How many times have you looked at an investment in Commercial Real Estate, and liked it, but it was only showing a 6% CAP. I am going to show you how to go after the property you want at a price that will get the yield you need for the risk.
Face it, in 2005, all of us were willing to take a 6% return on a commercial properties, because, we perceived there was very little risk, and we knew that the potential for appreciation would make it worth the wait and risk. In 2010 we are not wasting our time on 6%, 7% or even 8%. If it is not returning 9% or better, investors will not touch it. I have seen some really good TRIPLE NET Leases recently at 9% or better, on large publicly traded company properties. These are held by groups who have to sell them to raise quick cash so they can keep other properties, or acquire even juicier properties. So it is a good time to be looking, if you have cash.
Let's crunch some numbers to see how it works. If an owner lists a property for $1,000,000 promising a 6% cap, then they are telling you that you will 'net' $60,000 per year on this investment. The current owner calculated the property's expected net income, then backed into the value, dividing the net, by the cap. $60,000 divided by 6% = $1,000,000. Some owners can afford to sit on properties until the 6% market returns, but those that can't will be willing to give you your yield.
To calculate the price to pay, to get your yield, just back into it. Net Operating income, divided by desired yield equals the initial investment price, or stated another way, the Net Present Value of this property to YOU.
Divide NOI $60,000 by Desired yield 9% = $666,666.67. So instead of paying one million, you offer what it takes to get the yield to 9%, which is $666,666.67. Whenever I write an offer for a buyer for a substantial price reduction under what the owner is offering, I accompany the offer with my calculation and explanation, so the current owner knows where we got the number and what yield we need to make this investment. It keeps the owner from trying to counter back closer to their listing price, because they see quickly what we want, why and that we know what we are doing.
Try it yourself. It works. Or call me and let me crunch the numbers for you.
Wednesday, June 23, 2010
Wednesday, June 16, 2010
Commercial Real Estate Owners, It's time to sell
The market in Naples has adjusted itself for the desirability factor of our subtropical upscale location. The buyers are not who made our prices shoot through, and past the ceiling of reasonableness. It was everyone who took advantage of the increased interest by over extending and overbuilding as if there were no end to the increases.
If you have a commercial property for sale, it's time to cut the price and let it sell. Allow someone else to make a profit too. Take your profit and run. No need to be greedy, or hold out for an even bigger profit. It is not a bad thing to double your money. If you have done that, leave some future growth and profit for the next investor. Even if you only made thirty percent. Try getting that in the stock market.
The problem with most commercial properties that are still sitting on the market for these past twelve months is that owners are worried that they are leaving profit on the table. Trust me, you will never know when the right time has arrived. When the market hits bottom, it will not notify you. Drop your price so you can sell what you have now and move on.
The commercial market has plenty of buyers. Lots of them now are searching for 'steals.' But there are legitimate owner/users out there who may need your property for their business. Allow them some profit growth room.
Take your small profit, all the way to the bank, or let me help you find another. It's a great time to be a cash buyer, and even better to be a seller.
If you have a commercial property for sale, it's time to cut the price and let it sell. Allow someone else to make a profit too. Take your profit and run. No need to be greedy, or hold out for an even bigger profit. It is not a bad thing to double your money. If you have done that, leave some future growth and profit for the next investor. Even if you only made thirty percent. Try getting that in the stock market.
The problem with most commercial properties that are still sitting on the market for these past twelve months is that owners are worried that they are leaving profit on the table. Trust me, you will never know when the right time has arrived. When the market hits bottom, it will not notify you. Drop your price so you can sell what you have now and move on.
The commercial market has plenty of buyers. Lots of them now are searching for 'steals.' But there are legitimate owner/users out there who may need your property for their business. Allow them some profit growth room.
Take your small profit, all the way to the bank, or let me help you find another. It's a great time to be a cash buyer, and even better to be a seller.
Sunday, June 13, 2010
The Perfect Storm
NOW IS THE TIME TO FINANCE COMMERCIAL REAL ESTATE! June 8th, 2010. The SBA lowered their interest rate to 5.29% and will accept as low as 10% down on commercial real estate.
This is the lowest it has ever been and probably the lowest it will ever be! If you are on the fence about purchasing business assets, commercial real estate OR purchasing businesses that include commercial real estate, PLEASE, consider the SBA. Call me and I will introduce you to a lender. This is truly unbelievable.
Banks and other lending institutions offer a number of SBA guaranteed loan programs to assist small business owners. While the SBA itself does not make loans, it does guarantee loans made to small businesses by private and other institutions.
The SBA (Small Business Administration) offers guarantees on loans for small businesses or entrepreneurs who have cash flow but do not have the necessary principal to obtain a loan for expansion or for a startup. The SBA has many different types of guarantees that they will give to private lenders, each has its own interest rate.
7(a) Loan Program:
This is SBA’s primary and most flexible loan program, with financing guaranteed for a variety of general business purposes. It is designed for start-up and existing small businesses, and is delivered through commercial lending institutions.
CDC/504 Loan Program:
This program provides long-term, fixed-rate financing to acquire assets (such as real estate or equipment) for expansion or upgrade to your business. It is designed for small businesses needing financing against their assets. and is delivered by CDCs (Certified Development Companies) which are private, non-profit corporations set up to contribute to the economic development of their communities.
Business owners in search of small business loans have a government agency working on their behalf and that is the SBA. They encourages local banks to lend money to local businesses.
If you apply for a small business loan at a bank, the bank will check your application and supporting documentation to see if you qualify for a small business loan. If you do not qualify for a regular small business loan, the bank can check your application against the SBA guidelines. If your application meets the guidelines set by the SBA, the bank can offer you a loan that is guaranteed by the SBA. This means that in the event the business owner defaults on the small business loan, the SBA will pay the bank some money to help offset some of the loss it could experience.
One thing to know, the SBA will require you to commit to unlimited personal liability for the loan, but if it helps you grow and or succeed, then it may be worth giving that promise to the SBA.
It is truly the perfect storm in Commercial Real estate. Prices are coming down, and there are cash stressed owners willing to offer a deal to get some cash. Combine that with this news and you have all the notice you need that it's time to get serious about a business purchase or commercial real estate.
Let me crunch some numbers for you. I can run a discounted cash flow analysis, with financing , against your investment to show you if it will cash flow with the reported earnings and SBA loan. Everything is coming together for you, and the wind is starting to blow. Don't wait this storm out.
This is the lowest it has ever been and probably the lowest it will ever be! If you are on the fence about purchasing business assets, commercial real estate OR purchasing businesses that include commercial real estate, PLEASE, consider the SBA. Call me and I will introduce you to a lender. This is truly unbelievable.
Banks and other lending institutions offer a number of SBA guaranteed loan programs to assist small business owners. While the SBA itself does not make loans, it does guarantee loans made to small businesses by private and other institutions.
The SBA (Small Business Administration) offers guarantees on loans for small businesses or entrepreneurs who have cash flow but do not have the necessary principal to obtain a loan for expansion or for a startup. The SBA has many different types of guarantees that they will give to private lenders, each has its own interest rate.
7(a) Loan Program:
This is SBA’s primary and most flexible loan program, with financing guaranteed for a variety of general business purposes. It is designed for start-up and existing small businesses, and is delivered through commercial lending institutions.
CDC/504 Loan Program:
This program provides long-term, fixed-rate financing to acquire assets (such as real estate or equipment) for expansion or upgrade to your business. It is designed for small businesses needing financing against their assets. and is delivered by CDCs (Certified Development Companies) which are private, non-profit corporations set up to contribute to the economic development of their communities.
Business owners in search of small business loans have a government agency working on their behalf and that is the SBA. They encourages local banks to lend money to local businesses.
If you apply for a small business loan at a bank, the bank will check your application and supporting documentation to see if you qualify for a small business loan. If you do not qualify for a regular small business loan, the bank can check your application against the SBA guidelines. If your application meets the guidelines set by the SBA, the bank can offer you a loan that is guaranteed by the SBA. This means that in the event the business owner defaults on the small business loan, the SBA will pay the bank some money to help offset some of the loss it could experience.
One thing to know, the SBA will require you to commit to unlimited personal liability for the loan, but if it helps you grow and or succeed, then it may be worth giving that promise to the SBA.
It is truly the perfect storm in Commercial Real estate. Prices are coming down, and there are cash stressed owners willing to offer a deal to get some cash. Combine that with this news and you have all the notice you need that it's time to get serious about a business purchase or commercial real estate.
Let me crunch some numbers for you. I can run a discounted cash flow analysis, with financing , against your investment to show you if it will cash flow with the reported earnings and SBA loan. Everything is coming together for you, and the wind is starting to blow. Don't wait this storm out.
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