CRE Basics

|CRE Basics

The 7 Commercial Real Estate Commandments

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 [...]

Part Time Real Estate Bad Business

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. [...]

Understanding Building Classes

Typically, commercial real estate investors apply a simple, straightforward grading system to rate the quality, location, and other key characteristics of a building. The typical classes are A, B, and C. Building classes apply to all commercial product types, multifamily, retail, industrial, and office.What the "grade" tells us is how competitive an asset is compared to all the other [...]

Different Real Estate Investment Vehicles

REITs, Tenants In Common, Discretionary Funds, and Direct Deals 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. It really can be overbearing, so I'd like to [...]

The Single Most Important Phrase in CRE

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 [...]

Understanding Pad Sites

One of our favorite retail value-add strategies is the pad site deal. A pad site is an out-parcel building lot located within or adjacent to another piece of commercial real estate. Think about banks or fast food restaurants in their own free-standing buildings in the parking lot of a larger strip center. We like doing these types [...]

The Beauty of Commercial Real Estate Illiquidity

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 [...]

Going Outside of Your Backyard

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 [...]

Understanding Value Added CRE Deals

I’d like to share with you one of the great strategies that sophisticated commercial real estate investors utilize to generate significant risk-adjusted returns. It is the backbone of our investment strategy and the predominant strategy we utilize in our private equity real estate funds. It's called: "The Value Add" Value-added transactions are all about transforming a [...]

The Human Element of the Real Estate Business

As active Real Estate investors, we spend a tremendous amount of time searching for, and ultimately analyzing deals. We look at gross income, and the dozens of different expense line items. We analyze the amount of capital a building will need over the next ten or so years to account for new roofs, HVAC systems, and [...]