Commercial Real Estate Investment Articles

These are the Top 10 reasons people use for not succeeding in real estate investing. OK, maybe this list is a bit obnoxious, but I’m trying to make a point. If I offend anyone with this list, it probably means I’m right on track!

In recent years, some lenders have been placing “seasoning” requirements on loan transactions. This has caused some grief to investors that do “sandwich” lease options. [Note: A “sandwich” lease option is an arrangement where an investor leases a property with an option to buy from a homeowner, then subleases the property to a third party with an option to buy; the investor helps the tenant obtain a loan, then exercises his option to buy from the owner and simultaneously resells it to the tenant in a double-closing.] Some lenders are afraid to fund the second part of a double-closing because of the possibility that the tenant/buyer’s purchase price is inflated. The lenders are acting mostly out of irrational fear because of recent barrage of real estate scams.

As a real estate investor working with tenants, you must be very familiar with the laws of your business. These laws apply whether you own a property and rent it, or you do a “sandwich” lease option. An eviction proceeding, usually called a “summary proceeding” or “unlawful detainer” proceeding, is a lawsuit to obtain a court order to remove the tenant. It is not lawful to physically or constructively remove the tenant from the premises. No matter how upset you are, don’t even consider changing the locks, shutting off the power or taking the front door out for “repairs.”

In 1999 I attended a free real estate investing presentation promoted on late night TV. Since I had been successfully buying and selling property as a full-time real estate entrepreneur during the previous three years, I was curious to learn some new ideas–maybe a new angle to help me buy more homes. To my surprise, the presenter told the audience (consisting mostly of opportunity seekers) that finding good real estate investments was easy and raising the money to buy them was the challenge. I immediately jumped out of my chair and screamed, “BULL!” (Well, not really, but I wanted to…) This polished speaker went on to offer his program (several thousand dollars) to teach you how to go out and find those real estate bargains. And he would graciously help you by putting up the money. What a lucrative and effective way to find good deals. For him!

Many real estate investing courses and books (mine included) tell you to find a motivated seller. That’s where you get your good deals. As a rule, that’s true. The higher the motivation, the more likely you’re going to get a good price, good terms, or both. But generally, when you find a motivated seller offering a good deal, you should take a moment to “look that gift horse in the mouth.” Ask hard questions about why a seller is motivated. Here are some examples of “good opportunities” that shouldn’t necessarily motivate you to buy.

Is your real estate investing bringing you enough monthly cash flow? Is landlording draining you of energy? Is property maintenance depleting your bank accounts? Are you open to new and safe methods of bringing huge annual returns on your cash? If you answered “Yes” to any of these questions, please read on…

A column on the front page of The Wall Street Journal titled “Real Estate Takes on an Unaccustomed Role,” written by Dean Starkman, provides food for thought. I love the first line of the article: Commercial real estate has a reputation for being the drunk driver of economic highways, the sector whose periodic crackups wreak havoc on other industries. What a line! What an analogy! You can bet that my attention was sufficiently focused on what that article had to say, which by the way, was complimentary of the metamorphosis that the commercial real estate industry has undergone since the roller coaster of the eighties and early nineties.

It is pure lunacy to undertake any sort of investment activity unless you have a firm grip on exactly what it is you’re trying to make happen. Yet I see it all the time. New investors actually believe that they can just run an ad in the “real estate wanted” section of their local paper and money will somehow show up in their bank accounts shortly thereafter. Not true. In order to make money as a real estate investor, you need to have a plan in place that will take you not only from the initial call and up to depositing the check, but all the other steps in between. Your plan should allow you to accurately describe precisely how things will end up prior to you even signing that first offer. Don’t enter the real estate arena unarmed. It’s “ready, aim, fire.” Yes, in that order.

The way you conduct yourself in negotiations can dramatically effect the outcome. I’ve been teaching business leaders throughout North America how to negotiate since 1982, and I’ve distilled this down to five essential principles of negotiating. These principles are always at work for you and will help you smoothly get what you want:

A number of interesting questions have come up about tax-free real estate deals. Among them are the question about doing too many of them in your Keogh or IRA (also known as the “Dealer” issue); what is the difference regarding transactions in a Roth IRA versus a traditional one; and the ubiquitous Unrelated Business Income Tax question.

Power Negotiators know that you should never say “Yes” to the first offer (or counter-offer) because it automatically triggers two thoughts in the other person’s mind. Let’s say you’re thinking of buying a second car. The people down the street have one for sale, and they’re asking $10,000. That is such a terrific price on the perfect car for you that you can’t wait to get down there and snap it up before somebody else beats you to it.

As April 15th approaches, real estate investors, as most Americans, will come to a universal conclusion: We pay too much in taxes. Real estate investors can reduce their taxable income by taking advantage of government sponsored retirement plans for self-employed individuals. Once established, these plans become similar to Traditional IRAs, yet they allow individuals to contribute considerably more than $2,000.

Roger Dawson is one of the top negotiation experts in the nation. He is the author of Secrets of Power Negotiating, the largest selling business audio program ever published, with over 20 million copies sold. His last four books have been main selections for all major book clubs. Success Magazine calls him “America’s premier business negotiator.”

I was just reading some of my notes and quotes that I’ve complied over the years and thought I’d share some of them with you. Most were obtained from various speakers, teachers, and writers of motivational tapes, books, and seminars etc. Hope they have the same positive impact on you, as they did for me.

This article is an overview of exchanging. Before you actually put one into motion, you should get a qualified attorney and/or CPA to complete the deal. The regulations sound complicated, but once you cut through the mumbo-jumbo, the basic requirements are pretty simple, but they must be followed to the letter.

The best way to begin your career in real estate is to come up with a good, small, older apartment building–well located, and at a low price, with a small cash down payment. There are several ways to find this type of real estate bargain. I will begin with the most unconventional methods, since they often produce real bargains and then concentrate on conventional methods. Remember, however, there is no single formula that works all the time. The successful investor has network of people who know that he or she is a real estate investor and who will tell you about vacant properties, troubled sellers, or other opportunities that you could not find on your own.

What’s a motivated buyer? Well, you’re looking at him. I’m a motivated buyer, and I’m not ashamed to admit it. That means I spend my time tracking down and meeting with motivated sellers who are eager to sell me their houses, condos, and mobile homes. Soon enough, you’ll be a motivated buyer, too. We’ve been investing in real estate investing for years, and in that time we’ve developed a system for negotiating with sellers. It’s nothing more than taking what we’ve learned that really works and turning it into a system of rules which we scrupulously follow. If you’re not familiar with the system, it may seem like we’re doing things backwards at times, or that we’re getting the “cart before the horse.” Trust me, we’re not. I’ve done this enough times to know what works and what doesn’t and, once you’ve worked things this way, I guarantee that you’ll never go back to the old methods.

Making money is why you’re here. I want to offer my original money-making warnings. I hope these ideas will irritate you, stimulate you, and cause you to think–maybe even to send me an angry letter. Here they are:

With interest rates headed upward yet again because of the latest round of belt tightening by the Federal Reserve, and the stock market falling with no bottom in sight, many people are crying doom and gloom. I hear talk of watching for a rise in foreclosures because of stock market losses. Builder friends are convinced they are about to be ruined. In my opinion, this is no time to rush for the exits. The fundamentals of real estate investing are sound. A short history lesson may prove worthwhile. My experience goes back to 1980 – 1982, when I was a single-family home builder. Now that was tight money. With prime in the high teens, very few deals made any financial sense for lender or borrower. Then came the five years of favorable tax treatment that made dumb and dumber deals look good–until Congress pulled the plug on passive losses. Then we had to re-learn an old lesson: If it doesn’t cash flow, it’s not a deal. The recession of 1990 – 1991 was a cakewalk for those who weren’t over-leveraged. I wasn’t one of them and paid dearly for the mistake.

Real estate, like any other commodity, is bought and sold every day of the week. Many people become real estate agents because they know a small piece of a large pie means big bucks. Agents help facilitate a sale by finding a willing buyer for a willing seller, earning a commission of approximately 4% to 7% of the sale price for making the deal happen. It is relatively simple to get a real estate license, and it is a lucrative field for many people. However, as you may expect, there is strong competition among agents, and the ones who are successful work long, hard hours. In fact, most agents are on call weekends and nights, with their cell phones glued to their ears. Furthermore, real estate agents are required to take continuing education classes and follow strict guidelines set forth by bureaucratic agencies. There are better ways for an “entrepreneur” to make a living!

Talking with sellers on the telephone is something I do all the time. On a busy day, that can mean a dozen or more telephone conversations with people who have properties for sale. Typically, they’re calling on my ad or a postcard I mailed, and I’m on the phone with them for one reason only–to do business. And do you know what? Every once in awhile an eager seller and I are able to put a deal together right there on phone. How’s it done? By getting on the same page with the seller! In order for any of this to make sense, you really need to understand that whenever I’ve got a seller on the other end of the line, I’m much more interested in the seller’s situation than I am hearing the details of their particular property.

The Fair Debt Collection Practices Act (FDCPA) was enacted to prevent abusive practices by bill collectors. The Federal FDCPA, as well as its state counterparts, may apply to landlords, investors, and note buyers. The FDCPA applies to anyone who regularly collects or attempts to collect debts owed or due another. The definitions of “debt collector” and “debt” have been given broad meaning by state Fair Debt Collection Practices laws and court interpretations of the federal law.

Commercial real estate properties are a completely different animal from residential properties in regards to assessing value. That may seem like stating the obvious, but it is easy to overlook the many details that come into play. For commercial real estate, value is determined in an inverse proportion to the degree of risk inherent to the continuance and stability of the income stream from the property. And of all the commercial property types, perhaps none is more complex in evaluation than a multi-tenant property, either office or retail.

Alexander Burnett is very good at what he does. He buys and sells houses. Realizing the potential profits that could be made by investing in mobile home parks, he began a lengthy search for a small park he could buy. Eventually, he found an eighty-space mobile home park owned by a highly motivated seller.

Everyone has a comfort level in which they live and work. It is determined by several factors and can be changed with practice and time. We have a choice of what we do each day, how we spend our time, and how much money we make. This may come as a surprise to some people who are convinced their income is someone else’s choice, not theirs. Nothing could be further from the truth. Your income is the result of one thing and one thing only…