Investor Education
The information below is taken from various books, presentations, professional training sources for the benefit of our visitors. The information is provided in excerpts and will change periodically.
Why Commercial Real Estate is a Dynamic Investment
All real estate that is not solely used as your personal residence can become commercial in nature. If it produces rental income or is a part of your business, then it is commercial real estate. Commercial real estate is more direct and faster way to build your networth.
Important concepts:
Invested amount = cash + debt + time
Other People's Money
Leveraged Cash Flow
Equity Buildup
Appreciation you can accelate
Management postures 1,2,3,4
1. Do nothing to maintain the property
2. Do very little to maintain the property unless it is actually broken
3. Maintain the property in its original condition
4. Maintain the property in a constant upgrade mode
Supply & Demand
The Seven Dynamics of Commercial Real Estate
1. Ability to produce income
2. High yield through double - dipping
3. Job security
4. Tax shelter
5. Easy-to-create new value
6. Inflation fighter
7. Sell for less than you paid and still make a huge profit
The Three Most Important Words: Use, Location, and Approval
Opening your eyes to the bigger picture is critical in commercial real estate investing. Your real estate invstment will always be tied to its location - there is no doubt about that. Its value will always be affected by this location as well. However, there are other, perhaps more important elements to consider. The trio of location, use, and approval are the three most important words in real estate.
Access to any property can be the most critical aspect to maximizing its use. Too often access is taken for granted, when in reality it is not uncommon for two properties across from each other at an intersection to have quite different degrees of accessibility, by both pedestrian and vehicular traffic. Clearly, with all other elements equal, the property with greater ease of access will have a higher value than one with more limited access. Difficult access can render a property valueless to a user dependent on good access for clientele and employees.
Demographic data will tell you the economic and physical makeup of a community: the number of families, a breakdown of earning power and age, areas of concentration, growth trends, and so on. Such information can be important for ascertaining whether a prospective tenant will be successful in a built-to-suit situation where you are the builder or owner of the resulting building. (Midwest Strategies provides market study reports for individual and business investors.)
Traffic counts are made by the local authority that deals with the roads that provide access to any property. These counts are available to the public, often at no charge or at a nominal charge if the report is extensive.
A plat is a document that contains a recorded and approved drawing of a tract of land. It may be an entire subdivision, or a single parcel of land that was broken off from a former subdivision or from a vacant tract that was itself unplatted. the document will contain varying amounts of information, depending on the rules and regulations of the city, county, or state in which the land is located. Almost always the plat will include the following basic information:
- Legal description
- Property dimensions
- Plat items
- Plat notes
- Date of the plat
Source: "Commercial Real Estate Investing" by Jack Cummings, John Wiley & Sons, Inc, 2005 |
