The buyer?s market that is found in real estate these days has made all sorts of real estate available for the common investor.  One of these markets that have been made more affordable is the commercial real estate market.  This can be one of the most lucrative markets for investors, but many investors do not put much thought into buying up commercial properties, because they do not realize the benefits.  By weighing the cost versus the benefits, you will soon come to the realization yourself that commercial real estate is the way to go.

Consider the use for the property that you are choosing.  If it is a commercial property that is only good for one facet of the business world, you will find it more difficult to rent out the property or sell it in the future.  By finding a property that is flexible in its usage, you will increase your chance of success with your investment.

Consider the location of the property.  Is it off a main road? Is it behind other buildings?  Is it easy to get into and out of?  By considering all of these facets, you will be able to better determine if the property is right for you and for your needs, as well as assess its value to you for your investment.

Consider the profit potential of the property.  By determining what profit potential a property can offer you, you will be able to determine if it is a good choice for you.  This is an important consideration for you to make, so run those numbers and try to decide if the commercial property that you are considering is the right choice for you and your future financial situation.

Consider the market that you are in.  While the real estate market is fluctuating somewhat, this does not mean that it is not a good time to invest in commercial properties.  By taking advantage of this market, you will be able to find good investments that you can make a profit on.

Commercial investing can be a great choice over residential investing, simply because it does not seem to fluctuate as much.  By finding the right properties with the right location, considering the profit potential, and considering the market, you will be able to invest successfully in commercial real estate and make the most of your investment.  You will want to consider commercial real estate in your real estate investing to make the most of your money and your energy.

Commercial real estate courses are quickly becoming a very lucrative industry. Reality TV and midnight infomercials have bombarded with the notion of flipping residential property and becoming millionaires overnight. Yet, in an ever-challenging real estate market with tighter lending standards and at best stagnant property values that game is a little out of date. More and more investors are looking at leaving the amateur ranks of residential investors and playing on the big kid’s playground of commercial property investing. In order to feed this exploding need gurus and self proclaimed experts of all sorts are coming out of the woodwork with their “proven” systems.

So how do you know that the commercial investing courses you buy are going to actually help you make the money you are looking for?

First, you have to look at commercial property investment as a business. Any business worth getting into is not going to hard sold to you by a salesman in a hotel conference room. You would never buy an existing business or start a new one based on the threat of a ticking clock. You would do your due diligence, run the numbers and check out the market place for sinking money into anything. So do the same when it comes to one of those expensive commercial real estate courses.

If you’re new to commercial investing, elect to get your feet wet by reading some of the top quality books we recommend on this site, or for that matter blog posts. Try to find a reliable source of information published by people who are actually doing the investing, not just talking about it.

If you’re already accustomed to the commercial investing market and are looking to get to that next level, then take a look at some of the courses out there and see what they offer. Does the guru offer ongoing support and help when you run into rough waters? If not your expensive real estate course just turned into the most costly paperweight you owe.

A great alternative to buying any of the commercial real estate courses out there is to look into getting a commercial real estate mentor. By joining the right investment clubs, networking or even becoming a silent partner with a proven commercial real estate investor you will learn from a seasoned pro while having a friendly hand to guide you.

In the world of commercial real estate NNN leases offer decreased costs and increased property valuation for the astute investor. If you’re looking to get involved in commercial investment property or improve the returns you’re getting from your current commercial property then you need to check out the NNN lease.

NNN, or triple net leases, are commonly found in commercial real estate. The commercial NNN lease is just one kind of net lease. A net lease dictates that the tenant will cover some of the costs of property ownership in addition to paying rent. In a single net lease the tenant pays the real estate taxes. In a double net lease the tenant pays taxes and property insurance. In a triple net, or NNN, lease the tenant covers property taxes, insurance and maintenance costs.

The real estate investor gets to lower their costs with a commercial real estate NNN lease. Since commercial real estate is valued by the net income it produces, decreasing costs increases net income and thus how much the property is worth. To maximize the increase in property value minor cosmetic improvements can be done drawing in higher rents.

Commercial real estate NNN leases are most commonly used in multi-tenant retail and industrial complexes. They wouldn’t make as much since in a residential situation, but are common practice in other forms of commercial real estate. Tenants may be hesitant about signing up for leases where they are responsible for more than rent, but in return they get lower rents. If the building is new or recently refurbished then they will be more likely to sign up for a triple net lease.

So now that you know about the wonders of the triple net lease, what’s your battle plan?

First, do your homework. You need to find out the going rates of rents and valuations in your market. Once you have a handle on what people are willing to pay for the privilege of renting your commercial real estate then you can start to figure out what you can afford. Second, you’ll need to gather up a down payment on the property you are looking at. The bigger the down payment the lower the mortgage, but a nice medium must be found. If you put too much down you might be missing out on other opportunities that money could bring in.

Next, do some cosmetic improvements to the building. Assuming this isn’t a brand spanking new complex there will be some work you can do to improve it. The better it looks the more you’ll be able to bring in for rents. Also, with a newly updated building tenants will be more likely to sign up for a triple net lease because they won’t feel as though they are going to get hit with high maintenance and repair costs.

Finally, get yourself some tenants, sign them up on a triple net lease and sit back and watch the money roll in.

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.