Prequalifying a Income Producing Property

After the thrill of seeing a property and you have come back down to earth then it is time to kick the tires. Many an inexperience investor has had buyer’s remorse and wish they had done their due diligence (due diligence another post) before purchasing a property.

We don’t have the space or time to go into pre-qualifying an income producing property properly here but I will try to give you an overview of the process.

First as always before you start looking for a property you must have a plan which sets limits as to:

• What you are willing to invest in (Type of Property)?
• How much you are willing to invest (Cash Available)?
• How long you plan to keep the property (Time Horizon)?
• Can you finance it or get it finance?
• Who will finance it? (Bank or Hard Money)
• What are the numbers that will fit my objectives (What’s my expected return on my investment)?
• Are you willing to improve a property and if so what is my investment limit?

Once you have answered these questions then stick to them.

Since your plan is to purchase an income producing property then it is important to get actual numbers the same as if you were going to finance the property. Why do I say this? Because the lender is going to want to see actual numbers that can be verified by records that the sellers has.

If the seller can’t produce the needed documents then I have always found it is better to walk away with my wallet intact than be sorry with buyer’s remorse.

In later post I will go through the number process of pre-qualifying a income producing property since each type of property is qualified differently.

Remember! Success is achieved by those try and keep trying and where there is nothing to lose by trying by all means keep trying.

For more information go to Emerald Institute or EmeraldCSI

Curtis William Lee, Sr. CREA®

Success Plan for New Commercial Real Estate Brokers and Investors

Are you starting out new in the area of commercial real estate or in need of a business plan outline for commercial real estate investing?

We are fortunate enough to have gained permission from the Emerald institute to provide you with their success outline from their “Commercial Real Estate Advisor CREA® professional designation program.

The outline covers a five month period starting from scratch to the end of a commercial real estate sale and closing.

Many of the points in the outline can be successfully implemented by real estate buyers who specialize in commercial properties.

Success Plan

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Circle of Winners

Change in attitude on the part of Investors

From the National Real Estate Investor Magazine      September 29, 2010

Investors Go On Offense

Improving capital markets spark renewed interest across property types.

Growing confidence in apartments, hotels and even the downtrodden retail sector is helping pull investors off the bench and back into the game. Some 55% of all respondents to a survey conducted by National Real Estate Investor and Marcus & Millichap Real Estate Investment Services believe that now is the time to buy apartments, followed by retail (32%), undeveloped land (29%), hotel and mixed use (26%), and office and industrial (24%).

That enthusiasm is even strong among investors who already own apartment properties, with 70% indicating that now is the time to buy. Conversely, only 36% of office owners believe now is the time to buy office properties. Apartment owners also are bullish on rents, with 41% anticipating that rents will increase over the next 12 months.

The response to the online survey conducted between July 15 and July 30 – which yielded 529 responses – shows a big boost in confidence compared with a similar survey conducted in the fourth quarter of 2009. Back then, 31% of apartment investors projected an increase in effective rents, and the projected increase averaged a miniscule 0.2%.

 The exclusive National Real Estate Investor/Marcus & Millichap Investor Sentiment Index shows that investor confidence has taken a major step forward in the past year. After bottoming out in 2009 with an index rating of 91, investor sentiment rose to 113 in the first quarter and 119 in the third quarter of this year. Although the index shows that sentiment is still well off the high of 148 that occurred in 2005, the positive trend over the past year is an encouraging sign that investor confidence is returning.

The index takes into account survey responses related to expected changes in property values for various real estate sectors, as well as plans to increase or decrease total real estate holdings. The baseline of 100 indicates neutral sentiment for the industry. The trajectory shows that investor sentiment reached its high in 2005, followed by a dip to a trough in 2008 and 2009, and is now showing signs of an upswing in 2010.

Florida to make discision on future growth

I have attended presentations concerning admendment 4 concerning home rule and how it will affect the future growth of Florida.

I find there is merit on both sides and the question is how will the admendment affect the future of present property values going forward.

I don’t think that no one really knows the answer to that in that the present propert values are tanking and the outlook for future increases look bleak for the next 5 years.

I have included an article from the Wall Street Journal by Bobby Whelan that I found interesting.
Article: Wall Street Journal, September 18, 2010
Builders Fighting Florida Proposal
By ROBBIE WHELAN
The real-estate industry and pro-growth advocates are rallying to defeat a Florida ballot initiative that they say would limit future development in one of the nation’s largest housing markets.
Florida has been hit especially hard during the real-estate collapse. Not only does it lead the country in foreclosures—with tens of thousands of vacant homes scattered across the state—but average home prices have fallen in some major markets, including Miami and Tampa, by about 50% since 2006.
To control the construction and supply of new homes and other development, a group of environmental activists and attorneys have galvanized enough support from voters to put Amendment 4 on the November ballot, which would allow voters to decide on changes in local land-use plans.
Although it would cover commercial and residential development, the measure has especially drawn the ire of the home-building industry because large builders depend on having flexibility in land-use plans to keep building costs down. Home prices, as well as builders’ margins, are closely tied to the cost of buying and “entitling” land—or making sure the proper legal measures and zoning designations are in place to build.
In California, for example, where the land entitlement process can take several years, home sites that would be worth $20,000 or $30,000 in Florida can sell for more than $100,000 apiece, and builders typically pass these costs on to homebuyers.
Supporters say the initiative would reduce the type of rampant overbuilding that fueled Florida’s real-estate bubble and subsequent crash. “Basically, the builders, together with the local commissions here, drove Florida over the cliff with reckless speculation,” said Lesley Blackner, a Palm Beach-based environmental lawyer leading the drive. “What Amendment 4 does is give voters the check and balance” instead of “politicians who want to rubber stamp every development that comes their way.”
In Florida, as in many other states, new commercial developments and housing subdivisions must comply with local growth plans. But builders can often easily get around the plans by appealing to local planning commissions, which typically approve the changes. Under Mrs. Blackner’s plan, each proposed change must be brought to a direct vote in local elections. Mrs. Blackner says this is more democratic and will result in better land-use decisions.

Opponents say passing Amendment 4 would cost the state jobs and hamper efforts to attract new businesses. Ryan Houck, who leads Citizens for Lower Taxes and a Stronger Economy, a political-action committee opposing the measure, said it would result in higher property taxes and fewer construction jobs in Florida, as local government would be forced to raise taxes to pay for referenda and litigation challenging changes in land-use plans.
“When you’re no longer attracting business, the tax burden falls onto residents at a much higher rate,” said Mr. Houck, a former aide to former Republican Sen. Mel Martinez who now works full-time for the group. “Businesses that might seek to come to Florida would find it incredibly difficult, costly, and uncertain. It would chase away business at a time when the state is hurting for tax revenue.”
Despite its woes, Florida’s housing market remains one of the most important for builders because they already have a lot of money invested there. Over the summer, builders began snapping up thousands of undeveloped home sites in Orlando, for example, betting that the market there will recovery in the near future.
For now, though, figures on vacant single-family housing portray an overbuilt market with low demand: In Tampa and St. Petersburg, there is a 6.9 months’ supply of new, vacant homes, compared with about four months’ supply at the market peak in 2007, according to research firm Metro study. Miami has a 21-month supply of new, vacant, single-family homes. The U.S. average currently stands at a five month’s supply.
So far, 11 big U.S. home builders have donated more than $1.8 million to Mr. Houck’s group, according to campaign-finance records. Pulte Group Inc., a Michigan-based builder, led the pack with a $567,000 donation, followed by Miami-based Lennar Corp. with $367,000. The Florida Association of Realtors has donated $1.75 million.
A March poll conducted by The Neilson Co. for Leadership Florida showed that the amendment had the support of 51% of voters, but the threshold for passage is 60%.
With Florida in the midst if a hotly-contested election year with several prominent offices, including governor and a U.S. Senate seat up for grabs, the issue has taken a back seat to more traditional issues, such as job creation and taxes. Left-leaning politicians who typically might have supported a “smart growth” measure like this one are not, said Florida pollster Tom Eldon.
“Even democrats are staying a fair distance away from it. It’s gotten too much of an anti-business, anti-growth aspect to it,” he said. “It was a great idea when the economy was booming, but now that the economy is bad it’s not safe ground.”
William G. Hardin, an economist who heads the real-estate finance program at Miami’s Florida International University, said that passing Amendment 4 is in the interest of existing property owners because it will limit supply, and bump up the value of existing homes. But, he added, the amendment would damage the state’s economy.
“In a long-term development perspective, if you increase the value of property, you make Florida less competitive, and Florida has historically competed on price.” he said. “We have cheaper second homes, it’s cheaper to build commercial property here.”

Banks still reluctant to finance small business commercial properties

In my recent survey of banks who make small business property loans are still reluctant to make loans and if they do the requirements are very tough.

Loan to Value, Credit Status and Net Operating Income are have to be in the blue chip level.

I believe this will be the situation for some time to come.

Financing troubles loom for commercial real estate

BY ELAINE WALKER

ewalker@MiamiHerald.com

While the real estate industry in South Florida and across the country may be showing some glimmers of hope, there still is likely to be more pain in 2010 — particularly when it comes to commercial real estate financing.

That was the consensus Tuesday from a variety of local and national industry leaders gathered for the Urban Land Institute’s South Florida Economic & Development Outlook.

“We are starting to see the bottom,” said Eric Swanson, executive vice president of Flagler, a Coral Gables real estate firm, and chair of ULI’s Southeast Florida/Caribbean Council. “It’s probably not going to be a great year, but it’s going to be a better year than 2009. The mood is pretty optimistic for 2011.”

One of the major problems looming is a commercial real estate finance crisis, as commercial mortgages come due for refinancing on projects that are underwater.

Delinquencies on Commercial Mortgage Backed Securities are expected to steadily increase from the current level of about 4 percent, hitting a peak in late 2012 at 12 percent.

“This crisis could have a long tail,” said Stephen Blank, senior resident fellow in finance for ULI. “The aftershocks could go on forever.”

The issue is what the industry has dubbed the game of “extend and pretend.” That refers to a tendency by lenders to extend the term of a loan in order to avoid writing down the value of the asset, which could have seen as much as a 50 percent decline.

Some speakers blamed the government for failing to do anything about the problem and propping up the banks with federal support.

NO CATALYSTThe question is whether what happened during the savings and loan crisis — when properties were sold off at fire-sale prices by the Resolution Trust Corporation — would have yielded better results.

 “There is no catalyst today for things to move,” said Merrick Kleeman, managing partner of Wheelock Street Capital, a real estate private equity firm. “Last time the government was the enforcer. This time they’re the bartender.”

Troy Taylor, president of Algon Group, which specializes in distressed asset workouts nationally, says the key to a successful workout is getting both lenders and owners to accept the new reality of what projects are worth.

Until that happens on a large scale, any recovery is going to be hampered.

“You’re not going to see the bottom until you blow through all this stuff,” Taylor said. “Let’s go have surgery and put it behind us.”

The worst thing a property owner can do, said Taylor and other speakers, is use available cash to keep making interest payments on a project that is already underwater. Taylor said that workouts are more effective if a firm such as his comes to the table before the final hour because a major restructuring can take six months to a year.

Cyril “Sid” Spiro, chairman and chief executive officer of Regent Bank, agreed that one of the biggest problems is borrowers who don’t recognize issues “quickly” and bring them to the attention of lenders.

CROSSROADSOn a broader economic perspective, an executive with the Federal Reserve Bank of Atlanta suggested the economic recovery stands at a crossroads. The question is whether the recovery is a quick one (shaped like a V) or long and “painful.”

 Dr. David Altig, senior vice president and director of research at the Atlanta Fed, said he tends to take the more pessimistic view but wouldn’t be surprised to see things go the other way.

What concerns Altig most is the level of unemployment, which is higher in Florida than the U.S. average. “If the unemployment rate doesn’t come down significantly, the lifting of the fog is not going to happen,” he said.

Why you need an exclusive agent to sale your property

Why You Really Need An Exclusive Agent To Sell Your Property

Author: Henry Philip

Typical reasons we hear are

1. Then, there will be more agents working for me and I can get a higher price << our reply — not correct, because these agents may not act solely in the interest of getting the highest price for you
2. I’m worried he doesn’t spend time and effort on my property and if the property is still not sold after 2, 3 months, I am still tied down by the exclusive agreement and can’t list with other agents << our reply — correct, and that’s why you can sack us at any time if you are not satisfied with our service
3. I can save on the commission by selling the property myself << not correct — because majority of buyers are brought in by an agent and the agent will still get commission from you
4. What’s so difficult about selling a property? It’s just advertising, answering phone calls and going to open the house << half correct — you need the time, effort, knowledge and experience to do the whole process correctly, one wrong move could prove “fatal” to the deal

A good, reliable and professional property agent will not only get a higher price for the seller in the shortest time but also with the least amount of hassle for the seller.

By signing on exclusively with one agent (but do make sure he or she is a good, reliable and professional property agent), a seller will get to enjoy these benefits

1. The agent’s and agency’s network of in-house agents and co-broke agents who are specialists in the particular market segment
2. Getting featured, enhanced ad placements for marketing – website, flyers, e-newsletters, newspaper ads, etc
3. Much more awareness and buyer traffic for the property than if the seller tries to d-i-y
4. A professional’s skill in selling benefits to potential buyers – sales techniques, targeting the correct group of buyers, ad copywriting, pricing and negotiation
5. A professional to solely protect seller’s interests – getting the best price for the seller, otherwise the buyer’s agent will aggressively try to reduce the seller’s price in order to get maximum savings for buyer
6. A professional’s objectivity in the negotiation process – not being emotionally involved, staying focused on the purpose – getting the best price for the seller
7. Hassle-free selling – the agent handles everything – from valuation to marketing to conducting viewings to negotiating to document processing to liaising with banks and lawyers to handover
8. Ability to transfer the stress of selling to the agent and have fun pressurising the agent to show results

Now, if you are convinced about why you really need an exclusive agent, exclusively to sell your property and look after YOUR interest, let us tell you how we benefit you;

1. Acting as your exclusive agent, we will have the confidence to market your property aggressively – your property will receive much more attention from agents and potential buyers, receiving more newspaper placements, featured ad placements in website and other marketing materials
2. As your exclusive agent, we will make sure you get to spend more time with your family, on your work, with your friends, rather than be busy with the property
3. Working as your exclusive agent, we will put in 100% effort on your property, ensuring all viewing requests for your property are given top priority in our daily schedule
4. Our commission fees schedule will be given to you BEFORE you sign the exclusive agreement with us and it will fair and yet flexible (“attractively incentivised” to ensure we work doubly hard on your property, and ensuring you get the best price for your property)
5. Our exclusive agreement will have an “escape clause” for you – if at any time you are not satisfied with our services, you are free to terminate the contract immediately

Contact a good, reliable and professional property agent today, or you can submit your property details and we will be in touch with you shortly.

Article Source: http://www.articlesbase.com/real-estate-articles/why-you-really-need-an-exclusive-agent-to-sell-your-property-2097688.html

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Markets With Pervasive Distress Offer Treasure Trove of Deals

Markets With Pervasive Distress Offer Treasure Trove of Deals
May 11, 2010 10:54 AM, By Victor Calanog, contributing columnist
There are several metrics that investors can use to identify deals on distressed assets. However, investors typically take a silo approach, focusing on specific property types. Rarely is distress examined across properties. After all, if you’re targeting the office sector, how often do you assess the state of multifamily and retail?
As a first step in zeroing in on specific places where deals might be found, it is useful for investors to evaluate pervasive distress. Does a metro area rank at or near the top of measures of distress across multifamily, retail and office properties?
Despite much talk about market participants looking to deploy capital, transaction activity has yet to pick up. This is partly because of the relative willingness of lenders to adopt workouts instead of foreclosing on distressed assets and selling them at a deep discount.
Two markets that fit the bill
The probability of sellers being willing to reach a deal with interested buyers tends to rise in metro areas where pervasive distress is high. Consider the performance of commercial real estate in Phoenix, Ariz., and San Bernardino/Riverside, Calif.
Both markets are experiencing among the highest levels of distress across the multifamily, office and retail sectors. Occupancies have deteriorated so much that vacancy levels have more or less doubled over the last three to four years.
Year-end 2009 vacancy levels are either close to 30-year record highs or worse. Rent declines over the past couple of years have wiped out most of the gains of the last boom, knocking effective rents down to levels observed in 2005 [Figure 1].

Such pervasive distress stands in stark contrast to places like New York City, where some property types have withstood the current downturn better than others. New York office properties have exhibited a lot of distress on the rent side, but multifamily properties held on to vacancy levels at or below 3%, indicating relative tightness.
Not surprisingly, there are plenty of distressed loans supported by properties in Phoenix and San Bernardino/Riverside. As measured by CMBS outstanding loan balances 90 days or more past due across the multifamily, office and retail sectors, these two markets rank among the highest. Both markets are also within the top five MSAs with the highest percentage of properties in foreclosure across all three property types [Figure 2].

A broader look at other categories of distress — including the breakdown of delinquent loans 30 or 60 more days past due and REO properties as a percentage of outstanding balances — reveals similar results. Phoenix and San Bernardino/Riverside rank at or near the top, whether you’re examining multifamily, retail or office properties.
Astute investors must be careful of risks and structural weaknesses that helped cause trouble in the first place. Areas suffering from oversupply of specific property types will continue to see depressed returns in the near term.
Investors will still need to carefully sift through available deals on a market by market basis, but identifying which geographic areas are experiencing pervasive distress offers a useful first step in narrowing their choices.
Victor Calanog is director of research for New York-based research firm Reis Inc. His monthly column delivers insights on performance trends in commercial real estate

U.S. commercial real estate values fell in March

May 19 (Bloomberg) — U.S. commercial real estate values fell in March, pushed lower by a quarterly drop in retail and office properties in the biggest metropolitan areas, Moody’s Investors Service said.

The Moody’s/REAL Commercial Property Price Index fell 0.5 percent from February, the second straight monthly decline, Moody’s Investors Service Inc. said today in a report. Prices slid 25 percent from a year earlier and are down 42 percent from the October 2007 peak.

Mortgage Bankers Advocates Tout a Property Rally

Advocates Tout a Property Rally

Commercial Mortgages Rose in the First Quarter; Total Still Far Off Highs

The Mortgage Bankers Association has a piece of good news to deliver to the credit-starved commercial-property industry: The amount of commercial mortgages originated in the first quarter rose 12% from a year earlier.

But the level remains low, said Jamie Woodwell, the trade group’s vice president of commercial-real-estate research.

“There appears to be increasing capital available for commercial mortgages,” he said. “But folks for the most part are looking to keep their properties in their current conditions rather than sell them.” That leads to limited demand for new mortgages.

The Wall Street Journal  May 19, 2010