, and so may be willing to pay a higher rental rate or extend the lease term in exchange for a larger allowance for improvements. Alternatively, the tenant may be willing to fund all or part of the improvement costs in exchange for a lower rental.
Give-and-Take in Negotiations
Although it is obvious that any negotiating process involves give and take by both sides, corporate real estate executives have learned the importance of understanding the strengths and weaknesses of their bargaining position as well as that of the landlord. Within reason, these tenants are assured of getting whatever is needed if the bargaining team is aware of the options and takes carefully calculated risks based on solid information. o

The Use Of Other People’s Money


Each investor has a “comfort zone” about loans. The leverage seeker wants the largest loan that is practical. Others may have experience or training that calls for no loans at all. They must have the property free and clear.
Most of us have a loan comfort zone somewhere between these extremes. Nearly everyone accepts the idea of some sort of mortgage. The use of OPM (other people’s money) makes sense. The comfort in loans may affect the type of investment. Many of these “free and clear” owners prefer land as the investment. They want no improvements on it, just the bare land. Here’s some of the benefits of investing in unimproved land. These can make a lot of sense:

  1. There are no tenant problems. There may be a
    simple lease for farming or grazing, but only limited
    contacts between lessor and lessee. Often, the investment
    land lies unused.
  2. A well-chosen land investment can result in huge
    profits. We have all heard stories of owners who have
    purchased land for just a few dollars an acre, then
    later sold for millions! (The key is “well-chosen.”)
  3. Land is a secure investment. Even in the worst
    economic situations, the land is still there. Value can
    fluctuate, but the investment will not disappear.
  4. Land represents wealth. It can be a quick source
    of cash for an owner to use for another investment.
    Land looks good on a financial statement. It adds
    permanence and stability to an applicant for loans or
    for a line of credit.

What Every Real Estate Investor Should Know

 
Commercial Real Estate Formulas Every Investor Should Know   Commercial real estate involves formulas that differ from residential investments. Are you familiar with these key calculations?

Here’s a summary of some key formulas to remember when you’re investing in commercial real estate (and don’t forget to consult with real estate and financial experts for more advice).

Net Operating Income (NOI): This formula is used to determine the amount of income your property generates. It focuses on the real estate itself, not the financial situation of the prospective investor. To calculate the net operating income, subtract the operating expenses from the real estate revenue the property produces. Revenue includes all money generated from the property, not just leases. This could include parking and other facility fees.

Capitalization Rate: This is also known as the “cap rate.” Investors often use it to quickly determine how properties they own are performing financially or to assess the return on investment of properties they’d like to buy. It is calculated by dividing the net operating income by the property asset value. Cap rates are expressed as percentages.

  Cash-on-Cash: This is a rate of return often used to calculate the cash income earned in relation to the cash invested in the property. This is calculated by dividing the net income from a property for one year by the total cash invested into the property, expressed as a percentage. It takes into account debt financing but only considers income from one year.

Feel free to contact me for assistance with any potential investments. I’m happy to help you find a property that would be a solid investment for you.

Investment Property Inspections

Investment Property Inspections

When a buyer makes an offer on an investment property, it is usually only after a thorough inspection of all of the data that is available on the financial records of the building. Certainly, a good physical inspection is also made.

Some investors pay more attention to the data than the structure. The physical inspection of the property could be as important or more important than the rents and expenses. By thoroughly inspecting potential investment property, a buyer may be able to:

•  Work out a better price.

•  Get ready for any upgrading or maintenance expenses.

•  Avoid catastrophic repair bills for detectable problems.

•  When actually purchased, get a higher return on the investment.

Where to Start

First, the investor needs to know what experts to call. He needs to know what needs to be inspected and how to do it. The property must be verified as physically sound and is a worthwhile investment.

There are some broad categories of problems that investment properties are subject to, and the type of expert that is needed for the inspection.

•  Soil Conditions. When a property is located on certain types of land, a professional soil engineer or geologist should be called. Property could be low lying or reclaimed land; a former landfill or dump area; on hilly or mountainous terrain; located at lakeside or seaside; has structures or piers, pilings, stilts, or other unusual foundation conditions.

•  Drainage. If the property is located within a flood plain area, it should be carefully examined by a civil engineer. The buyer can check basements and interior walls for signs of water damage.

•  HVAC. Contact the representatives of the companies that manufactured or installed the heating, ventilating, and air-conditioning systems. Elevators and electric systems should be inspected by professionals in those fields.

•  Roofing. A roofing consultant or structural engineer should be called to determine age, condition, ability to withstand loads, etc.

•  Pests. Pest control companies are able to check for termites and other damage-causing pests.

Check the local building department and see what permits were issued and when. Some records may also show when fire inspections or health and safety inspections were made. Any violations will be on record.

The plans and specifications of the building may also be on file. These may contain the names of the original architect, engineer, contractor and developer. The investor may wish to contact one or more of these if any questions need an answer. o

Warehouses —A Great Investment


When Syndicates, partnerships, investment companies and their individual participants look at investments in commercial properties, many tend to look at properties that have that bewitching charm of glamour in brochures. A beautiful office building or an enclosed shopping center seem to have a more acceptable “status” as an investment property. These buildings can be nice to drive by and point out as “our” investment.

Originally, any property designated as a “warehouse” would always be located in areas zoned for industrial use. There is not nearly as much allure in a squat bulky warehouse building. The physical attractiveness is not there in color flyers and photographs. However, as money makers, these bulky buildings can be a very profitable real estate investment.

A recent check in one area showed a vacancy rate in distribution warehouses of 4% to 6%, while office buildings had a 10.7% vacancy level. The vacancy rate for warehouses remains low in good times and bad. If there is a slump in demand for real estate, commercial real estate should not be affected. The demand for space in warehouses should remain the same.

When choosing a site for a new facility installation, think first of the renters who will be your customers. Does the warehouse have easy access from a major highway or Interstate? Will the driveways and parking areas accommodate large trucks? Is the facility very close to any houses or residential areas that will complain about the noisy trucks?

Expenses and Income

The normal costs of operating any rental property are the utilities, insurance, property taxes, management and maintenance.

Access and parking are important. There should be direct access to each unit by a vehicle with multiple trailers. There should be room for these vehicles to turn around or be passed by another car or truck. Loading docks are provided at most commercial-oriented warehouses.

Security: The latest state-of-the-art equipment makes the convenience of round-the-clock access available with no loss of security. There can be computer-controlled entry gates and individual alarms in each unit with security cameras installed in various places around the facility. If the building is a conversion of an existing property, windows should be sealed. All entrances and exit doors should be barred and locked. Building a new facility is easier, with fences, electronic gates and alarms built in originally.

Real Estate Investment Guide

Which way is the right way in real estate investments in 2020? What is the future in these investments? An answer to these questions can be an interview with an interested professional real estate broker who can act as a real estate investment counselor. Each prospective investor can be interviewed in depth to find out specific needs in an income property. At the same time their needs are being evaluated, the broker will also communicate what benefits are available in various properties and how to identify them.

Some considerations should be given to the risk of loss for each age bracket of investor. Should an older investor purchase a property with the smallest down payment and highest leverage position? This will limit cash flow and may cause the property to have a “negative” cash flow. Is this what they want–or do they want cash flow from the property?

How about the younger investors? Are their objectives for long-range estate building or for current cash flow? Would they be more willing to take chances with a marginal investment that might bring big returns later?

Each investor must decide these answers for himself or herself. But, only after enough information has been furnished so that an intelligent decision can be made.

When a new investor has a better idea of the type of property that will do the right job for him/her, or them, then and only then should they be exposed to the market place and shown specific properties. Now the investor or investors can evaluate the various benefits and risks for the information shown on each property and apply the information to their own situation.

What is right for you? A new rental unit? A strip center? A one hundred-unit apartment property? Perhaps you should have five or six apartments or commercial properties in scattered locations. Real estate counseling can show you that you can choose which is right for you and know the reasons why it is right! 

Some Benefits of a Tax Free Exchange

The main benefit of a tax-free exchange is just that–freedom from a tax. The gain that could be realized by one or both of the principals in the exchange transaction does not need to be recognized at the time of the closing. The gains tax is deferred until the property owner makes a taxable disposition of the new property at some later time.

It takes more patience and hard work to set up an exchange than it does to arrange a straight purchase and sale of real estate. Some property owners and their agents simply do not understand the benefits of an exchange or are worried about the strict requirements imposed by the Internal Revenue Code.

Owners need to know that the 1031 Exchange is just another tool like a purchase, sale, option or lease.

The real estate exchange has become a normal business tool used by investors, corporations and business owners throughout the country. If you have not used this tool, you may have already paid too much in taxes.

The benefit from the tax postponement is apparent. The owner can reinvest the full equity in other property, including gains, without any decrease in value due to tax payments. In effect, the government extends an interest-free loan to the investor, who then is able to obtain leverage over and above that obtained from regular mortgage financing.

An example is a trade up to a larger income property.

An investor owns a 10-unit apartment building that is too small for an on-site manager. The income is desirable and a sale would be costly because of a large gain. The equity could be exchanged up into a larger apartment property that would adapt to professional management. The larger property would have increased income to cover the bigger loans and management fees. After the transaction the owner can have the same or higher income, hire a professional property management company and be relieved of management problems.

“Like-Kind” Property

To qualify as a 1031 exchange, the property being sold and the property being acquired must be “like-kind.”

The Like-Kind Property Definition is a very broad term which means that both the original and replacement properties must be of “the same nature or character, even if they differ in grade or quality.” In other words, you can’t exchange farming equipment for an apartment building, because they’re not the same asset. In terms of real estate, you can exchange almost any type of property, as long as it’s not personal property, it must be an investment property.

Some examples of types of exchanges that would be allowed

•  Exchanging a duplex for an apartment building.

•  Exchanging a single family rental property for a commercial office building.

•  Exchanging a rental property or vacation rental for a warehouse.

•    Exchanging a single-family rental property in Nevada, you could exchange it for a commercial rental property in Texas.

There are strict rules that must be followed to make a real estate exchange, and the original replacement property must be within the U.S. to qualify under section 1031.

Let’s get together to evaluate your present portfolio of properties and review your plans for future acquisitions. A real estate exchange might be something that you may want to consider in the future.  o