What You Need to Know to Ensure Success in Commercial Real Estate Investing

Investing in commercial real estate can be a great way to diversify your portfolio and generate long-term returns. However, it’s important to approach this asset class with a clear understanding of the risks involved. Here are some key considerations to keep in mind:

1. Research the market: Before investing in any commercial property, it’s essential to conduct thorough research on the local market. This includes analyzing supply and demand dynamics, property values, vacancy rates, and rental income potential.
2. Understand the property: Each commercial property has unique features and characteristics that can impact its value and income potential. It’s essential to assess the property’s condition, location, and tenant base to determine its long-term investment potential.
3. Consider financing options: Commercial real estate financing is typically more complex than residential financing. Investors should explore a range of financing options, including conventional mortgages, commercial loans, and private equity.
4. Factor in operating expenses: Owning a commercial property involves significant operating expenses, such as property taxes, maintenance costs, and insurance premiums. Investors should factor these expenses into their financial projections to ensure they can generate a positive return on their investment.

For those who are interested in owning and operating commercial real estate, there are additional considerations to keep in mind. Here are some key factors to consider:

1. Choose the right property: As with any investment, choosing the right commercial property is crucial to success. Owners should consider the property’s location, condition, and tenant base, as well as their own experience and expertise.
2. Build a strong team: Commercial real estate ownership requires a team of professionals, including commercial real estate brokers, property managers, accountants, attorneys, and contractors. Building a strong team is essential to managing the property effectively and maximizing its long-term value.
3. Maintain the property: Commercial properties require ongoing maintenance and upkeep to ensure that they remain attractive and functional for tenants. Owners should budget for these expenses and establish regular maintenance protocols to keep the property in top condition.
4. Manage tenant relationships: Tenant relationships are a critical aspect of commercial real estate ownership. Owners should work closely with tenants to ensure their needs are met, while also enforcing lease agreements and addressing any issues that arise.

In conclusion, success in commercial real estate investing can be an excellent opportunity for those who are willing to take on the risks and responsibilities involved. By conducting thorough research, understanding the property and financing options, and building a strong team, investors and owners can maximize their returns and build long-term value.

At Mobiliti CRE we focus 100% on representing tenants with relocations, expansions, contractions, and subleases throughout Tampa Bay and the entire West Coast of Florida.  We also assist businesses that are looking to purchase office, medical office, flex and industrial Reach out to us for assistance with all of your commercial real estate needs at (813)-300-2227 or email us at pam@mobiliticre.com

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More Commercial Real Estate Related Information

• Tampa Bay Commercial Office Market Snapshot
• How to Maximize Tenant Renewals
• 11 Tips for a Successful Real Estate Tour
• Tips for Renegotiating Rent Due to COVID-19
• Is a Sublease Right For You?
• Secrets to Finding Great Investment Properties
• How to Prepare for an Office Move
• Cost Saving Strategies to Reduce Rental Expenses
• How is my office building growing when there’s been no construction?
• Determining How Much Office Space You Need
• How to Avoid Commercial Real Estate Pitfalls

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Saves Time.

Most business owners are so busy running their companies, that they either don’t have the time and/or should not be spending their time looking for the perfect location.  A good broker will carefully interview you to help you determine wants, versus needs, and a realistic budget.  The broker will then survey the market to narrow down properties that best fit your wants, needs, image, and budget.  They will gather information on relevant properties and will organize a well-planned tour of the best options.  They will negotiate the best terms and conditions for you so that you can focus on running your business.

Saves Money. 

When investing in or leasing commercial real estate there is no substitute for market knowledge and experience. For example, let’s say you look at two comparable office properties.  Property A is $36/foot and property B is $33/foot.  You decide to go with Property B because it seems like a good deal.  How do you know $33 a foot is a good deal?  What if you found out another tenant with similar credit, similar tenant improvements,  and the same term just signed a lease in the building for $30 a foot and they got 6 months of free rent?  On a 5,000 square foot lease, that price difference would mean that you are paying $15,000 per year more for every year of the lease and you also missed out on $7,500 in free rent in year 1.  A knowledgeable broker will know what other recent deals have been done in the building and will use that market knowledge to your advantage when negotiating with the landlord.

Best Terms and Conditions. 

A typical business owner may only buy one commercial real estate property during the life of their business.  If leasing they may only be in the market once every five to seven years.  In contrast, commercial real estate brokers are out in the market every day.  They know what comparable properties are going for.  They know what concessions are being offered.  They also know which properties and owners to avoid.  Brokers review purchase and sale agreements and leases every day.  While they are not lawyers, experienced brokers can point out terms that are particularly onerous or outside of market norms.

What should you look for in a commercial real estate broker?  Here are few tips.

Experience – There is no substitute for experience.  Hiring someone with ten years or more of experience is preferable.

Knowledge of the Asset Class.  Hire a commercial real estate broker that specializes in the type of property you are buying selling or leasing.  For example, don’t hire a shopping center broker to help you with an office lease.

Knowledge of the Area.  Hire a broker who regularly completes transactions in the location where you are looking.

What Should you Expect to Pay for Commercial Real Estate Broker’s Services?

Buyers and tenants typically pay nothing for their broker’s services.  A buyer’s broker is paid by the seller at closing.  The landlord’s broker pays tenant broker fees.  Why not take advantage of this incredible free service?

At Mobiliti CRE we focus 100% on representing tenants with office relocations, expansions, contractions, and subleases throughout Tampa Bay and the entire West Coast of Florida.  We also assist businesses that are looking to purchase office, medical office, industrial, and retail space.  Reach out to us for assistance with all of your Tampa Bay commercial real estate needs at (813)-300-2227 or email us at pam@mobiliticre.com

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More Tenant Related Information

• Tampa Bay Commercial Office Market Snapshot
• How to Maximize Tenant Renewals
• 11 Tips for a Successful Real Estate Tour
• Tips for Renegotiating Rent Due to COVID-19
• Is a Sublease Right For You?
• How to Spot Rental Scam Listings
• How to Prepare for an Office Move
• Cost Saving Strategies to Reduce Rental Expenses
• How is my office building growing when there’s been no construction?
• Determining How Much Office Space You Need

The post How to Avoid Commercial Real Estate Pitfalls appeared first on Mobiliti CRE.

Anyone who has invested in the stock market (especially during the first dot.com bust) knows that the value of money invested in stocks can not only decrease but can lose all of its value.  Stocks represent an ownership interest in a publicly-traded company. They are not tangible, physical assets and serve no utility other than as a store of value and a liquid security instrument.  Real estate on the other hand, is a tangible asset that has inherent value. You can physically modify a property to improve its value or change the tenants to improve your return on investment.  If something happens to a structure on the property insurance will cover rebuilding the structure and the land still has value.

For some investors, that is more reassuring than buying shares in companies that may not survive. Many small business owners who purchase the building in which they operate discover that when they go to sell the business, the real estate is worth substantially more than the business.  It is worth mentioning that real estate does have risks that stocks and bonds do not.  A vacant property can end up costing an investor a lot of money in expenses with no return while the property is vacant.  Also, real estate is a fairly illiquid asset. That makes real estate an investment that is best for those who are in for the long term rather than those who may need their money on short notice.

Leverage

Not only is commercial real estate likely to appreciate over time, but most owners carry mortgages on their property. This allows them to leverage the money they have to invest while also building equity in the property.

Take for example an investor who purchases a property with a 20% down payment and a mortgage for the other 80%.  The property only has to appreciate 20% in value for the money initially invested to have a return of 100%.  That leverage does come with additional risk.  If the owner can’t make mortgage payments, the owner could lose the property through foreclosure.  It is critical not to over leverage and to ensure that there is enough cash flow from rents to service the monthly mortgage payments.

It Can Be Used as A Hedge Against Inflation

Another advantage of commercial real estate is that it can offset the long-term impact of inflation. Rents can be raised in order to offset inflation.  With stocks and bonds, inflation can cause returns to diminish.

While getting a loan on an investment property can be challenging in the current environment, crowdfunding provides an avenue for even the smallest investor to invest in commercial real estate.  Crowdfunding is a method for raising money for businesses and an easier way to access such ventures for investors. It utilizes the Internet and social media outlets to reach an audience of potential investors.  The idea behind crowdfunding is that many people are willing to invest a small amount, and when they do, large sums of money can be raised quite quickly.

For those looking to purchase commercial real estate in which to operate their own business, loans are still readily available.  Through the SBA’s 504 program owner occupiers can finance up to 90% of their purchase at attractive rates.

Here at Mobiliti CRE we assist both small and large investors as well as owner occupiers with commercial real estate purchases.  Do not hesitate to reach out to us at 813-300-2227 or via email at pam@mobiliticre.com

More Tenant Related Information

• Tampa Bay Commercial Office Market Snapshot
• How to Maximize Tenant Renewals
• Tips for Renegotiating Rent Due to COVID-19
• How Does a Foreclosure Impact Tenants?
• Cost Saving Strategies to Reduce Rental Expenses

The post 3 Reasons Why Commercial Real Estate Is a Good Investment appeared first on Mobiliti CRE.

What is a sale leaseback?

A sale leaseback occurs when a business sells a building that it owns and occupies to an outside investor and simultaneously enters into a long-term lease agreement with that investor/purchaser.

What type of companies and properties are good candidates for a sale leaseback?

• Single tenant properties.
• Most commercial real estate property types (medical, office, retail, and industrial).
• Companies with a healthy balance sheet and long, proven operating history.
• Companies willing to enter into at least a ten-year lease at market rates (longer leases increase value).
• Companies willing to enter into a triple net lease with the tenant responsible for all operating expenses.

What are the benefits of a sale leaseback to the user/seller?

• Converts a non-liquid real estate asset to cash while the user retains control and use of the property.
• Avoids the costs associated with placing conventional debt financing on the real estate.
• Allows the user to effectively depreciate the land because the lease payments cover the use of the land and the building. The lease payments are tax deductible.
• Improves the companies’ debt to equity ratio by removing debt that was associated with the real estate from the companies’ balance sheet and replacing it with cash.

What are the disadvantages of a sale leaseback to the user/seller?

• The user gives up any future property value appreciation.
• The user loses the ability to sell the real estate as part of a subsequent sale of the business.
• The tax impact resulting from the sale may be substantial if the property has been owned for a long period of time.

If you are considering a sale leaseback please reach out to Mobiliti CRE for assistance in valuing the property, structuring the lease and marketing the property.  We can be reached at 813-300-2227 or feel free to email pam@mobiliticre.com.

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PROS

• Costs Remain Stable and Predictable – Leasing costs involve a predictable periodic outlay of cash. There are no surprise expenses.
• Flexibility to expand, contract and move as business conditions and needs change.
• Source of Financing – Leasing provides 100% financing while most borrowing requires a down payment.
• Additional Tax Deductions – Lease payments are fully tax deductible and reflect rent paid for both the land and structures. An owner of real estate cannot deduct the land portion of the investment.  In a triple net lease, the tenant can also deduct operating expenses.
• Financial Flexibility– Leasing frees up cash that can be used to invest in the business for things such as inventories, salaries, and equipment.
• Location – Leasing allows a tenant to be in a premier location that they might otherwise not be able to afford.
• Technology – Leasing allows a tenant to respond to technological changes quickly giving them the ability to move to a more high tech building.
• No Repairs or Maintenance – While you may be responsible for keeping carpets and interior spaces clean, but the landlord will need to keep the building in good repair.

CONS

• Appreciation – Tenants cannot take advantage of property appreciation.
• Control – Leasing does not allow control of other tenants. In a multi-tenant property, new neighboring tenants might not conform to the image the lessee is trying to project or may simply be “bad neighbors”.
• Cost – Businesses with strong earnings, good access to financing, and the ability to take advantage of the tax benefits of ownership, leasing is often a more expensive alternative. Individuals and small firms often find that the costs of leasing and buying are relatively equal.
• Alterations – The building owner may want to make cost-saving alterations benefiting the landlord that may disrupt the tenant’s business.
• Operational Control – Tenants have no control over amenities, management personnel, etc.
• Equity – At the end of a long term lease, the tenant walks away with nothing while an owner would have been building equity in the space.

Any tenant or business owner considering whether to lease or purchase commercial real estate, in Tampa Bay and the surrounding areas, should consult a commercial real estate agent.  A competent real estate agent can perform a detailed lease versus buy analysis to assist you, the client, in making the most cost-effective solution.

If you have questions regarding the decision to lease versus purchase commercial real estate in Tampa Bay, Florida please contact Pam Pester Esq., CCIM, President at Mobiliti CRE, pam@mobiliticre.com, (813) 300-2227, www.mobiliticre.com.

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Before we get to the tips, keep in mind that there is a big difference between commercial real estate agents and residential real estate agents.  Residential agents help homeowners find a home for his or her family.  Residential agents are familiar with things like neighborhoods and school districts.  Commercial brokers focus on things like rental rates, return on investment, zoning and financial analysis.  They know their market and how to analyze which real estate properties are a good value and which are not.   They have the tools necessary to provide a business owner with all of the financial information necessary to make an informed decision.  With that being said, below are our tips.

Prepare Some Guidelines

Before you contact a broker, determine what type of property you are searching for.  For example, are you searching for office, flex or industrial space?  How much do you have to spend for a lease or purchase?  In what area are you looking to locate your business?  How much space will you need?  Is visibility important?  Is image important?  Preparing a list of requirements in advance will help your broker quickly provide results.

Do Your Due Diligence

You will want to find a commercial broker that specializes in the type of property you are searching for.  For example, if you are opening a storefront, you will want a broker that specializes in retail properties.  If you are looking for office space, you will want an office broker.  You will want a broker that is knowledgeable about the areas in which you are looking.  Ask the broker to describe recent transactions they have done that involved the types of properties you are interested in and in the locations you are interested in.  Ask the broker for references and follow up.

How Much Experience Does Your Broker Have in Commercial Real Estate? 

It takes years to get the type of in-depth market knowledge a good commercial broker will possess.  It also takes time to develop the skills necessary to analyze things like return on investment, cap rates, net operating income etc.  Ask your broker how many years they have been in the business.

Does The Broker Have The Proper Tools to Represent You? 

You will want to make sure your broker has access to the best tools and market information necessary to adequately represent you.  At a minimum, they should subscribe to Costar and Loopnet.  A Certified Commercial Investment Advisor (CCIM) has access to a vast amount of market information and tools.

Does The Broker Have Conflicts of Interest? 

Engage a commercial broker that is working 100% for your best interests.  If you are a tenant and you call about a real estate property, you will receive a call back from the landlord’s broker.  That broker would be happy to lease you space but he or she will be representing the landlord, not you.  Engage your own tenant representation broker to represent your interests.  They will be looking out for your interests.  Best of all their services are free to you.  Even though they work solely for the tenant, their fees are paid by the landlord.

Are you looking for a trusted Commercial Real Estate Broker in Florida? Our team of experienced real estate experts here at Mobiliti CRE can help you find the best space to lease or purchase in Pasco, Hillsborough, Pinellas, Sarasota or Manatee County. Learn more about the services that we provide and contact us today.

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Establish Client Goals – Before a plan can be formulated, it is imperative to understand all of the buyer/investor objectives. An owner-occupier will need to consider physical space needs, brand/image, employees, clients, competitors, location and budget. An investor will need to consider which asset classes are the most attractive at the time, cap rates, internal rates of return, geography, tenant mix and credit worthiness, location, local economy and facility condition.

Market Review and Evaluation – Once the organization’s goals and objectives have been defined, we will develop a list of the most suitable options and the advantages and limitations of each. Pertinent industry trends including vacancy rates, cap rates, new construction, supply/demand, recent sales and other market information will be compiled and analysed. We will tour the market and the preferred options will be “short listed.”

Comparative and Financial Analysis – My team will perform a detailed financial analysis of each property. We calculate the present value of each option and if appropriate, we will prepare a lease versus own comparison. In addition, we will evaluate each location based on subjective requirements such as location and company image. A detailed summary will be developed, highlighting key economic and non-economic concerns. Specific client concerns are also incorporated.

Market Information Regarding Comparables – Real estate consultants are only as good as the information they provide and successful transactions are guided by accurate market information. We will provide you with detailed market information regarding comparable sales in the market. This information is obtained through both technology as well as years of experience in the market. The information provided to you will assist you in making the most informed decision and enable us to negotiate the best possible terms.

Letter of Intent – After several rounds of negotiations among competing sites, the preferred building and/or property is selected and letter of intent terms are negotiated. During this phase, Mobiliti CRE will prepare a letter of intent outlining key business and legal issues thereby laying the groundwork for a smooth negotiation of the purchase.

Document Review – Mobiliti CRE will review the purchase agreement to ensure that all of the terms outlined in the letter of intent are reflected in the purchase agreement. In addition we will identify any problematic provisions in the agreement and generally assist your attorney in finalizing the transaction.

If you have any questions regarding leasing commercial real estate in Tampa or St Petersburg, Florida please do not hesitate to reach out to us. Mobiliti CRE is a leading provider of commercial real estate services specializing 100% in tenant representation. For assistance contact Pam at (813) 300-3337 or email pam@mobiliticre.com

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