While residential investing tactics are well known to many property investors, many still do not know about why they should, or how to, invest in commercial real estate. If you mention real estate investment to most people you will most likely find yourself in a conversation dominated by reality TV fueled residential real estate moves.

Yes, we all know about flipping residential properties and all the money that was made until the bubble burst. We get it! But residential real estate is valued on comparison sales, so what happens when these sales are dropping like a skydiver without a parachute and the number of sales are drying up? You’re left with a property that you can’t “turn and burn” in a short amount of time and possibly one you bought too high.

If you run into a frozen credit market and have home buyers who can’t get mortgages your home is going to sit there bleeding you every month as you rack up carrying costs. While buying and selling or renting houses has its benefits as an investment activity, learning how to invest in commercial real estate will not only help you potentially make more money but will also broaden your investment horizons and provide you some diversity.

Commercial real estate comes in many forms and is simply any property that is owned with the sole purpose of creating income for the owners. While single-family residential homes do technically fit the bill, they are not commonly considered to be commercial investments. Office buildings, apartment complexes, land, hotels and other types of property are what we are looking at here when we are learning about how to invest in commercial buildings – apartments, shopping centers, office space, and strip malls.

Commercial real estate has an advantage over residential in that its value is not based on comparison sales. Just because an office building down the street went for $1 million doesn’t mean yours will too. When you invest in commercial property, you do so based on the income it creates. Thus, if you want to increase the value of your property you simply find a way to increase income. This can be done by increasing revenues like rents, storage fees, vending, or laundry or decreasing expenses like maintenance, mortgages or interest.

Commercial buildings with a unique set of challenges and benefits. Like any other investment you must weigh your risk tolerance, money and time you have available for investment and what the market place is doing. Commercial real estate investing is the “big time” that most part time amateurs graduate to after they have dabbled in residential real estate investment. Investors find the ability to manipulate value through increasing income, diversification of risk through many tenants and better leverage all as reasons to leave the residential game to amateurs and reality TV stars.

While commercial real estate is fraught with pitfalls if you don’t know what you’re doing, the best way to maximize income and minimize headaches is implementing the NNN lease. Also referred to as triple net lease, NNN leases will be the cornerstone of your commercial real estate career and vital if you’re looking to make some serious money.

Now I’m not talking about late night infomercial stuff here. Commercial real estate investing takes an understanding of field, marketplace and some work. You will need capital to invest and like any investment there are risks involved. Unlike your plans to become a professional internet poker player, that meth lab you’re working on in your garage or waiting for that check from the Nigerian prince you gave your bank account number to, commercial real estate investing can offer you a real chance at financial success and even liberation from the nine-to-five grind. By slowly building up a collection of commercial real estate properties you can create steady income as well as build equity without much work on your part.

Now before you run out and get a reality TV show and bad hairpiece to match “The Donald,” let’s start with some basics. Most of us have come across standard leases in our lives. We sign the lease and agree to pay X amount of rent for X amount of time. While you can opt to use this kind of mile toast lease for your commercial property you are not taking full advantage of your situation as an investor. Net leases are very popular amongst those who make their living through commercial real estate. Basically a net lease assigns some of the expenses associated with property ownership to the tenants.

There are many different kinds of leases. The single net lease assigns the real estate tax expense to the tenant. A double does the same but also tacks on the insurance costs. The triple net lease, or NNN lease, has the tenant cover the real estate taxes, insurance costs and maintenance fees in addition to the rent. There is an even more advantageous version of the NNN lease, called a bondable lease. A bondable lease is also called an absolute NNN lease or the very scary “hell or high water lease.” In this version of the triple net lease the tenant is responsible for every possible real estate risk. Some provisions of this extreme triple net lease are that the tenant will rebuild after a catastrophic event.

So why would a tenant ever sign up for a deal like this? First of all they get lower rent. In a building that is up to snuff or brand new it’s an especially good deal because the other costs are lower. Second, perhaps they “need” to be in that area. If you own the prime retail shopping center in the area tenants will be willing to meet your demands in order to create more business for them.

In short, the NNN lease is a great tool for commercial investors. It increases your income while decreasing your headaches. The tenants pay the mortgage and all expenses and you build in a little extra for the monthly cash flow.

One of the most lucrative real estate markets that investors take part in is commercial real estate.  Commercial properties offer a more secure investment than residential real estate, too, which is a great benefit for investors.  Renting out these properties to commercial businesses can allow you to make money on a regular basis to help you get the most value out of your investment.  If you are looking to invest some money in real estate, commercial real estate may be the way to go for you.  What are the benefits to investing in commercial real estate?

Tenants tend to stay longer.  Commercial tenants do not move around as much as residential ones do.  By choosing your tenants carefully by getting references and running a credit report, you will increase the chance that you lease to a tenant that will be dependable.  This is a great benefit for investors, because they will be able to be more secure in their investment.

Commercial properties tend to rent for higher prices.  You can get more when you rent commercial properties, because they are for businesses only.  This raises their value somewhat.  By pricing your commercial rental fairly, based on the commercial comparables in your area, you will be able to rent it out and keep it rented.

Short term fluctuations are not as damaging in commercial real estate.  While residential real estate tends to see severe fluctuations, you will find that in commercial real estate these fluctuations in value and pricing tend to be short-lived.  This can allow your investment to be more secure than other investments, including residential real estate and stocks.

You will have an office space for your own business.  If you purchase a multi-business property, you will still be able to make a profit, even if you use one of the spaces for your own needs.  This can be a great way to oversee the office building or commercial space as well.

It is a buyer?s market right now for all types of real estate, including commercial real estate.  Due to this, you can find great deals in commercial real estate that you can take advantage of and make a profit on in the future.  The benefits of long-lasting tenants, higher rental prices, fewer market fluctuations, and the ability to have your own office space will allow you to have a secure investment that will give you pride and profit.  Consider commercial real estate for your investing today.

Part of growing you business might include getting a commercial real estate loan.  Many feel to get approved it is complex and difficult.  As a business owner you need to realize that you need to prepare your credit and your debt to income ratio or you will find the situation with commercial real estate lenders more difficult than if you had fixed your credit and got your debt to income ration below 40%. Our friends at http://capitallynk.blogspot.com/ came up with “examples of eight difficult loan scenarios are described to illustrate two key points: (1) difficulties with commercial real estate loans are not uncommon; and (2) difficulties with commercial real estate loans can be overcome in most cases.

 

A  commercial loan that needs to be closed in 60 days or less.

 

It is not unusual to discover that a traditional lender considers six to nine months “normal” for commercial loan underwriting. Obviously this will act as a severe constraint if a commercial borrower is trying to buy a property that the seller wants to close in two to three months. If quick funding is essential, the commercial borrower should contact a non-bank business lender where most commercial real estate loans will close in 45 to 55 days.

 

A commercial  loan that won’t work without long-term financing.

 

What is long-term financing for a commercial loan? Some commercial lenders view 3-5 years as the longest period before a commercial loan will be subject to a balloon payment. If that sounds short-term instead of long-term, most non-bank business lenders can arrange 25-year to 40-year commercial real estate loans for commercial properties. Longer-term financing will often be the critical difference that facilitates a successful business investment (especially because mortgage payments will be reduced dramatically).

 

Providing financial data to a commercial lender after the loan is closed.

 

Some commercial real estate loans will have covenants stipulating that the lender must receive financial data even after the loan closing and that the loan can be recalled (forcing the borrower to repay early) if the audit of this data is not satisfactory to the lender. In stark contrast to this, commercial real estate loans via non-bank commercial lenders based on Stated Income will not require business plans or income verification either before or after the loan is closed.

 

Borrower is self-employed or income is paid on a commission, bonus or incentive basis that is somewhat erratic and difficult to document properly.

 

Non-bank commercial lenders using a Stated Income business loan program will not require tax returns or any income verification. They also will not require commercial borrowers to sign IRS Form 4506 (which authorizes the lender to obtain tax returns directly from the IRS), a form routinely required by many commercial lenders.

 

A borrower wants to refinance a commercial property and use $500,000 to $1 million from the proceeds to buy another property.

 

Most commercial lenders will restrict the maximum cash that can be taken out of a refinancing, with a normal limit of $100,000 to $250,000. It is also not uncommon to encounter restrictions on the use of the cash. With a commercial loan via most non-bank commercial lenders, the commercial borrower could receive unrestricted cash up to one million dollars and use the proceeds without restrictions.

 

DIFFICULT COMMERCIAL REAL ESTATE LOANS SITUATION NUMBER 6:

A borrower wants to use a substantial amount of subordinated debt (a seller second or other secondary financing) to reduce the amount of cash needed to purchase a commercial property.

 

Many commercial real estate loans will not permit a seller second or other forms of subordinated debt. With a commercial loan via most non-bank business lenders, a commercial borrower can obtain Combined-Loan-to-Value [CLTV] ratios up to 95% with subordinate financing (including seller seconds).

 

DIFFICULT COMMERCIAL REAL ESTATE LOANS SITUATION NUMBER 7:

Sourcing and Seasoning of assets or ownership.

 

For a purchase, commercial lenders will frequently want documentation about where the down payment is coming from (the source, so having limitations about where the funds are coming from is called sourcing). Commercial lenders will frequently have requirements stipulating that the down payment funds must have been in a specific account for a specific period of time, often 3-6 months or longer (this is called seasoning because it is tantamount to requiring that the funds have matured by being in the same place for a while).

 

Seasoning of ownership is similar to seasoning of funds, except this requirement involves the minimum time someone has owned a commercial property before they can refinance the property. Most non-bank commercial lenders do not have any requirements or limitations involving either sourcing/seasoning of funds or seasoning of ownership.

 

A borrower needs a $100,000 commercial loan.

 

What’s difficult about this situation? Many/most commercial lenders will have much higher minimum amounts for commercial real estate loans ($250,000 to $350,000 is not uncommon). At most non-bank business lenders, the minimum commercial real estate loan is $100,000.”

 

For many loans the lender will want the following information for the last three years:

* Cash Flow Projections

* Profit and Loss Statements

* Balance Sheets

Commercial Real Estate in India

Gone are days when India was considered to be the country of agriculture and farmers. Now it is well known due to its high tech companies and software professionals. India is the 2nd most populated country and have second largest workforce. This population has attracted all MNC’s and has truly become land of opportunity in today’s world. In this land of opportunity prices of land are as high as opportunities. Commercial real estate in India is on fire at this moment.

2010 has brought a new ray of hope in the realty sector of India after facing tremendous recession in year 2009. The Indian economy is rapidly recovering, resulting in the Indian property market to reach out new heights of achievements, especially with respect to commercial estates.

After recession, India witnessed increase in business activities. Hence, the demand for commercial properties in India increased causing the property developers to take up challenging commercial projects. Important Indian cities like New Delhi, Mumbai and Bangalore are witnessing the strong-end user demand for commercial projects. This demand have eventually lead to the expansion of business and hence, benefiting the commercial land lords.

Commercial Property in India

Increasing demand for the commercial property in India would receive a further boost due to the favorable monetary policies taken up by the Indian government in 2010. Many realty developers in India offer various services like property valuation and property management services for easy assessment of the property.

Among the commercial properties in India the most popular and demanding categories are the shopping malls, multiplexes , IT spaces and branded retail outlets. There is tremendous demand of such facilities and lifestyle at all the locations in the country is buzzing the commercial real estate.

Commercial real estate developers in India are coming up with mass developments of commercial properties for sale, for rent and for lease. Real estate values in commercial sector are experiencing high annual appreciation of approximately 8-11 per cent.

All real estate developers are constructing commercial projects and are making huge profit of it. For an individual also buying commercial properties in India is always profitable venture and the annual returns are also high. It fetches you a handsome monthly rental and works as an additional source of income. This can be substantiated by example that prices for a residential apartment have risen to 15-20% since 2009.

Commercial Real Estate Development in India

Commercial real estate development is rapidly taking place at all up growing cities in India and in the developing tier- 2 cities. Most of the corporate house involved in IT services prefers to establish their offices in such cities due to cheaper land rate.

One reason why commercial real estate market in India is gaining pace is the international marketing equation. According to international marketing equation, India is the primary market in world. This is because of huge population and wide consumption of this population. Hence the companies interested in property investment in India are plunging into Indian market to set their foot mark which has given a primary boost to commercial real estate market.

Second reason is the purchasing power of Indian consumer. Purchasing power of Indian consumer especially middle class has increased. Lifestyle changed due to increase in purchase power and hence demands of malls, multiplexes, shopping centers, showrooms and other commercial property in India increased, and this gave boost to commercial real estate in India.

Domestic investors and foreign investors both find it profitable to invest in commercial property in India. According to market analysts, trends will continue with the increasing interest of MNC’s in India, increase in lifestyle of people, and strong consumer base who thinks that investing in land is better than investing in stock market. And if trend continues in similar fashion then one day prices of commercial real estate in India will reach to sky high.

Commercial real estate investors that are involved in renovation projects and or actively seeking new acquisitions should take a hard look at the new commercial second mortgages that have become available. This commercial equity loan can create a significant amount of liquidity in investor’s existing commercial equity. Equity th at was previously dormant can now be “tapped” and used in other projects.

The most common uses that we see investors employ with this loan is as property rehabilitation capital or as down stroke capital for new building acquisitions. Investors that have been involved in traditional commercial construction loans understand the extensive process/reporting requirements and like the idea of avoiding this, by pulling cash out of another property via a commercial second mortgage and use those proceed as the rehab capital on a another property.

Likewise, many investors do not want to tie up cash into an acquisition. Investors can pull cash out of an existing property and use that capital as the down payment on the new purchase, effectively buying the property with 100% leverage.

The concept of a loan that sits in second lien position is certainly not new, but is rare. The vast majority of banks would never sit in second position especially if they do not hold the first mortgage. Said in another way, the significant point of the new commercial second mortgage is that it sits in second lien position behind any existing first mortgage, regardless of the underlying bank/lender.

The other major benefit of the Commercial Second Mortgage, (which will be hard to believe) is that the funding bank incurs the third party costs directly. The borrower does NOT have to pay for an appraisal, title, environmental or any other types of upfront fees. The borrower literally has no cash into loan with the only fee being an origination fee of 1% to 1.5% depending on the loan amount.

Investors need to examine their equity positions to determine if this is an option. The program is limited to a combined loan to value of 75%.

For example, if your existing first mortgage is at 50% loan to value you would be eligible for a 25% loan to value second mortgage. Also, there is a combined debt coverage ratio limitation of 1:1.25. Other requirements include needing to own the existing property for at least one year and the borrower needs a minimum credit score of 680 to qualify (among other less important requirements).

As far as the negatives, by far the most common complaint is the loan is capped at only $500,000 and the property value cannot exceed $3,000,000. Not surprisingly, the interest rate is higher than a typical bank loan and is heavily influenced by the borrower’s credit score.

Another negative is that expenses on the property are taken off the owners schedule E or 8825’s of their tax returns which, for obvious reasons, are typically reported higher than what they really are.

Despite these restrictions the overall program can be an outstanding tool for commercial real estate investors to unlock equity and use these proceeds to grow their overall commercial real estate portfolios.

If you are a commercial real estate broker loan, and only work on large commercial mortgage loan, that of hunger. For the reasons set out below, large commercial mortgage loans rarely close to the corridors of commercial mortgage loan.

In order for a commercial bank or even a hard money commercial mortgage lender to be prepared to make a large commercial loan, the borrower must usually have a net worth at least as large as the loan amount. Therefore, if you’re trying to put a $ 20 million of commercial real estate loan, the borrower’s better to have a net worth of at least $ 20 million.
Why on earth that a borrower with a $ 20 million of equity apply to you – the typical commercial mortgage loan broker? He did not. He recognized quickly that you are not a great expert in commercial lending. Heck, the top real estate investors and developers probably know much more about commercial real estate finance than you. Therefore, the types of major trade agreements that are generally borrowers and developers with $ 3 million net worth trying to borrow $ 20 million. It’s a pipe dream! The loan was never close.
If a borrower has a $ 20 million net worth, you can be sure it has had dozens of bank loan officers by calling directly on it. Therefore, even if you do not get lucky and went to work for an investor or developer with a huge net worth, you can bet that is also in touch with his own bank and a half dozen other bankers who have called for direct to him. Therefore, even if you delivered a delightful period of a sheet of bona fide mega-bank, which will add its half-point rate to the mega-bank of a point to pay. Guess what? Direct lenders are also working on the agreement can always be that nearly matches the interest rate and provide a road within just one point because there is no agent involved in the operation.
But you probably will not succeed in delivering a piece of delicious period of some mega-bank or large business of life. Why? Because the top loan officers working in the mega-banks and large companies probably do not give him the life time of day. These guys are constantly in demand, and that rarely waste their time working with some beginners, intermediate level or even a mortgage broker business. These top of the food chain loan officers tend to have stable of about a dozen top bankers who provide commercial mortgage with 95% of its loans – and you are not one of them! These top commercial mortgage loan officers probably just blow it off the phone, even if its operation was perfect.
If you never work in big real estate loans? The only time it may make sense on that front would be if the borrower was a client. Perhaps it closed a $ 3 million commercial mortgage loan for him seven years ago, and then to $ 7 million three years ago. It is now trading up to a larger commercial property and needs $ 13 million deal. Clearly, in this case, you absolutely must have in the deal.
However, in the absence of a track record or some other personal relationship (perhaps the filthy rich investor is his stepfather), you should not take on these large commercial mortgage loans.
By contrast, stick to small business loans standing, the types of deals that actually close and feed his family by http://www.pro-bargainhunter.com.

Securing commercial real estate financing can be a difficult task if you’re not familiar with the field. First, let’s distinguish between residential and commercial. Residential properties are solely for housing people. The location can have up to four units. Five or more units, and just about anything not intended for habitation, qualifies as commercial.

With that clear, let’s discuss the actual financing. Acquiring money, and how much you are allowed to borrow, is affected by a number of factors.

When analyzing an investment plan, lenders consider the following:

* The borrower’s credit rating

* The net income of the venture

* The laws and demographics of the area

* The kind and number of tenants.

These are not the only things lenders consider, but these can give you an idea of how much planning and research you need to do. We’ll address these as the most immediate concerns that you can also investigate on your own.

Commercials all over television talk about a person’s credit rating. This very important number controls your financing life and future. Basically, the higher the rating, the more likely lenders are to give you a larger loan with a decent interest rate. For them, a good rating indicates not only your ability to pay, but your level of responsibility to your debtors. If you have a median rating, you may have to begin with a smaller venture so that you can get a reasonable loan and interest rate.

In addition to the credit rating, but far more important a consideration in commercial property, is the net income of the venture. Financiers want to see that the venture will allow you to pay the mortgage due each month. A proposal that does not clearly indicate profits enough to cover expenses and loan payments is not likely to receive funds. It is important that you investigate this before proposing a venture to a lender. Make sure you account for all of the expenses (repairs, maintenance, etc.) before presenting your net income on the property.

Consider the laws and demographics of the area because the finance agency will. If laws are going to restrict the productivity of your venture, lenders may be reluctant to provide a loan. The same is true of demographics and the economic climate of the location. If the population is low or isn’t likely to patronize your business, again, that can effect whether or not you get funding. Also, the economic activity of the area influences financial decisions. If there is a boom, your chances increase. Let’s say the area is a money drain, or in an escalating slump. It will be harder to justify commercial real estate financing in those kinds of conditions.

Also look at your tenants. For example, if you’re proposing to open a health food store in a strip property that has several fast food tenants, then your business’s chances of success are much lower. If, for instance, you open the same kind of store in a strip with a gym, yoga studio and health spa as tenants, the likelihood of getting frequent customers is increased. Lending institutions take these sorts of things into consideration because they influence the profitability of your venture.

These are not the only considerations, but they are easy to check into and can help you decide if a particular venture is worth your time and the work involved in securing commercial real estate financing. Make sure you do your homework first, and securing funds for your venture will be an easier process.

If you are a business owner, at one point in your business journey, you have probably had the thought of whether or not you should own the building your company occupies or lease it from someone else. If you have common sense, you would think that buying the facility and build equity in the property is the way to go. However, when dealing with something this big, the decision is rarely easy to make. There are many factors that could come into play to make purchasing commercial real estate a bad idea. I will go into some of these factors in greater detail.

Probably the biggest factor that comes into play is the financial limitations that purchasing office space has on a business. Do you really have enough money, or are you making enough money each month to make it happen? What about the tax benefits? What about equity? Is the local commercial real estate market growing or shrinking? How about growth? Do you have enough room to grow your company in the building your are considering purchasing? All of these are good questions that need to be answered before you make any decisions about your big purchase.

For most business owners, the number one questions is, do I have the required 10-15% to put down on the property and can the business afford to tie that amount of money into the property? If you didn’t realize, commercial real estate is not a liquid asset, you can’t just pull money out of it at any time. If purchasing office space makes you cash poor, you might want to put your plan on hold.

Another huge factor that need to be taken into consideration besides the money aspect of the purchase are your growth plans. If your business is in the initial growth phase and are expecting to expand in the near future, the business owner should know what he plans to do with the building it they are forced to move out due to company size. Will they rent the building, sell it to another company, or even keep part of their operations in it and expand to another building. These are all simple questions that require very complicated answers.

Commercial loans have never been easier to obtain then at this time. If it in your company’s best interest to buy some commercial real estate, now is a great time to do so. Just make sure that you can do it financially, it is not worth losing your business or struggling horribly, just because you want your own office space. Take your time, do your research, and make sure that this is for you.

Finding commercial property in Houston Texas used to be hard, but there is so much of it now that in Houston, commercial land for sale can be found almost anywhere. This is in no way an indication that there are problems selling these kinds of properties, though. It is only that there is so much growth and development taking place around the city that commercial properties continue to be on the rise.

When looking for a ground lease for sale, Houston is one of the best places to find one. For commercial property Houston is one of the best places to go, as well. There are so many opportunities there, but not all buyers realize this yet, and so the commercial property the area has often goes unnoticed by those who are trying to decide where to move to or invest in. Fortunately, though, many new buyers are moving into Texas, and so the commercial real estate Houston Texas has to offer is being bought and used.

For commercial retail this city is a great choice, because in Houston commercial land for sale is both abundant and fairly priced. Buyers look for commercial real estate where they are able to purchase it at a great price. If they have to pay too much for it, it will not be a great investment. If they can purchase it too inexpensively, it is possible that there are reasons for this, such as the property being in a bad neighborhood. Buyers must be careful so that they buy their investment property in a neighborhood that will continue to grow and develop.

This will stop them from having problems with deterioration of the neighborhood, crime rates, and other concerns. Naturally, it is not possible to know everything about an investment property before one buys it, because circumstances can change. Though, trends can be studied and information can be gathered which will help to protect a buyer from serious problems as much as possible.

The market for commercial property in Houston Texas is a healthy one. In commercial real estate here continues to grow, and this is helpful for buyers who are looking for a way to grow their operations and move toward increasing their investments.

Not everyone may find the commercial property market here to be the best one for them, but they should certainly pay attention to the market so that they can make a decision as to whether they believe that this market will be a great choice for them in the future.