All Forum Posts by: Francis Louis Vogel Jr

Mike,

To be a player in commercial real estate, learn to think like a professional. For example, know that commercial property is valued differently than residential property. Income on commercial real estate is directly related to its usable square footage.

Map Out a Plan of Action

Setting parameters is a top priority in a commercial real estate deal get a sense of how much you will pay over the life of the mortgage.

Learn to Recognize a Good Deal

The top real estate pros know a good deal when they see one. What's their secret? First, they have an exit strategy – the best deals are the ones where you know you can walk away from. It helps to have a sharp,

Key Commercial Real Estate Metrics

The common key metrics to use for when assessing real estate include:

Net Operating Income (NOI)

The NOI of a commercial real estate property is calculated by evaluating the property's first year gross operating income and then subtracting the operating expenses for the first year. You want to have positive NOI.

Cap Rate

A real estate property's "cap" – or capitalization – rate, is used to calculate the value of income producing properties. For example, an apartment complex of five units or more, commercial office buildings, and smaller strip malls are all good candidates for a cap rate determination. Cap rates are used to estimate the net present value of future profits or cash flow; the process is also called capitalization of earnings.

Cash on Cash

Commercial real estate investors who rely on financing to purchase their properties often adhere to the cash-on-cash formula to compare the first-year performance of competing properties.

Look for Motivated Sellers

Like any business, customers drive real estate. Your job is to find them – specifically those who are ready and eager to sell below market value.

Approach to Evaluate Properties

Be adaptable when searching for great deals. Use the internet, read the classified ads and hire bird dogs to find you the best properties.

Thanks

To find a property legal description is at the County Register of Deeds through the County Clerks Office.

I think the government has dumped so much cash into the economy it's hard to determine what the result will be. As long as local governments stay business friendly. The market should stabilize in the near future. Hopefully.

Enjoyed the post, thank you.

There are still plenty of properties worth less than the debt, and there are more foreclosures to come. Most of the distressed multifamily properties are B, C and D class properties. These properties can provide great returns with cap rates from 8 percent to 12 percent on existing income, and in most cases have plenty of vacancy for even more upside.

Property sources:

Get to know the attorneys in the distressed market and the lenders with existing loans. Establish relationships with brokers who specialize in  multifamily properties who track distressed apartments and have relationships with lenders. Offer to protect their reasonable fee for  acquisition opportunities they source for you.

Notes:

Consider buying notes but be sure to understand the risks of stepping in the lender's shoes. Consider the collateral, the collateral title, the  borrowers' intentions, and jurisdiction issues related to the foreclosure process and recent bankruptcy/cram down court decisions. Also consider the time, risks, and costs to get from lender to property owner.

Ability to close:

Provide your best proof of ability to close in writing with offers. Liquid cash in the bank sufficient to close all cash is best. If not, get as close to that as possible. Consider large earnest money deposits—of course with a solid contract and a safe escrow agent. Lenders in short sale, receivership or REO situations may not respond to offers without proof of ability to close.

Due diligence and underwriting:

To increase occupancy in most cases you should underwrite your lease rates and lease up conservatively. Make sure you understand the sales comps, lease comps, demographics, the job market in the area, the loan status of competing properties and all the costs to bring the property to stabilization. Sometimes when buying notes or when in a competitive bid situation, it pays to do your due diligence prior to making an offer.

Depending on the MSA the residential or commercial real estate is in, value is going to be driven by the unemployment numbers in my opinion.