Commercial Real Estate Agents

Let’s face it – you cannot intelligently buy commercial real estate properties without the help of an expert. Hiring a commercial real estate agent is your best bet against losing thousands of dollars you’ll likely spend, when you make costly mistakes or miss out on solid, commercial real estate investing opportunities. That is why finding and hiring a commercial real estate agent should be your first and most crucial step – it can make or break your commercial real estate venture.

Benefits of hiring commercial real estate agents

Professional commercial real estate agents or broker companies give you access to the best commercial real estate information available. They provide you with information about the latest sales price data, vacancy and absorption rates and comparative tax and labor costs to help you make informed decisions.

Experienced commercial real estate brokers can also help explain to you the present market lease trends, the current demographics, and they will give you a straightforward competitive analysis of different commercial properties that fit your purpose and budget. Professional commercial real estate agents or broker companies give you all this information so that you can anticipate opportunities, gain a competitive advantage and implement the best possible real estate approach.

If you plan to build commercial real estate, an agent can help you determine the best location using scientific local market data and a keen knowledge of the economic trends that affect the commercial real estate market. These agents are specially trained to handle very large transactions – millions upon millions of dollars. Their purpose is to find investments that will not only increase in value, but also give the investor a good revenue stream.

Never try to invest in commercial real estate property without consulting a commercial real estate agent. He or she will have the right training to impart helpful research, advisory and transaction services to you so that your commercial real estate venture goes smoothly.

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Commercial Real Estate Loans – 12 Problems to Avoid

This article describes 12 recurring problems with commercial real estate loans that commercial borrowers and their advisors need to anticipate before it is too late. The following problems are common in traditional bank commercial real estate loans and should be avoided if feasible (special circumstances will periodically make some of these terms unavoidable).

COMMERCIAL REAL ESTATE LOANS PROBLEM NUMBER 1: Tax Returns versus Stated Income

Most traditional banks will require several years of tax returns in order to qualify for a commercial real estate loan. The alternative is to use a Stated Income lender that does not verify personal income or assets. Many borrowers will simply not qualify for a commercial mortgage loan if tax returns are used due to high business expenses (and low net income). Many lenders using tax returns will also continue to verify income after the loan closes. Stated Income lenders will not engage in this practice.

COMMERCIAL REAL ESTATE LOANS PROBLEM NUMBER 2: Special Purpose Properties

It is becoming increasingly difficult to get commercial loans for special purpose properties. Properties that do not fall in the categories of apartments or retail/office buildings are often placed in this special purpose classification. This means that business acquisition loans for commercial properties such as restaurants/bars and auto service businesses are frequently hard to find. Commercial financing will be even more difficult to locate for such specialized properties as churches, funeral homes, nursing homes and assisted living facilities.

COMMERCIAL REAL ESTATE LOANS PROBLEM NUMBER 3: Recall/balloon features

These terms are used by many banks to effectively shorten most commercial real estate loans to 3-7 years.

COMMERCIAL REAL ESTATE LOANS PROBLEM NUMBER 4: Short-term loans (less than fifteen years)

15-40 year commercial property loans without recall/balloon features are available.

COMMERCIAL REAL ESTATE LOANS PROBLEM NUMBER 5: Up-front Commitment fees

Under most circumstances, commercial borrowers should not pay such a fee. Please note that processing/retainer fees are not included in this discussion of commitment fees. Processing/retainer fees should be viewed as an acceptable and standard business practice when dealing with commercial real estate loans.

COMMERCIAL REAL ESTATE LOANS PROBLEM NUMBER 6: Business Plans

Under most circumstances, commercial borrowers should not use a lender that requires a business plan.

COMMERCIAL REAL ESTATE LOANS PROBLEM NUMBER 7: Cross-collateralization

Commercial borrowers should not be required to use their personal assets as collateral for a commercial property loan.

COMMERCIAL REAL ESTATE LOANS PROBLEM NUMBER 8: Sourcing and seasoning assets. Seasoning of ownership.

This particular problem will not be relevant to all business borrowers. However, if it is relevant, you should seek out a lender without sourcing and seasoning requirements or limitations. Most banks have strict guidelines for sourcing and seasoning of assets or ownership to qualify for commercial real estate loans. For a purchase, commercial lenders will frequently want documentation about where the down payment is coming from (sourcing). Commercial lenders will also frequently have very specific requirements stipulating that the funds must have been in a specific account for a specific period of time, often 3-6 months or longer (seasoning). Seasoning of ownership is similar to seasoning of funds, except this requirement involves the minimum time someone has owned a commercial property before they can refinance the property.

COMMERCIAL REAL ESTATE LOANS PROBLEM NUMBER 9: Requirement to sign IRS Form 4506

IRS Form 4506 authorizes the lender to obtain a borrower’s tax returns directly from the IRS. This form is routinely required by most traditional banks and many other commercial lenders for a business acquisition loan. Commercial borrowers using a Stated Income lender with limited documentation requirements will avoid this requirement.

COMMERCIAL REAL ESTATE LOANS PROBLEM NUMBER 10: Debt Service Coverage Ratio (DSCR) in excess of 1.2 for a business acquisition loan

The most flexible approach to DSCR for a commercial property loan will require a DSCR in the range of 1 to 1.2, with exceptions permitting a DSCR less than 1.

COMMERCIAL REAL ESTATE LOANS PROBLEM NUMBER 11: Minimum commercial property loan size that is too high for your commercial mortgage needs.

It is not unusual to encounter a minimum commercial real estate loan requirement of $500,000 to $1,000,000.

COMMERCIAL REAL ESTATE LOANS PROBLEM NUMBER 12: Excessive length of the commercial real estate loan process

Many traditional banks require three to nine months to close a commercial mortgage. A more action-oriented commercial lender will close commercial real estate loans in 45 to 60 days.

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Pop Quiz Commercial Real Estate Investing

I read once that if you took all the real estate lawyers in Illinois and laid them end to end along the equator – it would be a good idea to leave them there. That’s what I read. What do you suppose that means?

I have written before about the need to exercise due diligence when purchasing commercial real estate. The need to investigate, before Closing, every significant aspect of the property you are acquiring. The importance of evaluating each commercial real estate transaction with a mindset that once the Closing occurs, there is no going back. The Seller has your money and is gone. If post-Closing problems arise, Seller’s contract representations and warranties will, at best, mean expensive litigation. CAVEAT EMPTOR! “Let the buyer beware!”

Paying extra attention at the beginning of a commercial real estate transaction to “get it right” can save tens of thousands of dollars when the deal goes bad. It’s like the old Fram® oil filter slogan during the 1970’s: “You can pay me now – or pay me later”. In commercial real estate, however, “later” may be too late.

Buying commercial real estate is NOT like buying a home. It is not. It is not. It is NOT.

In Illinois, and many other states, virtually every residential real estate closing requires a lawyer for the buyer and a lawyer for the seller. This is probably smart. It is good consumer protection.

The “problem” this causes, however, is that every lawyer handling residential real estate transactions considers himself or herself a “real estate lawyer”, capable of handling any real estate transaction that may arise.

We learned in law school that there are only two kinds of property: real estate and personal property. Therefore – we intuit – if we are competent to handle a residential real estate closing, we must be competent to handle a commercial real estate closing. They are each “real estate”, right?

ANSWER: Yes, they are each real estate. No, they are not the same.

The legal issues and risks in a commercial real estate transaction are remarkably different from the legal issues and risks in a residential real estate transaction. Most are not even remotely similar. Attorneys concentrating their practice handling residential real estate closings do not face the same issues as attorneys concentrating their practice in commercial real estate.

It is a matter of experience. You either know the issues and risks inherent in commercial real estate transactions – and know how to deal with them – or you don’t.

A key point to remember is that the myriad consumer protection laws that protect residential home buyers have no application to – and provide no protection for – buyers of commercial real estate.

Competent commercial real estate practice requires focused and concentrated investigation of all issues material to the transaction by someone who knows what they are looking for. In short, it requires the exercise of “due diligence”.

I admit – the exercise of due diligence is not cheap, but the failure to exercise due diligence can create a financial disaster for the commercial real estate investor. Don’t be “penny wise and pound foolish”.

If you are buying a home, hire an attorney who regularly represents home buyers. If you are buying commercial real estate, hire an attorney who regularly represents commercial real estate buyers.

Years ago I stopped handling residential real estate transactions. As an active commercial real estate attorney, even I hire residential real estate counsel for my own home purchases. I do that because residential real estate practice is fundamentally different from commercial real estate.

Maybe I do “harp” on the need for competent counsel experienced in commercial real estate transactions. I genuinely believe it. I believe it is essential. I believe if you are going to invest in commercial real estate, you must apply your critical thinking skills and be smart.

POP QUIZ: Here’s is a simple test of YOUR critical thinking skills:

Please read the following Scenarios and answer the questions TRUE or FALSE:

Scenario No. 1: It’s Valentine’s Day. You are in hot pursuit of the love of your life. A few weeks ago, she confided in you that all she ever dreamed of for Valentine’s Day was that her lover would show up at her door, dressed in a white tuxedo with tails and a top hat, and present her with a beautiful bouquet of flowers. You’ve rented the tuxedo, but now you are concerned about how much money you are spending.

TRUE OR FALSE: Since flowers are pretty much all the same, it is OK for you to skip the roses and show up with a bouquet of fresh yellow dandelions.

Scenario No. 2: For several years you eyesight deteriorated to the point where you can barely see your alarm clock. You are now considering corrective eye surgery so you won’t need glasses. Your sister-in-law had corrective eye surgery and has had spectacular results. She recommends her eye surgeon, but mentions the cost is about $5,700 for both eyes and that the surgery is not covered by insurance. A few years ago, you had surgery to correct your hemorrhoids and it cost you only eight hundred bucks.

TRUE OR FALSE: Since surgeons all went to medical school and are all medical doctors, you are being frugal and wise by asking the surgeon who performed your hemorrhoid surgery to perform your corrective eye surgery.

Scenario No. 3: Several years ago, when you first got married, you asked a former classmate who is a lawyer to represent you in the purchase of your townhome. The cost was only $375. A year later, you started a family and decided you needed a Will. The same attorney prepared Wills for you and your wife for a total cost of $700. You started your own business and your attorney friend formed a corporation for you and charged you only $600 plus the cost of the corporate minute book. Years later, when your son was arrested for misdemeanor reckless driving, your attorney friend handled the criminal case and got your son off with supervision for only $1,500.

Your business has been successful and you have built a pretty sizable nest egg, but you are tired of working for every dime and want to try investing in real estate. You have your eye on a strip shopping center. It includes a grocery store, bank, hardware store, dry cleaners (on a month to month tenancy), a couple of fast food restaurants, a gift shop, dental office, bowling alley (with a lease about to expire), and wraps behind a gas station/mini-mart on the corner. The purchase price is $8,000,000, but the net operating income looks pretty good. You figure if you turn the bowling alley into a full service restaurant/banquet facility, and convert the dry cleaners into a 24-hour coin laundry, the net operating income will increase and the shopping center will turn into a spectacular investment. You plan to pull together much of your life savings and put down $2,000,000 to buy this strip shopping center, borrowing the balance of $6,000,000. You remember that your lawyer friend handled the purchase of your home several years ago, so you know he handles real estate.

TRUE OR FALSE: Commercial real estate is the same as residential real estate [Hey, its all dirt, isn’t it (?)], so you are being a shrewd businessman by hiring your lawyer friend who will charge much less than a lawyer who handles shopping center purchases several time a year. [What is this “due diligence” stuff anyway?]

ANSWERS:

If you answered “TRUE” for any of the foregoing Scenarios

STOP!

The Quiz is over.

Please find a quite place to reflect upon your life and consider whether the decisions you make consistently give you the results you desire.

If, on the other hand, you understand that the answer to each of the foregoing questions is FALSE, I am available to help you in Scenario No. 3.

For Scenario No. 2, you should follow your sister-in-law’s suggestion and contact her eye surgeon, or some other eye surgeon with equal skill.

For Scenario No. 1, you are on your own. [But, if you answered TRUE for Scenario No. 1, you may be FOREVER on you own.]

Investing in commercial real estate can be profitable and rewarding – but it requires good critical thinking skills and competent counsel.

You have a have a brain. It is strongly recommended that you use it.

R. Kymn Harp is a seasoned attorney based in Chicago, Illinois with 30 years experience representing commercial real estate investors, lenders and developers. He is a frequent speaker at continuing education seminars, and is a widely published author on commercial and industrial real estate topics including due diligence, entitlements, commercial real estate financing, and Brownfield development and financing.

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Is Commercial Real Estate An Appealing Means Of Investing?

Commercial real estate is an excellent opportunity for investing and generating outside income. There are numerous people over the years that have started to invest in commercial real estate, with this type of property being sold and purchased on a regular basis, this could be a great way to invest your money with the potential of a good return. Before anyone ever decides to invest in the commercial market, it is extremely important to understand the industry and all the components surrounding it.It’s very important investors understand the commercial real estate basic definition. Commercial property is made up of various properties that can produce revenues and possible income for their owners. The properties can have the capability of producing revenue and/or income immediately, or possibly sometime in the future, but are still consider commercial real estate.Investing in commercial properties is a very smart choice for investors for various reasons. One reason that investors like to invest in commercial properties is because of the potential short-term and long-term financial benefits. In the short term the property can produce a better cash flow for the use of the property, with in the long term the property can appreciate in value which in the long term could be of value to you upon selling the property. In most cases investing in commercial properties has a lot less risk involved then in some other types a real estate. As for example, if you purchase a strip mall or maybe apartment building, the risk of you investing in those properties is divided up between your renters, and even though you may not have all units rented, you are still getting return on your investment in still making money.

Another factor to consider is a large amount of different types of properties that you can invest in. There are numerous areas of different commercial properties there are great investments. If a building consist of more than four units, they can be considered as commercial real estate. Other areas that are considered commercial property can include properties such as commercial centers, industrial parks, mobile home parks, strip malls, apartment buildings, and RV parks.If you’re thinking about investing in commercial properties you need to have a plan about how you are going to handle the financing. Most investors do not use all their money to finance or purchase a property, but have other means to finance and purchased it. In most cases you will go to a lender to heat your financing, but they are a few things you need to think about. Make sure you have a good business plan and be able to describe to the lender the type of property you are looking for and how you plan on being successful with your investment. You need to show to the lender that you have a portion of the funds needed put aside, and that you are a serious investor that is willing to invest in your success. You should have an update appraisal of the property that you are interested in investing in so the lender can see what the current market value is of the property you are wanting to invest in. With this type of investment you should hire a attorney to look into any legal issues that could come up to protect your interests. And before you make a decision on any financing you should compare rates of several lending companies.

There are several ways that you can get started in investing. One of the main things you need to do is to educate yourself by reading books on investing in real estate, searching the Internet for any information on commercial property investing, and maybe one of the best ways is to talk to your family or friends or business associates that are already investing in commercial property. Studying their success in the states can help you tremendously. If you’re thinking of investing you need to look around the area that you live in, and what type of properties are for sale and what the asking price of the property is and what properties sold and the price. You can also attend some of your city planning and zoning meetings to see what is going on in your area.Commercial real estate can be a great investment opportunity for you, but educate yourself.

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How To Save Money On Car Insurance For Young Drivers? Read To Know

The cost of car insurance policy is determined by many factors typically examined by insurance companies online such as driver’s age, the location where he mostly drives a car on, the make and model of car, driver’s driving experience, etc. Insurance companies take into considerations these factors to figure out if driver will be a high risk. Usually, young drivers are considered risky as they are less likely to have good driving experience and skills. This is why it is challenging to qualify for cheap car insurance for young drivers. But, the interesting thing is that today many online insurance companies specialize in offering various discounts which you can earn to reduce your insurance cost or simply get cheap car insurance for young drivers. Before applying for insurance policy, it is advisable to get some knowledge about the same.

If you install security or safety devices in your car, you are less likely to get injured or your vehicle is less likely to get easily stolen or damaged. Many online insurance companies offer discounts for the same. Moreover, if you want to save money, you should think of joining a recognized driving course. This will improve your driving experience as well as skills and also could get you one more discount. One more way to get best affordable auto insurance is to drive less. If you drive less, the possibilities of accidents or similar circumstances leading to insurance claims will get reduced. Some insurance providers also offer discounts to students who score good grades. Besides, your driving location also affects insurance cost. Even make and model of car will affect what you will pay for insurance policy. Some vehicles are expensive to be insured while other cars are not too expensive.

Thus there are many aspects which you should work on to save money. But, most importantly, you need to locate insurance company which offers the most affordable auto insurance rate and also multiple discounts. One of the easiest ways to locate best insurance company in your local area which is willing to provide affordable car insurance with many discounts is to take free professional assistance of a reputable online car insurance service. These services which are closely connected with a huge online network of insurance providers that offer cheapest car insurance quotes will help you to get easy and quick access to best insurer.

The risk factor associated with you will affect your insurance cost significantly. So, it could be advisable to see if you can reduce the risk taken by insurance company by following some expert guidelines and improve your eligibility for affordable auto insurance rate. Get assisted by experienced car finance specialist to know what these guidelines are and how to get cheap car insurance for young drivers.

Log on to FreeCarInsuranceQuote.ca to get more information on young driver affordable car insurance in Canada. It offers various discount on premiums to lower down your monthly payments and helps you to save money. The interest rates are also so minimal compare to market rates. Visit us soon.

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