Commercial RE 101: Any suggestions

[jpinpb]

[quote=SK in CV]When you say commercial real estate, that covers a whole lot of territory. Retail, hotels, industrial, office, public storage, mixed use, high rise, free standing.
[/quote]

I think some apartment complexes are considered commercial.

[Coronita]

[quote=SK in CV]When you say commercial real estate, that covers a whole lot of territory. Retail, hotels, industrial, office, public storage, mixed use, high rise, free standing. The market is different in each one of them. The ups and downs in each move on their own tracks (somewhat like high end and low end residential, though there is at least one of those categories that has continued to perform very well over the last few years.) The current investment model is different in each one of them. The financing is not always the same either.

In most categories,(though not all) trends tend to follow residential rather than lead. With the exception of hotels, trends tend evolve slowly, both up and down.

Comparing commercial real estate to residential real estate is like comparing apples to fish. They’re not even in the same family. And when someone tells you that commercial real estate is “mostly” anything, they don’t know what they’re talking about.[/quote]

I understand that commercial re is a broad nefarious subject by folks like me who have no clue in this area and considerably more complex then residential…And no way I’m considering it as any time of “investment” since I don’t understand how it works.

So at the risk of sounding really dumb (so be it),
I was just curious as someone knowledgeable in any one of those categories could kinda give an overview of that categories investment model, financing,etc to a completely clueless person like me…
with the exception of hotels(or any time of residential short term rentals),

a)public storage
b)office space
c)you mention mixed use? Can you elaborate?

Sorry, this stuff needs to be dumbed down for me. I guess I can search some more on google. I just don’t even know where to start, except with SDR’s suggestion about visiting the other blog/website. Those “investment seminars” appear to be more interested in selling you “training” versus really explaining any of this.

It would be the equivalent of some non-techie asking me what is how do mobile O/S works, to which I would then say there’s so many of them..here’s a list. Which one do you want to talk about….

[Coronita]

[quote=SK in CV]When you say commercial real estate, that covers a whole lot of territory. Retail, hotels, industrial, office, public storage, mixed use, high rise, free standing. The market is different in each one of them. The ups and downs in each move on their own tracks (somewhat like high end and low end residential, though there is at least one of those categories that has continued to perform very well over the last few years.) The current investment model is different in each one of them. The financing is not always the same either.

In most categories,(though not all) trends tend to follow residential rather than lead. With the exception of hotels, trends tend evolve slowly, both up and down.

Comparing commercial real estate to residential real estate is like comparing apples to fish. They’re not even in the same family. And when someone tells you that commercial real estate is “mostly” anything, they don’t know what they’re talking about.[/quote]

I understand that commercial re is a broad nefarious subject by folks like me who have no clue in this area and considerably more complex then residential…And no way I’m considering it as any time of “investment” since I don’t understand how it works.

So at the risk of sounding really dumb (so be it),
I was just curious as someone knowledgeable in any one of those categories could kinda give an overview of that categories investment model, financing,etc to a completely clueless person like me…
with the exception of hotels(or any time of residential short term rentals),

a)public storage
b)office space
c)you mention mixed use? Can you elaborate?

Sorry, this stuff needs to be dumbed down for me. I guess I can search some more on google. I just don’t even know where to start, except with SDR’s suggestion about visiting the other blog/website. Those “investment seminars” appear to be more interested in selling you “training” versus really explaining any of this.

It would be the equivalent of some non-techie asking me what is how do mobile O/S works, to which I would then say there’s so many of them..here’s a list. Which one do you want to talk about….

[Coronita]

[quote=SK in CV]When you say commercial real estate, that covers a whole lot of territory. Retail, hotels, industrial, office, public storage, mixed use, high rise, free standing. The market is different in each one of them. The ups and downs in each move on their own tracks (somewhat like high end and low end residential, though there is at least one of those categories that has continued to perform very well over the last few years.) The current investment model is different in each one of them. The financing is not always the same either.

In most categories,(though not all) trends tend to follow residential rather than lead. With the exception of hotels, trends tend evolve slowly, both up and down.

Comparing commercial real estate to residential real estate is like comparing apples to fish. They’re not even in the same family. And when someone tells you that commercial real estate is “mostly” anything, they don’t know what they’re talking about.[/quote]

I understand that commercial re is a broad nefarious subject by folks like me who have no clue in this area and considerably more complex then residential…And no way I’m considering it as any time of “investment” since I don’t understand how it works.

So at the risk of sounding really dumb (so be it),
I was just curious as someone knowledgeable in any one of those categories could kinda give an overview of that categories investment model, financing,etc to a completely clueless person like me…
with the exception of hotels(or any time of residential short term rentals),

a)public storage
b)office space
c)you mention mixed use? Can you elaborate?

Sorry, this stuff needs to be dumbed down for me. I guess I can search some more on google. I just don’t even know where to start, except with SDR’s suggestion about visiting the other blog/website. Those “investment seminars” appear to be more interested in selling you “training” versus really explaining any of this.

It would be the equivalent of some non-techie asking me what is how do mobile O/S works, to which I would then say there’s so many of them..here’s a list. Which one do you want to talk about….

[Coronita]

[quote=SK in CV]When you say commercial real estate, that covers a whole lot of territory. Retail, hotels, industrial, office, public storage, mixed use, high rise, free standing. The market is different in each one of them. The ups and downs in each move on their own tracks (somewhat like high end and low end residential, though there is at least one of those categories that has continued to perform very well over the last few years.) The current investment model is different in each one of them. The financing is not always the same either.

In most categories,(though not all) trends tend to follow residential rather than lead. With the exception of hotels, trends tend evolve slowly, both up and down.

Comparing commercial real estate to residential real estate is like comparing apples to fish. They’re not even in the same family. And when someone tells you that commercial real estate is “mostly” anything, they don’t know what they’re talking about.[/quote]

I understand that commercial re is a broad nefarious subject by folks like me who have no clue in this area and considerably more complex then residential…And no way I’m considering it as any time of “investment” since I don’t understand how it works.

So at the risk of sounding really dumb (so be it),
I was just curious as someone knowledgeable in any one of those categories could kinda give an overview of that categories investment model, financing,etc to a completely clueless person like me…
with the exception of hotels(or any time of residential short term rentals),

a)public storage
b)office space
c)you mention mixed use? Can you elaborate?

Sorry, this stuff needs to be dumbed down for me. I guess I can search some more on google. I just don’t even know where to start, except with SDR’s suggestion about visiting the other blog/website. Those “investment seminars” appear to be more interested in selling you “training” versus really explaining any of this.

It would be the equivalent of some non-techie asking me what is how do mobile O/S works, to which I would then say there’s so many of them..here’s a list. Which one do you want to talk about….

[Coronita]

[quote=SK in CV]When you say commercial real estate, that covers a whole lot of territory. Retail, hotels, industrial, office, public storage, mixed use, high rise, free standing. The market is different in each one of them. The ups and downs in each move on their own tracks (somewhat like high end and low end residential, though there is at least one of those categories that has continued to perform very well over the last few years.) The current investment model is different in each one of them. The financing is not always the same either.

In most categories,(though not all) trends tend to follow residential rather than lead. With the exception of hotels, trends tend evolve slowly, both up and down.

Comparing commercial real estate to residential real estate is like comparing apples to fish. They’re not even in the same family. And when someone tells you that commercial real estate is “mostly” anything, they don’t know what they’re talking about.[/quote]

I understand that commercial re is a broad nefarious subject by folks like me who have no clue in this area and considerably more complex then residential…And no way I’m considering it as any time of “investment” since I don’t understand how it works.

So at the risk of sounding really dumb (so be it),
I was just curious as someone knowledgeable in any one of those categories could kinda give an overview of that categories investment model, financing,etc to a completely clueless person like me…
with the exception of hotels(or any time of residential short term rentals),

a)public storage
b)office space
c)you mention mixed use? Can you elaborate?

Sorry, this stuff needs to be dumbed down for me. I guess I can search some more on google. I just don’t even know where to start, except with SDR’s suggestion about visiting the other blog/website. Those “investment seminars” appear to be more interested in selling you “training” versus really explaining any of this.

It would be the equivalent of some non-techie asking me what is how do mobile O/S works, to which I would then say there’s so many of them..here’s a list. Which one do you want to talk about….

[surveyor]

commercial

Commercial properties are a very difficult investment to work with and you should really tread into it very carefully. I will at least share what I’ve learned (some of it the hard way lol).

Apartments with 5 or more units are considered commercial.

It is VERY difficult to get funding for commercial properties. Because they are not usually financed by the government, they often want you to have an LTV of around 25% or even 40%. Their amortizations are also not 30 year fixes like residential properties. The amortizations they have run around 20 year or so. If you are analyzing a property, put that into your calculations. Interest rates are also much higher and can run up to 10%. Make sure you at least know what loan you can get and what the loan parameters are because if you are using residential loan rates for commercial, you will be in for a rude awakening.

Never never never go into an owner financed loan. If you can’t get funding through a commercial lender, don’t buy the property in the first place.

The value of a commercial property is determined by its income, net income, but do realize that you have to study the income/expenses statement really closely because numbers can be manipulated. There are three forms of appraisal methods, and for commercial, the banks will decide to lend to you using the income/net income method. However, most people try to sell you the property based on comparative value.

Even the vacancy rate can be tampered with, the owner may say that it is 100% occupied, but they may have made deals with the tenants to stay there for free or for a reduced rent.

Repairs, maintenances, and fees for a commercial property are much higher than a residential property and many of them do not show up on the expenses statement often because they are deemed “one-time” only expenses. Property taxes are also a big deal because most municipalities are not as eager to lower the assessment for you as compared to residential. Also, they will try to raise your assessments as often as they can.

For most commercial properties, you will need to hire a property manager. Believe me, you do not want to deal with the stuff yourself. It is more than a full time job.

Utility rates for commercial buildings are also higher than residential. Power, water, trash, sewer, these fees have been going up the past few years at an alarming rate.

There are more but I think this covers the basics. I’ll see if I can remember more (after a huge night of binge drinking).

[surveyor]

commercial

Commercial properties are a very difficult investment to work with and you should really tread into it very carefully. I will at least share what I’ve learned (some of it the hard way lol).

Apartments with 5 or more units are considered commercial.

It is VERY difficult to get funding for commercial properties. Because they are not usually financed by the government, they often want you to have an LTV of around 25% or even 40%. Their amortizations are also not 30 year fixes like residential properties. The amortizations they have run around 20 year or so. If you are analyzing a property, put that into your calculations. Interest rates are also much higher and can run up to 10%. Make sure you at least know what loan you can get and what the loan parameters are because if you are using residential loan rates for commercial, you will be in for a rude awakening.

Never never never go into an owner financed loan. If you can’t get funding through a commercial lender, don’t buy the property in the first place.

The value of a commercial property is determined by its income, net income, but do realize that you have to study the income/expenses statement really closely because numbers can be manipulated. There are three forms of appraisal methods, and for commercial, the banks will decide to lend to you using the income/net income method. However, most people try to sell you the property based on comparative value.

Even the vacancy rate can be tampered with, the owner may say that it is 100% occupied, but they may have made deals with the tenants to stay there for free or for a reduced rent.

Repairs, maintenances, and fees for a commercial property are much higher than a residential property and many of them do not show up on the expenses statement often because they are deemed “one-time” only expenses. Property taxes are also a big deal because most municipalities are not as eager to lower the assessment for you as compared to residential. Also, they will try to raise your assessments as often as they can.

For most commercial properties, you will need to hire a property manager. Believe me, you do not want to deal with the stuff yourself. It is more than a full time job.

Utility rates for commercial buildings are also higher than residential. Power, water, trash, sewer, these fees have been going up the past few years at an alarming rate.

There are more but I think this covers the basics. I’ll see if I can remember more (after a huge night of binge drinking).

[surveyor]

commercial

Commercial properties are a very difficult investment to work with and you should really tread into it very carefully. I will at least share what I’ve learned (some of it the hard way lol).

Apartments with 5 or more units are considered commercial.

It is VERY difficult to get funding for commercial properties. Because they are not usually financed by the government, they often want you to have an LTV of around 25% or even 40%. Their amortizations are also not 30 year fixes like residential properties. The amortizations they have run around 20 year or so. If you are analyzing a property, put that into your calculations. Interest rates are also much higher and can run up to 10%. Make sure you at least know what loan you can get and what the loan parameters are because if you are using residential loan rates for commercial, you will be in for a rude awakening.

Never never never go into an owner financed loan. If you can’t get funding through a commercial lender, don’t buy the property in the first place.

The value of a commercial property is determined by its income, net income, but do realize that you have to study the income/expenses statement really closely because numbers can be manipulated. There are three forms of appraisal methods, and for commercial, the banks will decide to lend to you using the income/net income method. However, most people try to sell you the property based on comparative value.

Even the vacancy rate can be tampered with, the owner may say that it is 100% occupied, but they may have made deals with the tenants to stay there for free or for a reduced rent.

Repairs, maintenances, and fees for a commercial property are much higher than a residential property and many of them do not show up on the expenses statement often because they are deemed “one-time” only expenses. Property taxes are also a big deal because most municipalities are not as eager to lower the assessment for you as compared to residential. Also, they will try to raise your assessments as often as they can.

For most commercial properties, you will need to hire a property manager. Believe me, you do not want to deal with the stuff yourself. It is more than a full time job.

Utility rates for commercial buildings are also higher than residential. Power, water, trash, sewer, these fees have been going up the past few years at an alarming rate.

There are more but I think this covers the basics. I’ll see if I can remember more (after a huge night of binge drinking).

[surveyor]

commercial

Commercial properties are a very difficult investment to work with and you should really tread into it very carefully. I will at least share what I’ve learned (some of it the hard way lol).

Apartments with 5 or more units are considered commercial.

It is VERY difficult to get funding for commercial properties. Because they are not usually financed by the government, they often want you to have an LTV of around 25% or even 40%. Their amortizations are also not 30 year fixes like residential properties. The amortizations they have run around 20 year or so. If you are analyzing a property, put that into your calculations. Interest rates are also much higher and can run up to 10%. Make sure you at least know what loan you can get and what the loan parameters are because if you are using residential loan rates for commercial, you will be in for a rude awakening.

Never never never go into an owner financed loan. If you can’t get funding through a commercial lender, don’t buy the property in the first place.

The value of a commercial property is determined by its income, net income, but do realize that you have to study the income/expenses statement really closely because numbers can be manipulated. There are three forms of appraisal methods, and for commercial, the banks will decide to lend to you using the income/net income method. However, most people try to sell you the property based on comparative value.

Even the vacancy rate can be tampered with, the owner may say that it is 100% occupied, but they may have made deals with the tenants to stay there for free or for a reduced rent.

Repairs, maintenances, and fees for a commercial property are much higher than a residential property and many of them do not show up on the expenses statement often because they are deemed “one-time” only expenses. Property taxes are also a big deal because most municipalities are not as eager to lower the assessment for you as compared to residential. Also, they will try to raise your assessments as often as they can.

For most commercial properties, you will need to hire a property manager. Believe me, you do not want to deal with the stuff yourself. It is more than a full time job.

Utility rates for commercial buildings are also higher than residential. Power, water, trash, sewer, these fees have been going up the past few years at an alarming rate.

There are more but I think this covers the basics. I’ll see if I can remember more (after a huge night of binge drinking).

[surveyor]

commercial

Commercial properties are a very difficult investment to work with and you should really tread into it very carefully. I will at least share what I’ve learned (some of it the hard way lol).

Apartments with 5 or more units are considered commercial.

It is VERY difficult to get funding for commercial properties. Because they are not usually financed by the government, they often want you to have an LTV of around 25% or even 40%. Their amortizations are also not 30 year fixes like residential properties. The amortizations they have run around 20 year or so. If you are analyzing a property, put that into your calculations. Interest rates are also much higher and can run up to 10%. Make sure you at least know what loan you can get and what the loan parameters are because if you are using residential loan rates for commercial, you will be in for a rude awakening.

Never never never go into an owner financed loan. If you can’t get funding through a commercial lender, don’t buy the property in the first place.

The value of a commercial property is determined by its income, net income, but do realize that you have to study the income/expenses statement really closely because numbers can be manipulated. There are three forms of appraisal methods, and for commercial, the banks will decide to lend to you using the income/net income method. However, most people try to sell you the property based on comparative value.

Even the vacancy rate can be tampered with, the owner may say that it is 100% occupied, but they may have made deals with the tenants to stay there for free or for a reduced rent.

Repairs, maintenances, and fees for a commercial property are much higher than a residential property and many of them do not show up on the expenses statement often because they are deemed “one-time” only expenses. Property taxes are also a big deal because most municipalities are not as eager to lower the assessment for you as compared to residential. Also, they will try to raise your assessments as often as they can.

For most commercial properties, you will need to hire a property manager. Believe me, you do not want to deal with the stuff yourself. It is more than a full time job.

Utility rates for commercial buildings are also higher than residential. Power, water, trash, sewer, these fees have been going up the past few years at an alarming rate.

There are more but I think this covers the basics. I’ll see if I can remember more (after a huge night of binge drinking).

[SK in CV]

Nice comment surveyor. Mostly stuff that is consistent with my experience, though much of it only applies to a piece of the commercial real estate market.

But I’m totally confused by this.

[quote=surveyor]Never never never go into an owner financed loan. If you can’t get funding through a commercial lender, don’t buy the property in the first place.

[/quote]

Why not? if the terms are right, once a loan is made, contract signed and recorded, 100% of the leverage is on the side of the borrower. What do you see as the downside?

[SK in CV]

Nice comment surveyor. Mostly stuff that is consistent with my experience, though much of it only applies to a piece of the commercial real estate market.

But I’m totally confused by this.

[quote=surveyor]Never never never go into an owner financed loan. If you can’t get funding through a commercial lender, don’t buy the property in the first place.

[/quote]

Why not? if the terms are right, once a loan is made, contract signed and recorded, 100% of the leverage is on the side of the borrower. What do you see as the downside?

[SK in CV]

Nice comment surveyor. Mostly stuff that is consistent with my experience, though much of it only applies to a piece of the commercial real estate market.

But I’m totally confused by this.

[quote=surveyor]Never never never go into an owner financed loan. If you can’t get funding through a commercial lender, don’t buy the property in the first place.

[/quote]

Why not? if the terms are right, once a loan is made, contract signed and recorded, 100% of the leverage is on the side of the borrower. What do you see as the downside?

[SK in CV]

Nice comment surveyor. Mostly stuff that is consistent with my experience, though much of it only applies to a piece of the commercial real estate market.

But I’m totally confused by this.

[quote=surveyor]Never never never go into an owner financed loan. If you can’t get funding through a commercial lender, don’t buy the property in the first place.

[/quote]

Why not? if the terms are right, once a loan is made, contract signed and recorded, 100% of the leverage is on the side of the borrower. What do you see as the downside?

[Author]

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