When analyzing leveraged commercail real estate (properties you acquire using debt) assets, one of the most important metrics to look at it something known as Debt Service Coverage Ratio. Debt Service Coverage Ratio (DSCR) is a ratio that tells you how much debt you need to service, compared to how much net operating income you are [...]
Great wealth has been grown and preserved by investing in commercial real estate assets, and one of those reasons is for what I like to call “the fuse burning at both ends” concept. Lenders love commercial real estate. It is a highly financeable, secured asset that does not move. That’s why the bankers love it. When you [...]
I wanted to share with you what I like to call the "Seven Commercial Real Estate" Commandments: 1. Commercial real estate is a local business There is no substitute for local market knowledge. Local operators will outperform investors who do not intimately understand the market. 2. Commercial real estate is a full-time business There is no [...]
When you're making an offer on a property, you're usually working off of numbers provided by the seller and/or seller's broker. Doesn't this seem a little strange? A party with the complete opposite interest of yours is providing you with ALL of the data that you will base your potential offer to purchase on. I'm not [...]
Private equity commercial real estate can offer an excellent return for investors when the right property is chosen. But there is a risk if the asset doesn’t meet certain requirements that will benefit all investments. If you are an investor thinking about asset options for your portfolio, then our team at First National Realty Partners is here [...]
When you are purchasing something for several million dollars, it is incredibly important that you give yourself an opportunity to conduct serious due diligence on the isolated asset. At our firm, we have over a 100 point checklist of documents and items that need to be reviewed and cleared before we can close. No matter what [...]
There are many ways to invest in real estate. Many asset classes. Many styles. Many locations. Etc. Savvy investors are able to generate a return on investment in many unique niches. But ultimately, it comes down to two very distinct styles. 1. Buy and Hold 2. Value Add Buy and hold investors acquire real estate simply [...]
I know many people who were successful in other industries who parked much of their wealth into real estate assets and built tremendous net worth. Usually, though, this is the exception, not the norm. Most people who come into the real estate business do not have the right expectations of what it takes to be successful. [...]
When you are preparing to invest in a new venture, commercial real estate building classes can be helpful in providing information about the property. This grading system is both simple and straightforward, giving investors details about the location, quality, and other key characteristics of the building. Three Categories: Commercial Real Estate Building Classes The building classes [...]
For passive investors, finding the right way to expose yourself to the real estate asset class can be confusing. You might hear many different terms or buzz words - REITs, TICs, LLCs, Funds, Private Equity, Notes, Debt Funds. The question many investors ask is "What's the difference between all of the available commercial real estate investment [...]
One of the most crucial valuation components to a piece of commercial real estate is the term left on the current tenancy's leases. It's a simple equation: Longer Terms = Higher Valuation While keeping a properties net operating income (NOI) as high as possible is also a major contributor to the valuation of a property, sometimes [...]
One of the most straightforward, effective value-add deals to look for, acquire, and then reposition, is the asset that is starved for capital. Many times you can find well located real estate that is simply not performing because it requires an additional capital infusion. Think about a retail center with a large parking lot that is in [...]
If you have played craps before you understand how the come bet works. I won’t try to explain it in detail if you aren’t familiar with the game, but when you hear the phrase it basically means that you don’t have what you need right now, but you are willing to bet on getting what you’ll need to [...]
I think the single biggest opportunity for commercial real estate investors across the United States over the next decade will be in investing in service oriented retail shopping centers. When I say service oriented, I am referring to what investors in the industry call neighborhood or community centers. These are centers many times anchored by drug stores [...]
The single most important phrase in the real estate business is "You Make Your Money on the Buy." What that means is that the profitability of a deal is actually determined before you close on the property, not when you start managing it. The purchase price of an asset is the single most important factor in [...]
I often get questions from current and prospective partners about leases. I wanted to write you this short email to tell you about the different kinds of leases we sign with our tenants. 1. Gross Leases In a gross lease, the tenant pays the property owner a fixed amount. This amount is all inclusive for a [...]
The underlying principals of commercial real estate investment are pretty simple, you own a building, and tenants pay you rent to lease space from you. But what goes into being successful from a management standpoint, can vary drastically from asset to asset. On one side of the spectrum, you have an absolute triple net retail building [...]
Business owners looking for a new location sometimes find that the retail space in strip malls or shopping malls isn’t a good fit for the needs of the company. As a result, commercial real estate pad sites can be an effective solution to allow business owners the opportunity to choose a different size or style of [...]
From time to time, current and prospective partners often raise concerns about the illiquid nature of real estate assets. And while it is nice to be able to push a button and immediately convert an asset to cash, the fact that real estate, and other non-traded assets, are illiquid, is what makes them superior to traded [...]
Anyone who has spoken with me or read any of my work knows I am a major proponent of Real Estate being a local business. So what if an opportunity or market presents itself outside of your backyard? Should you stay away from it? No. Absolutely not. Real Estate needs to be managed, leased, and handled [...]