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Winston Rowe |
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Winston Rowe & Associates |
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Lake Shore Dr St Clair Shores, MI 48082 |
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| (248) 246-2243 | |
Rankings
Lender in MI
Endorsements
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Winston Rowe |
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|
Winston Rowe & Associates |
|
|
Lake Shore Dr St Clair Shores, MI 48082 |
|
| (248) 246-2243 | |
Rankings
Endorsements
Commercial Real Estate Finance
Beginners Guide Commercial Real Estate Easy Read
Commercial Mortgage Brokers Handbook
How to Fix and Flip Easy to Read Book
Tips for Real Estate Investors
Hard Money Bridge Loans:
Commercial Real Estate Purchase Loans:
Loan Amount $250,000. to $10.000,000.
Commercial Real Estate Refinance Loans:
Commercial Real Estate Cash Out Refinance Loans:
Portfolio Financing:
SBA Financing:
Small Balance Commercial Financing:
Commercial Property Types Considered:
248-246-2243
Unlike residential real estate, commercial investments generally consist of purchasing properties used solely for business purposes, and then leasing the space in order to collect rent from each business that occupies the respective space.
These properties are commonly referred to as retail, office, industrial and apartment buildings, warehouses, and mixed-use buildings.
If you're wondering how to invest in commercial real estate, the following will explain the importance of conducting due diligence, including performing market research before investing, as well as the many benefits associated with commercial real estate investment.
Benefits of Commercial Real Estate Investing
Investing in commercial real estate can be very rewarding, both personally and financially. For many, the objective of investing in commercial real estate is for future wealth and security; others utilize it for tax benefits and increased diversity on investments.
A commercial re-developer can take advantage of the following benefits:
Higher Income: The hallmark benefit of investing in commercial real estate is higher potential income. Generally speaking, commercial properties typically have a better return on investment, which averages from six to 12 percent, while single-family home properties fetch between one and four percent.
Commercial real estate provides lower vacancy risk because properties are spread over several units. In addition, lease contracts are generally longer than those you will find with residential real estate.
Cash Flow: Commercial real estate has one very distinct advantage: a relatively consistent stream of income. What's more, commercial properties typically have much longer leases than residential rentals, which means steady and reliable income on a monthly basis.
Commercial properties generally consist of multiple units which means multiple streams of income. In some cases, tenants will also pay operating expenses on a commercial property. Known in the industry as triple net lease, this will generally include the lessee paying the building's real estate taxes, property insurance and maintenance costs, in addition to monthly rent.
Less Competition:
Longer Leases: Perhaps the biggest perks of commercial real estate are the attractive leasing contracts. Commercial buildings generally have longer lease agreements with tenants than residential properties, which offers impressive returns and considerable monthly cash flow to investors. In many cases, lease agreements for commercial properties are signed for multiple years.
Commercial real estate investing offers investors an array of opportunities and advantages that other investment strategies don't. Once the benefits of commercial real estate investing are recognized, the next step is to consider the currently market conditions.
Choosing the Right Commercial Real Estate Investment
The question of 'how to invest in commercial real estate' only has one answer: with due diligence. Like any investment deal, it pays to do your homework and due diligence is a critical element to ensure success in real estate. Learning the ins and outs of commercial investing is important, but actively conducting market research is even more significant. In essence, the function of due diligence is to verify the commercial property is a viable investment option.
Real estate location is another important feature for investors to consider. If the location of the property is not in demand, more than likely finding tenants will be difficult and result in vacancies. Beginner investors should also examine the neighborhood a potential commercial property is located in. By going to open houses and talking to property owners in the neighborhood, investors can gain a better understanding of the property as a long-term investment.
Analyze comparables in the area, including researching future development. Otherwise known as "comps," these assets refer to prices paid for recently sold homes that are similar in location, size and style. Analyzing comps will help investors determine the current market value of a property. A general rule of thumb when determining comps is to choose a property where the square footage does not go beyond 10 percent higher or lower than that of the property being evaluated. This will allow for the most accurate comparables possible.
Understanding the common key metric used to assess real estate. Believe it or not, commercial real estate investing involves a wide array of math, as well as an understanding of real estate finance.
To be a player in commercial real estate, there are a few formulas you should know.
Net Operating Income
This is a calculation that equals all revenue and costs from a particular property. Configured before taxes, this number provides investors with an idea of how much they'll make from an investment minus all necessary operating expenses, which are required costs to run and maintain a commercial building. Costs typically consist of insurance, property management fees, utilities, repairs and janitorial fees, utilities and property tax.
Cap Rate
Used to calculate the value of income producing properties, the "cap" — or capitalization rate — will provide investors with an estimate of future profits or cash flow. This is essentially the ratio of net operating income to property asset value.
Cash on Cash
Used to measure commercial real estate, cash on cash is a metric that provides investors with a rate of return on their real estate transaction. It's typically used by investors who rely on financing to purchase their property. Cash on cash will measure the return on the actual cash invested, which will provide an accurate analysis of an investment's performance.
Winston Rowe and Associates a commercial real estate due diligence and advisory firm. They can be contacted at http://www.winstonrowe.com
Financing is the lifeblood of small business, and the more you know about what lenders are looking for from borrowers, the better your chances of securing financing when you need it.
Let's consider five factors that can have considerable impact on your chances of getting the right financing at the right time.
1. Credit Scores
You credit score is often the most important factor when it comes to qualifying for a small business loan.
Borrowers with good credit scores have a wider range of choices, with terms more favorable to long-term success.
To qualify for the best financing for your business, strong personal credit scores are generally a must, but did you know that your small business has a business credit score as well? Building up your business credit score will help legitimize your business in the eyes of banks and lenders, simplify your taxes, and open doors to trusting relationships with vendors and suppliers.
2. Cash Flow
Cash flow is defined as the total amount of money coming into and going out of your business. Lenders are not only interested in how much money you're making, they also want to see (a) how you reinvest it back into your business, and (b) if you're able to maintain cash reserves for a rainy day, versus spending it as soon as it comes in.
When applying for a commercial loan, banks usually want to see documentation for at least three months' worth of your operating expenses. These should include any and all loan payments. If you're new to business, prepare to show all of the statements you have available, because the more information you can share, the better the likelihood of getting a loan.
3. Time in Business
Traditional lenders keep a close eye on these numbers, and place a high value on the length of time your business has been up and running. It differs according to lender, but the minimum sweet spot for both traditional and alternative lending is usually around a year. Some alternative lenders require as little as six months, but less stringent requirements usually come at a cost—you'll want to make sure you're able to repay the loan quickly, otherwise the higher interest rates may hurt your business' cash flow.
4. Collateral
Collateral can include deposits on a merchant processing or business bank account (a good option for new business owners), home equity, and business-owned equipment. Collateral is a strong motivator for paying your bills on time, but think long and hard before considering it an option. If you can't repay the loan, the bank will take your assets to make up for its loss.
5. Social Media
Social media can be an excellent tool for reaching customers and establishing a brand, but the role it can play in obtaining financing isn't always as obvious.
Although many banks have yet to consider social media a factor for the financial success of your business, a number of credit unions and alternative lenders are looking to social media to see how favorably a business is viewed online, whether it's trusted by its customers, and the extent to which it's considered an authority by both customers and peers.
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