Smooth Real Estate Transactions: 4 Tips to Consider When Selling or Buying a Commercial Property

No one would invest in a piece of commercial real estate without investigating it’s resale value, income generating potential, building structure, etc. However, there are a couple of things that seem to get overlooked, even by the savviest investors. Following are the four most overlooked items that you should consider when you are selling or buying a commercial property:

Has the building been unoccupied for more than 180 days?

Collier County has an established Land Development Code (LDC) that governs things like a building’s architectural standards, setbacks, landscape and parking requirements. These requirements vary based on the district where the property is located. The LDC is reviewed and updated twice a year and new projects are required to comply with the codes. Existing buildings are usually “grandfathered” in, however, there are certain times that a building is subject to review for compliance with the current land development code.

One reason a building is subject to review is if it is unoccupied for a period of more than 180 consecutive days. To bring newer buildings into compliance with the LDC may be as simple as revamping the landscaping with extra trees or buffer shrubs. However, with older buildings it can be very costly. A local businessman purchased an older building with the intention of using it as a warehouse-showroom. When he tried to get a permit for a renovation, he was informed that he would have to change the front facade of the building to include among other things, a 75% glass storefront. To bring this building into compliance, it would have meant serious structural changes that increased the renovation costs by tens of thousands of dollars. The project proved infeasible and the building was subsequently resold and developed.

Will the occupational license require a change of use for the building?

Another reason that would make the building subject to review for compliance with the land development code would be if there was a “change of use.” Change of use doesn’t necessarily mean a zoning change. It can mean going from a jewelry store to an office supply store, or a retail store to a restaurant. The reason for this review is to make certain that the new use is in compliance with the permitted uses of the specific zoning area. This review also ensures that there is adequate infrastructure (ie parking) to support the new use.

Will the building need alterations to the fire alarm or sprinkler system?

Another overlooked item is the fire safety system, which includes the fire alarm and fire sprinklers. By adding sprinklers or changing out a fire panel, you open the whole fire safety system up for review and it will have to be brought up to current code. Depending on the age of the building, this can include relocating the fire alarms on the wall; adding fire sprinkler heads; or replacing an entire control panel, which can add thousands of dollars to a project. If you are in doubt, get a consultation with a qualified general contractor or architect during your due diligence period.

Have you allotted enough TIME for planning and permitting?

Permitting is frequently the place where owners don’t allot enough time. According to the City of Naples Building Division, it typically takes three-four weeks for a permit application to be reviewed and a permit issued. However, if your permit application is rejected it can take another two-four weeks after your plans have been revised by the architect. According to the Collier County Building Department, it typically takes six weeks for a permit application to be reviewed and permitted. Depending on the complexity of the project and allowing for a couple of rejections, it is more realistic to plan on three to twelve months for a permit to be issued. A renovation might be three months and a building under 10,000sft might take six-nine months. Unfortunately, there are NO short cuts in getting through the permitting process.

With proper planning, your commercial real estate transaction can go smoothly and provide you with a profitable investment. If you have any questions about the process, it would be wise to consult with a reputable commercial general contractor and an architect.

Commercial Real Estate Agency Blogs – 5 Tips For Success

It’s no secret by now that one of the cornerstones of a great marketing strategy, you need to have great content, well-written and helpful to your site visitors. Perhaps the easiest way to achieve this is through creating and actively maintaining a blog. You’re probably thinking, wait, I’m a commercial real estate agent, where do I even start with having a blog? Here are some tips to get you started on your way to becoming a CRE wordsmith.

1. Don’t cover too much at once

As an author, your space on the blogosphere is pretty much unlimited. However, this does not mean that you should try to cram all you know about one topic into one single blog post. If you think that the topic can be broken down into smaller sub units, you should also make blog posts covering only those sub units. It will be easier for your readers to process, it will be easier for you to write, and it will give you more content and more traffic.

2. One topic = one blog post

Related to our previous point, your blog posts should revolve around one single topic. The reason is simple – both you and your readers will be able to stay more focused. If you’re already brewing with ideas, write them down and expand them in future blog posts.

3. Answer the right questions

Writing helpful content is one of the best ways to get your visitors engaged and keep them returning to your site. However, you need to make sure that you’re answering those questions which they need help with. Put yourself in the prospects’ shoes and see what kind of concerns and problems they might have.

4. Cover common problems

In your average working day, you come across dozens of clients and they all have similar questions and doubts. Why not use this knowledge to your advantage? Your blog can be a platform where you address frequently asked questions, problems and concerns your clients might have.

5. Look at the bigger picture

You might think that having your own blog implies that you should use it to write about yourself, your agency and your work experience. However, your potential clients will not be looking for information specific to your agency. Instead, they will be looking for more general information pertaining to the commercial real estate industry. This is why your blog posts should rarely touch upon your own agency, unless it’s something really worth noting – such as an important deal you closed, company anniversary, charity event you hosted or similar.

Commercial Real Estate Loans

Commercial real estate loans can help you purchase, build or refinance commercial properties owned by you or your company. Such loans are designed to help acquire, construct or simplify payments for residential income properties, such as like apartment buildings, commercial business properties (offices), retail and warehouses and development projects like a condominium and subdivision projects.

There are a number of free commercial mortgage lender databases on the Internet to help you find mortgage lenders and commercial construction lenders who will process your application. These search directories can be very powerful tools, if you know how to use them. As a general rule, you should only use commercial mortgage lender databases that give you direct links to the lenders, not brokers. This way, you cut the paper trail and do business directly with the lender.

Most commercial mortgage lender databases require that you fill out a basic commercial loan application. After you submit your application, the database matches your data with hundreds of commercial mortgage financing programs. The results of the search will depend on your location and the type of commercial real estate loan you are looking.

Your application will be matched with commercial lenders who best meet the information you provided. You can compare rates and choose lenders who you think will work for you. If you use commercial mortgage lender databases to your advantage, you can easily secure loans for virtually any commercial property purpose. A good database gives you intelligent insight into what kind of conventional and government commercial property loan is best for your particular circumstances.

How to Determine the True Worth of a Commercial Property

Did you know that when it comes to determining the true worth of commercial property, there is a difference between market value and investment value? This is true, there IS a difference. In order to understand this concept it is necessary to first understand the different commercial property value in existence. In this article we will briefly discuss these in addition to some other valuation factors.

“Market value is what’s typically meant when referring to a property’s value and is the value used for loan underwriting purposes.” Market value is used to estimate the amount of money the fully developed project will bring in (upon its completion) when it comes time to sell it or rent out its individual units. There is an organization called the Appraisal Foundation where much more information can be found on market valuation of commercial properties.

“Investment value refers to the value to a specific investor, based on that investor’s requirements, tax rate, and financing.” Or in other words the amount of money that a particular investor would pay for the property in question, upon its completion. Different people have different goals when it comes to investing their money. Therefore the investment value of a specific commercial construction property can vary from one investor to another.

Other types of factors that make up the total worth of commercial property include: insurable value, assessed value, liquidation value, and replacement value. There is also the cost approach; or a value that is determined upon what it would cost to replace that particular building in accordance with the value of the land. There is also a sale comparison approach where a particular building is compared in value to other properties with like characteristics.There is the income approach where a perpetuity discount model type is used to determine the rate of return on a project. There is a problem with this specific type of approach in that long-term tenants might not be paying current rates; therefore the building’s value goes down. Inflation can also negatively impact this type of approach to figuring out the worth of a certain commercial property.

In calculating the total worth of a certain commercial property it is necessary to have a basic understanding of the above-mentioned valuation concepts and also of the different approaches. MUCH more information is available on each of these factors on the Internet. Just go online to your favorite search engine and type in the title of this article. Your search will produce oodles of pertinent information for you to study. If you are having difficulties understanding these different aspects of commercial real estate investing, it is recommended you consult one or more experts who can assist you. A listing of such experts can also be found on the Internet.

Tips to Hire a Commercial Real Estate Agent

If you don’t want to handle your relocation project or commercial lease renewal yourself, you can go to a commercial real estate agent. All you have to do is choose the right professional for your needs. Given below are 6 things you may want to consider during your evaluation. Read on.

Likability

A relocation or lease renewal is similar to a construction project. The difference is that it takes a bit longer than expected. So, it’s a good idea to go with someone who you like. This way you will enjoy throughout your journey and the process of negotiation may also go well.

Trust

Make sure the professional agent that you are going to hire can be trusted. It may be difficult to find out who can be trusted but it can be done during the interview. By asking a few relevant questions during the interview, you can get a pretty good idea as if they are trustworthy or not.

Conflicts of Interest

What does a conflict occurs? Actually, the conflict may occur when you go with an agent who already is a representative of many property owners in the same area. Now, the agent wants to serve you despite that the fact that they have given their word to the property owners that they will find a way to earn them the highest rate of rent possible. So, you may want to get a clear idea of the conflict severity and its importance for you.

Experience

Experience of the agent is of utmost importance as far as choosing the best professional is concerned. Ideally, it’s a good idea to go with a commercial real estate agent who has over 10 years of experience in the field. Their grey hair may be a sign that they have been in this business for years. You can ask about their experience during the interview.

Age

Age of the professional should not be taken as an evidence of their experience in the field. The million dollar question is how long have they been actively involved in the business. You need to keep in mind that commercial real estate is on the list of those businesses that people do part time. So, make sure you choose a professional who has been working full time as an agent. What matters is experience not the age of the agent. After all, age is just a number.

Specialization

Typically agents specialize in two ways. They can do it by industry vertical or location. As far as importance is concerned, location specialization carries more weight. An agent with location specialization has a pretty good idea of what is happening in the market. They know about the best deals and best property owners. Aside from this, their negotiation style is pretty impressive.

Long story short, if you have been thinking of hiring the services of the best commercial real estate agent, we suggest that you take these factors into consideration. This will help you choose the best service provider.

Commercial Real Estate Tenant Screening Checklist

The length of a commercial lease is more than a residential one. Generally, a commercial unit is rented for 3-5 years. Since it involves a great deal of money, it’s important to screen tenants before renting. Read on to know the essential commercial real estate listings before renting out an office space.

Have an established process for screening tenants

One must have an established process for screening inhabitants. Prospective renters must fill in an application form. In the form, one must seek permission to do a credit check. The method makes sure that there is no discrimination by the landlord while leasing out his property.

Review credit report

There are many online services which run credit checks on inhabitants on the behalf of landlords. After receiving the credit report, owners must review it carefully and ask for an explanation if there is any delinquency. The report will make it clear whether the tenant has a history of paying bills late or has suffered bankruptcy.

Get personal information

While leasing out a commercial real estate for rent, owners must ask for personal information of the lessee. Often during such a deal, tenants use the company’s credit, information, and not their own personal information. If the inhabitant is new in the business, it’s the right of owners to know whether he/she can pay the rent incase the business shuts down. Personal information will also help proprietors to know if the renter has a criminal background or not.

Contact previous landlords

Most applications ask tenants to fill name and contact information of their earlier landlords. However, owners tend to overlook it and don’t call up past proprietors for references. It’s a huge mistake as a past owner can give valuable information, which is not available otherwise. Therefore, before renting it’s imperative to contact previous owners of the prospective occupant.

Get help from tenant screening firms

It’s not always possible for an owner to do all the checks on his own. In such a scenario, they must seek help from tenant screening firms who do credit checks, reference check, etc. Landlords can make a decision based on the report of such firms.

Interaction in person

The last part of the screening process should include a face-to-face interaction with the renter. There are several things that can’t be communicated in an application or telephonic discussions. During such interactions, owners must study the body language of the lessee. This is a great indicator to know whether the occupant is reliable or not.

Proper screening doesn’t cost owners much, but reaps huge benefits for them in the long run.

Tips to Hire a Commercial Property Inspector

Hiring a commercial property inspector is an important part of buying, selling, or owning a building. Having relevant and accurate information regarding the state of a building can be helpful in each of these circumstances:

1. When an individual is preparing to purchase a building and wants to know the true state and value of their investment.

2. When an individual already owns a building, but wants to know the condition of their building, enabling them to take preventative care measures or reevaluate their investment.

3. When an individual is preparing to sell a building and wants to know the true state and value of their investment.

In each of these circumstances, the property-owning individual requires information that can only be provided by a commercial property inspector, making the process of hiring a commercial property inspector rather important. The tips included in this article are therefore intended to help commercial buyers, investors, and owners gain an accurate evaluation of their investment in order to protect and grow their investment portfolio.

Six Tips:

1. First and foremost, it is crucial to make sure that your commercial property inspector is licensed, whether by National Property Inspections, the International Code Council, the National Association of Certified Home Inspectors, the state, or another reputable and trusted standards association.

2. Do your research. Social media sites like Yelp and Google Reviews provide unfiltered reviews of commercial property inspection businesses. Though business owners can control the reviews that appear on their company website, they cannot control the reviews posted about their business on social media sites like the examples above. These are the best places to get a feel for the businesses you’re considering; however, don’t let one bad review rule out a company – look for a general consensus.

3. Do more research! Follow up on the company’s references. Of course the references that any business owner provides you with will have a positive review to share, but they may be able to answer specific questions that you have regarding work styles, principles, and other miscellaneous concerns.

4. Make sure that your commercial property inspector’s equipment is updated and conforms to current standards of practice. Advances in technology, such as thermal imaging systems, have bettered an inspector’s ability to identify water and air leaks, and should be on your list of requirements. Further, make sure that your commercial property inspector has adequate training to use advanced equipment – ask for credentials!

5. Discuss payment options. Some commercial and home inspectors are small, often family-owned, businesses and may not have the ability to take credit cards. If you plan on paying by credit card, make your intentions known early on so that you may decide to choose another company or another payment option.

6. Communicate effectively. Be clear about your expectations for the commercial property inspection and discuss obstacles. Inspectors are not expected to move potentially harmful objects, such as heavy machinery or hazardous materials.

If you are unsure of whether to hire a commercial property inspector or not, make the smart decision and move forward with an inspection. For property owners, preventative maintenance is always more cost effective than repairs, which may also stall productivity. Additionally, whether you are interested in buying or selling commercial property, an inspection will give you the information you need to accurately assess your investments.

Growing and Adapting Your Commercial Real Estate Agent Relationships

In commercial real estate agency the relationships that you have with your clients will shift and change during the year as their property needs change. Importantly, you should adjust your approach and make all your contact processes relevant and of high value.

There is no point in contacting the same prospect or client with the same information and strategy each time you call. Fresh market information and ideas will help the client relationship grow. So what type of information can you provide that will help the client connect with you?

Try some of these:

  • Time on market factors impacting the different property types
  • The levels of inquiry coming in currently through the local region
  • Price trends with properties on the market and those that have been sold
  • Rent strategies and results from recent leases
  • Yields and cap rates applying to prices and rents
  • Best marketing strategies that are getting better inquiries locally

In an ideal world you should be 'on top' of these facts as part of your daily market activity in commercial real estate. It is simply a matter of having the information available in a form that you can provide to the clients and prospects that you work with.

Here are some ways to distribute the information to the people that are in your database and that you regard as targets for more new business:

  1. Start a blog in your own name and featuring the local area and property type that you specialize in. Every week you can write a short article or two about current market activity and trends. Given this you can link your blog article in your emails and newsletters that you send out.
  2. Your database should be constructed and contained in a system where you can broadcast many emails and newsletters. It is best to send out a newsletter via email at least once a fortnight.
  3. The previous two points are 'electronic' and internet related. You will still need some more 'traditional' approaches to getting information to your clients and prospects. Direct mail once a month will be useful. Enclose a 'hard copy' of your newsletter in the mailing process. Always enclose your business card in every direct letter sent.
  4. Create what I call a 'one sheet'. It is essentially a single sheet of paper printed on one or two sides. It is a mini version of your newsletter and provides an update. You can conveniently copy the number of 'one sheets' that you need as the weeks progress. Black and white copy is fine for the process but always attach your business card to the sheet. Use the 'one sheet' in meeting new people or prospects, or in door knocking local businesses. Use the sheet as a 'leave behind' marketing tool. It is simple and yet highly effective process in getting the attention of the prospect.

Be sensitive to the growing and changing relationships with all of your prospects and contacts. Your marketing material can be adjusted to their ever changing property needs.

A Systems Approach to Commercial Property Due Diligence (An Investors Guide)

Systems

A Systems approach to thorough Due Diligence will provide all the information you require to make an informed choice and most importantly, provide peace of mind. Commercial Property Risk comes in four distinct areas. Each of these risks must be specifically identified and mitigated against. We include all the activities associated with closing the purchase, even those outside the process of Market, Financial, Tenant and Physical Due Diligence. No single person can be expected to complete all the information search by themselves. No one can remember to perform a thorough discovery process, there is just too much information to cover. Due Diligence demands that a proven system be used, to get the results you require. Doctors invest the same way they approach any presenting set of risk symptoms: break down a symptom (risk), and search the smallest components and follow a proven system of (due diligence) discovery.

A system checklist provides a step by step information search you will require for both apartment and Healthcare or Medical Office Building (MOB) commercial properties. A checklist will organize your actions and make sure you complete your search. Do not do begin your search without a complete list!

The Letter of Intent can give the Seller time to gather the information you need. The Seller may also resist your request for certain documents or delay making them available. When you put a request for information in your Letter of Intent (LOI), you can negotiate your information requirements up front. The sooner you start, the sooner you will have the information and begin to implement a systems discovery approach.

Commercial Real Estate Agents – Technology Tips and Tools You Must Have to Succeed Today

In commercial real estate you will need some technology tools to assist your progress in commercial property sales and leasing. When used fully and correctly they will drive more opportunity towards you and help you keep it under control.

At the bare minimum in today's commercial property market you should be able to work with all of the following:

  • Mobile smartphone with your personal diary and database
  • Computer for presentations and property information
  • Database that is easy to use and comprehensively captures the inquiry
  • Website that promotes your listings and your business
  • SMS technology for sending messages to clients and prospects of new listings and updates
  • Email contact and the use of attachments such as brochures and flyers
  • PDF documentation and formatting of promotional material
  • Creation of adverts and marketing material on your computer
  • HTML email that updates all your contacts of recent listings
  • Auto responders for automated contact via email
  • Internet placement of advertised properties
  • Use of word processing for reports and information memorandums

Some salespeople will have a PA to do this work for them and that is fine; It is the fact that you or someone working for you is doing it that really matters.

Presentational and communication tools today are part of business in commercial property. If you use the tools to their fullest capability then your market and the prospects around you will see it.

So let's add a few extra technology tools to the process now that you may not use. They have something to do with the internet and they are all critical to the online profile you would like to have.

  1. Start to grow your personal profile on the internet by establishing an online community of contacts. You can do this with something like LinkedIn or similar internet based community tool. Importantly you should separate your business life and personal friends to two different sites as they are looking at you from different angles. Most professional business people will have a profile on the web that is searchable and is likely to be looked at by business prospects before or as part of business contact. Establish your profile on the internet the way you want to be seen.
  2. Establish a blog in your name so you can write short informational grabs about property industry trends in your area on a regular basis. Everything you write should be linked back to your main office website and your listings. It is remarkable how this simple regular practice will help lift your personal profile on the World Wide Web as long as you do it regularly.
  3. Write short online articles about commercial real estate and publishing them to a recognized internet articles directory on a regular basis. There are some very good article directories on the web and many of them take articles on commercial real estate. That is where you need to go to write about things of interest in commercial investment property. Each article you write should be linked back to your website and personal profile. It is the link back to your site that is really critical to your branding and internet profile.

These extra 3 things will assist your profile on the largest and most important part of the promotional stage in commercial property; the internet. More than ever before the internet and your profile in it will be essential to your success and image in your market. Get ahead of your competition and start the 3 extra processes above before they do.