This article will give you some helpful tips on potential guidelines in choosing which broker to work with. The first paragraph will focus upon some general guidelines that many successful commercial investors have found followed by explaining some of the differences between the listing broker and selling broker.
If you are in the beginning stages of your commercial investing career, you may want to look at using a young and aggressive agent to begin with. A younger agent may be more responsive in working with you and will also help foster a closer relationship than veterans who have been in the business for many years. Veterans who have been in the business for a great deal of time will often have established relationships with many clients and may not have the time or desire to develop new clientele.
This can happen because the older commercial broker has a well-developed network of contacts that bring him more business than he or she may be able to handle at one time. A younger commercial broker will often be working to establish his or her business and you can use this to your advantage to develop a close working relationship. This will allow you to develop a relationship which you can build on in the future. You can work to build your business as he develops his business. This is a good bond you two can have in common.
As with any industry, there are many different types of companies in the marketplace. You will find benefits to working with many different types of companies. Many commercial properties are listed through large commercial brokerages. Many successful investors have done this to great advantage. When looking to acquire properties, many successful investors may look to work with lesser known brokers. These brokers may hold information or listings which are not on the market or are being under-marketed currently. You may work with many brokers but be sure that you have a close relationship with at least one. A broker will be one of, if not the most important, business partners you can have. If you do not have a good broker, you are cheating yourself out of valuable industry contacts, information, and experience. You cannot focus upon using one broker for all of your activities because you are cheating yourself out of many different sources of deals.
Check out the broker and ask for references. This can allow you to check into the broker’s background and what others are saying about this particular individual. Ask around the market what others think about this particular broker as well. You need to do your homework before choosing a broker because this is a partner you will use often and a relationship to build slowly but surely.
Hopefully this article on choosing a broker has given you good insight. There is not necessarily a set formula to finding a good broker but these are tips which may be able to help you. When looking for a broker, take time to develop a relationship from the beginning and you will be rewarded throughout with the benefits of a good business relationship.
 |
 |
The secret to making money in real estate is to find a way to get your property to make money for you. That’s right you want your property to do all of the work for you and then turn its earnings over regularly. How is this possible? Well, obviously a building cannot go out and plow a field or fix a road. It can, however, provide a home to an indefinite number of individuals, and it is this ability that will allow it to turn into a positive income generator for you.
The trick to getting your property to generate a maximum amount of income for you is to purchase a multi-family home. What is a multi-family home? A single family home is one that will hold only one family comfortably, generally only three to five individuals, and generates only one rent. With that explanation, you should be able to figure out a multi-family property is one that will house multiple families and generate multiple rents, allowing you to enjoy a bigger income.
When evaluating a multi-family property it is important that you take the time to figure out its capitalization rate, or the ratio between the capital that will need to be expended to purchase the property and the income it generates yearly. This will give you some idea of how quickly the property will pay for itself, thereby allowing you to begin to pocket the proceeds; after all, unlike when a single family is sold and the income it brings in comes in one lump sum a multi-family home is not going to stop generating income after it is paid for.
Figuring (and understand) the capital rate can be difficult, so I have developed what I call my times ten valuation calculation to assist fledgling investors to determine the return they can expect to get on their investment. First, take the yearly income of your property and subtract the yearly expenses; this is going to give you your NOI, or net operating income. Yearly expenses should include such things as repair estimates, land rentals, etc.
These expenses should not include your mortgage payment. Remember this, it is a very important part of this process.
1st equation: Income-Expenses=Net Operating Income.
Take the net operating income and multiply it by ten, giving you the approximate value of the property and allowing you to decide whether or not it is a worthwhile investment.
|
|
Would you like to be notified every time I post a new blog entry? Click here & subscribe to my blog!
Check back for new teaching videos from Dave at the Apartment House Riches Boot Camp!
Sign up below to discover how YOU can learn more about the strategies that Dave mentioned in the video!
|
|
Would you like to be notified every time I post a new blog entry? Click here & subscribe to my blog!
Check back for new teaching videos from Dave at the Apartment House Riches Boot Camp!
Sign up below to discover how YOU can learn more about the strategies that Dave mentioned in the video!
|
|
Would you like to be notified every time I post a new blog entry? Click here & subscribe to my blog!
|
|
Would you like to be notified every time I post a new blog entry? Click here & subscribe to my blog!
Huntsville, AL .. August 28-30 2009
|
|
Would you like to be notified every time I post a new blog entry? Click here & subscribe to my blog!
When investors think of what it means to invest in real estate, there are two common things that come to mind. One is the holding of rental properties. The other is fixing up rundown properties and selling them for a profit.
Now, when it comes to working with apartments, which are my specialty, the idea of rehabbing gets really exciting. Nothing motivates an apartment owner to sell like having a bunch of rundown, outdated, or decrepit units that either can’t be rented or can only command either low rents or sub-par tenants. It’s all too common, especially for apartment owners who have been in the business for a while, to see a large scale need to update and renovate as a sign from above that it is time to move on and sell the building.
This situation can be your goldmine and it has been mine too in the past. Apartments that are in disrepair should command a significant discount, credits at closing for repairs, or both. What you want to look for are deals that have the greatest upsides. By this, I mean a rundown apartment building in a low rent part of town may not command that much more rent when it is renovated so the upsides are weak.
Conversely, a rundown apartment building in a decent area of town may have depressed rents that are more attributable to the property condition than market rents in the area. These are some of the best deals to pursue because the upside here is tremendous. Imagine a 100-unit apartment building that is only 70 % occupied and whose rents are 20% below market because the property is in dire need of an overhaul.
If the value of this property is normally $5,000,000 ($50,000 per unit), then you might expect to be able to purchase it for $3 million in its current condition, equivalent to $30,000 per unit. By most models, rents of $300 per month should cover the note on such a value. Let’s say you invest an average of $10,000 per unit to update the property, bringing your total investment to $4,000,000, or $40,000 per unit. Upon updating, the market rents of $550 per unit are now competitive and reasonable, making this property both an equity source and an income producer. See how this works?
Unlike single family homes, whose retail values after a rehab are subject to the whims of market sales conditions, apartments are more valued based upon income. When you can increase both occupancy rates and the rents, as a result of a rehab effort on an apartment building, both income and property values will increase.
Can you see how rehabbing applies as much to apartments as it does to single value homes? Can you see how the worst looking apartment building in the neighborhood could be your best investment opportunity? Real estate empires are built by both seeing things differently and knowing the proper actions to take to get maximum results from every investment. Rehabbing single family houses will make you money. Rehabbing and either selling or holding apartments can make you a fortune! Which do you prefer?
|
|
The federal reserve lowered it’s interest rate to zero, using its nuclear option to help us get out of this struggling economy. If this doesn’t work, is the end near? Not necessarily, part two of the Fed’s plan is to start buying bad debt to take the strangle hold off of lenders so we can get money circulating back into the economy again.
Does this mean our interest rates are going to be lower for the deals we are about to do? Unfortunately Virgina, there is no Santa Claus, you see, there are three types of lenders who will give us money to do our deals; local banks, national banks and conduits.
Local banks have the highest interest rates and shorter amortization schedules, thus higher payments, which gives us lower cash flow. National lenders sell their loans to Fannie Mae and Freddie Mac, more about them in a minute. Conduit lenders are the institutions on Wall Street. These are the guys who got us in this mess in the first place!! Not only that, they all are pretty much out of business at this point.
Because of this, Freddie Mac and Fannie Mae have no competition. They used to be kept in check by competing with the Conduits. The interest rates on commercial properties are based on the 10 year treasury note, the difference between the interest rate we are charged and the 10 year treasury note is called “the spread”.
It used to be the spread was only 1.75 – 2 points higher than the note, the conduits were usually 2 – 2.25. A little higher than Freddie and Fannie but they were much more aggressive in their lending practices (this is what got them in trouble). With no competition, Fannie and Freddie are setting their spreads at 3 points and more off of the 10 year treasury.
Rates will remain about the same…hovering around the 6% range for the next six months or so, the good news is, they are not going up….raising interest rates means rising cap rates which means a loss in value.
Hopefully the lower rates and the Fed buying bad debt will lube the economy and get consumers spending again, soon!
Hey, it’s a great time to be a buyer of real estate, this window of opportunity comes around every 15 years or so…don’t miss this one!
If your interested in getting two free copies of my Real Estate Insights monthly newsletter, go to
LinkedIn
Myspace
Facebook
Live Events
Twitter