Author Archive
Sep
06
Triple Net Leases Allow Tenants More Freedom and Owners More Profit
Posted by: | CommentsTriple net leases are becoming more popular in the Houston area. Here, they are obviously less expensive for the property owner, and can allow a truly passive form of income for the property owner. With one of Houston’s triple net leases, a property owner can be hands off, which is exactly what more and more property owners are looking for. Of course, there are down sides to them as well.
Most triple net leases give control of the property to the lessee, which can be either a good deal or a bad deal, depending on who the property owner is dealing with. They provision the renter to pay for maintenance as well as other costs associated to property ownership.
Before ever purchasing one, potential owners should have these leases looked over by a Houston real estate attorney to be assured that the property owner can still control structural changes to the property as well as enforce the general maintenance that the property requires.
While a property owner can simply go online and download a lease agreement, these leases in particular can work against the owner of the property. Legally speaking, it is very difficult for a property owner to deny liability for destruction of property, especially if they are being held accountable by a third party. A well written, clear and concise lease can help avert such situations.
Every triple net lease property for sale in Houston is going to vary at least in structural repair requirements. Many of them require the tenant to pay for everything except roof repairs while some require everything including roof repairs. A bond clause requires the tenant to pay for the property even if the property doesn’t exist anymore, such as the loss resulting from fire, flood, earthquake, or other natural disasters.
Triple net leases are a hard sell for potential tenants, regardless of whether you are referring to residential tenants or commercial tenants, and there has to be a motivation for the tenant. There is an exceptional amount of negotiation associated with them, and potential purchasers should yield to caution when entering a pre-existing lease.
Leases for sale with huge profit potential can be difficult to find. They take a bit of cultivation, and a bit of finessing to create the perfect situation. If the tenant of a triple net lease is not worthy of the sale, the sale will often never materialize.
Both the landlord and the tenant can benefit from a triple net lease and can experience great frustration from them too. Keeping in mind that the tenant who agrees to one needs to get something out of it, purchase of a triple net lease in Houston can lead to more pitfalls than necessary if the situation hasn’t been scrutinized.
In most cases, residential leases in Texas are rare. It costs too much money. The only notable exception to that rule refers to some apartment buildings, usually units that house between 6 and 12 units. These can be an acceptable alternative to home ownership under the right circumstances. The vast majority of triple net properties in the area are commercial properties.
Finding an ideal triple net lease for sale in Houston or the surrounding area can be considered an impossible task. Because they are unique between landlord and tenant, most ideal situations are created rather than purchased. Those leases which are up for sale are often good situations, but a potential owner is hard pressed to find a perfectly ideal situation unless they have created it for themselves.
Creating one and then selling it can be ideal for those looking for a high end real estate business. Some of these leases are signed for as long as 50 years, offering up some very tempting terms for a potential buyer. After all, provided that the lease is signed for an extended period of time, the lease can provide a significant income-expense ratio for the owner. Additionally, the resale of one can also bring in revenue.
Anyone considering purchasing a triple net lease for sale in Houston should never consider the purchase without the assistance of an attorney for the simple reason that these leases are personalized per situation.
A great find will still be a great find after a lawyer looks over the lease. A good find can turn into a great find after an attorney evaluates the lease. Then of course, a lawyer can save you much headache and pain when it comes to a triple net lease that shouldn’t be touched with a single dollar.
Sell and Rent Back
Sep
05
How to Choose the Right Commercial Mortgage Broker
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Commercial mortgage brokerage is an elaborate process that involves the performing of an extensive series of tasks and building a solid broker client relationship so that all the parties involved can benefit from the collaboration. With the help of an experienced and dedicated commercial mortgage broker, the borrower benefits from professional assistance in structuring the deal, while the lender benefits from better exposure and credibility and has the opportunity to integrate in a prominent, reputed group of lenders. Commercial mortgage brokers play major roles in closing the right deals, so whether you are looking for an appropriate commercial loan or you are interested in lending funds, it is crucial to collaborate with an experienced, reputed and reliable broker in order to be provided with professional assistance.
A highly competitive commercial mortgage broker should have in-depth experience in the field and advanced counseling, administrative, analytical and processing abilities, vital traits in commercial mortgage brokerage. As a borrower, you should look for a commercial mortgage broker who collaborates with a large number of reliable lenders; this way the chances of closing the perfect deal are substantially increased.
Also, it is advisable to employ the services of a mortgage brokerage company that is well-defined in the market, a company powered by numerous specialized teams of professionals, able to efficiently service the borrower’s needs. Considering the fact that the process of closing a commercial mortgage deal involves plenty of work, you should ensure that the commercial mortgage brokerage company of your choice is appropriately staffed to handle all the required paperwork and other important aspects. From the lender’s perspective, the right commercial mortgage broker should have a high position in the market and as many active collaborations with major lenders as possible.
To make sure that you will find a commercial mortgage broker who has the required expertise and the right professional skills, it is advisable to perform an elaborate analysis of the market, relying on various sources: media (you can rapidly find a reliable commercial mortgage brokerage company by browsing specialized websites on the Internet or by reviewing newspaper articles), private sources (you can obtain recommendations from professionals who constantly collaborate with commercial mortgage brokerage companies real estate lawyers and accountants, for instance) and face-to-face meeting (a great way of finding more things about a certain company is to schedule a meeting with that company’s representatives in order to provide you with answers for your questions regarding credentials, professional achievements and specific policies.
When looking for the best commercial mortgage broker for your business’ needs, it is advisable not to make hasty decisions. You should take your time and carefully investigate the market in order to find the right broker. By performing an in-depth research and analyzing all possibilities, your chances of identifying the best commercial mortgage broker are substantially increased and this way you will be able to get the most out of your next commercial mortgage transaction.
For more resources regarding more Commercial Mortgage Broker subjects we recommend you clicking this link.
Rent Back
Sep
04
Commercial Mortgages
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(c) 2008 Donna Elizabeth Lewczuk
Commercial mortgages are available through banks, commercial mortgage companies and private lenders. Commercial mortgage rates vary as widely as residential mortgage rates. Traditional banks offer some very low rates. However, due to their restrictive lending criteria, they are prevented from making commercial mortgages for many kinds of commercial properties. Gas stations, with or without convenience stores, for example, can be difficult to obtain commercial mortgages for. Commercial mortgages can also be difficult to obtain from traditional banks if you don’t have excellent personal and business credit scores.
Hard money commercial mortgages are also available through private lenders. Unlike traditional banks, private lenders have more flexible lending criteria. Also known as hard money lenders, private commercial mortgage companies focus more on the current value of a commercial property than on your personal financial package.
Private lenders are often able to fund a commercial mortgage if there is a clear picture of how the loan will be paid back. When determining whether to fund a commercial mortgage, private lenders will often look at the ratio of income to operating expenses. Unless a borrower has repeated defaults and bankruptcies, private lenders are not as concerned if the borrower has less than perfect credit.
When applying for a commercial mortgage, be prepared to provide your commercial mortgage company, be it a bank or a hard money private commercial mortgage lender, with the following:
- A completed standard commercial mortgage loan application, which includes a personal and business balance sheet
- A description of the use of proceeds of the commercial mortgage you are seeking
- A description of the property
- The current value/purchase price of the property
- The cost of improvements you will make to the property
- An estimate of the property’s value after improvements
- A repayment plan for the commercial mortgage/hard money loan
- For a hard money loan, provide an exit strategy for the commercial mortgage
- will you refinance this commercial mortgage with a traditional bank after making improvements or alterations to the existing property or some other scenario?
Owners considering a commercial mortgage refinance will find many unique loan programs. Specialists of commercial mortgage refinancing offer some of the best loan options available, most of which local banks simply don’t have. Refinancing your commercial mortgage is not an act exclusively reserved for the time your commercial mortgage matures. There are some great reasons for refinancing your commercial mortgage prior to this (see the article “Why a Commercial Equity Loan”).
Now, given the current the state of the capital markets its more important than ever to work with seasoned professionals. Lender guidelines and underwriting parameters are changing rapidly as banks try to protect themselves. Options for commercial mortgage refinances, though still broad, are getting harder to determine and close. Just as important it is key to know not only which lenders are offering the lowest rate and fees but which are still actively funding loans. A good, seasoned mortgage professional will know who these lenders are.
Sell and Rent Back
Sep
03
Property Title Insurance in the Offing
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Bajaj Allianz, ICICI Lombard in talks with American company to launch the product.
Property transactions in India will soon have an insurance cover to fall back in case something goes wrong in the deal. The country’s two large private sector insurers, ICICI Lombard General Insurance and Bajaj Allianz General, are planning to launch title insurance covers this year.
Title insurance is a cover that protects a potential owner of a property against loss from defects in title. The policy is a retrospective one, where the insured is protected against losses arising from the events that occurred prior to the date of issuing the policy. Globally, the policy is bought by investors, occupiers and financiers.
At present, none of the property transactions, be it large acquisitions or a simple sale of a land or a flat, is covered through an insurance policy by an Indian insurer.
The reason is that Indian insurance companies do not have the underwriting expertise to offer title insurance products. Indian insurers require reinsurance support to be able to offer the product.
Both Bajaj Allianz and ICICI Lombard are in talks with First American Title Insurance Company (FATIC), which will be offering reinsurance support for Indian insurers to offer the product.
FATIC is the largest title insurer globally, with a revenue of $8.4 billion in 2006.
Says Swaraj Krishnan, CEO, Bajaj Allianz General Insurance, “We have had a preliminary discussion with First American Title Insurance. We have asked them to give us the product details. We will be doing a market study, verifying the titles and will file the product with the regulator in the coming months.”
The value of the title insurance cover will be equal to the price of land that has to be acquired. The premium rates will be a function of the value of property, the nature of transaction, which means the size of the purchase, the past history of the real estate property, costs relating to title search and the legalities involved in the title search.
Howden Insurance Brokers is also in talks with real estate developers, financial institutions, law firms, insurance companies and reinsurers to culminate into the next few insurance policies being sold.
Says Anoop Mathur, vice-president of Howden Insurance Brokers, “The value at risk has grown proportionally as the land cost has increased for the real estate developers. Title insurance makes a project bankable and saleable to customers.”
According to Akshaya Kumar, chairman, Park Lane Property Advisors, consultants during due diligence discover 20-30 per cent cases have title defects in them.
Property consultants believe that the availability of title insurance products will boost private equity investment in Indian real estate since most of the institutions are very particular about clear titles.
According to accounting and business consultancy firm Grant Thornton India, private equity firms have invested nearly Rs 25,000 crore in Indian real estate and infrastructure in 2007and, according to industry estimates, the investments are set to grow in the coming year.
“Institutions do not buy even if they have the slightest doubt about the titles. More private equity funds will flow in the Indian real estate if title insurance products are available in the country,” says Anuj Puri, chairman, Jones Lang LaSalle Meghraj, an international property consultant.
Adds Anshuman Magazine, managing director, CB Richard Ellis, South Asia: “Title insurance products give a lot of comfort to international investors to invest their funds in the property markets of developing markets such as India. Since these investors do not invest directly and do joint ventures with Indian developers, the local partners will take care of title issues. But we have also seen foreign investors demanding these products before signing the agreements to develop properties.”
According to Mathur of Howden Insurance Brokers, the two Bills — Land Acquisition Amendment Bill, which has been introduced last month in the Lok Sabha, and the Resettlement and Rehabilitation Bill – will make corporates acquiring land for SEZ or other reasons buy title insurance covers.
Explains Mathur, “After the amendement of the Land Acquisition Act, 1984, the government will not be able to acquire land and make it available for companies. As a result, corporates will have to acquire the land directly from land owners at a higher price. In such a scenario, title insurance would protect project developers from any financial loss arising from any defects in title to real property.”
There are two types of title insurance policies: the owners’ policy and the lenders’ policy. Owners’ title insurance is bought by a buyer of the property. It protects the buyer from all loss or defects in a title.
On the other hand, the lenders’ title insurance is bought by lenders such as banks and financial institutions. Experience in other global markets is that all institutional lenders require title insurance to protect their interests in the collateral of loans secured in real estate.
The policy amount decreases each year in proportion to the loan paid off each year. The policy has a provision for defence cost if a title to the real property is challenged in a court of law up to the actual amount of indemnity provided under the policy.
Land records in the country are not computerised and are not easily accessible.
The deeds registration system is not guaranteed by the state government and is inconclusive; typically leaving buyers with 30 years of title deeds to assess. Besides, the level of fraud in Indian real estate transactions is very significant; and the legal process is slow.
According to insurance officials, four to five foreign title insurance companies are keen to do business in India on this product. They may set up a dedicated company in India or could provide reinsurance support to Indian insurers to offer the policy for this line of business.
Quick Property Sale
Sep
02
Breaking into the Real Estate Market – Commercial or Residential?
Posted by: | CommentsWhile the current economic climate might not make many run to the real estate market for their top career choice, for some, it can be a lucrative business. If you’ve decided to enter the real estate business consider the varying specialties that might help you to succeed. You may want to start as a commercial real estate agent, someone who specializes in selling commercial real estate. You may also consider becoming an appraiser, the person who determines the value of the home being bought or sold; a broker, who assists buyers with the actual transaction; developer, a person who improves land by adding or replacing or fixing up buildings; property management, someone who manages the property for an owner. With all these choices when becoming a real estate agent you are bound to find something that will be the perfect fit.
When deciding whether or not you’d like to do commercial or residential real estate consider these major differences. Obviously, commercial real estate agent will focus around office space or other types of commercial properties that are mostly income producing. Most homes will simply be by their owners. Commercial real estate can encompass leasing office space, owning an apartment complex or selling real property to name a few of the areas that you might be working in.
It’s also important to note that the paperwork involved is very different between the two areas of real estate. Residential deals are given much more consumer protection than commercial deals. Disclosures common to residential are not necessarily required. Commercial real estate buyers are going to need to ask about zoning laws, whether or not the area is suitable for their business, among other business decisions. As a real estate agent you’re going to need to have the skills necessary to meet different needs for the consumer.
No matter the type of real estate you decide to specialize in, each requires a different level of skill and a different level of knowledge. The type of person you are going to be dealing with in residential real estate is going to be quite different than the person you might deal with in a commercial transaction. Consider the types of customers you would most like to work with when comparing the two. Consider the types of goals you have and the types of needs you like to meet for others. It can be exciting helping the first time homebuyer discover and purchase the home of their dreams. Does this get you more passionate than helping the savvy business owner find the perfect space for leasing, a space that can help them meet their business needs. While there are two different goals, helping people meet those goals can be very rewarding.
Committing to becoming a residential real estate agent or a commercial real estate agent can be a big step. Determining that you want to go into real estate can be a difficult decision, especially when the current real estate climate is shaky. However, in the end, it can be a very rewarding career choice and a very lucrative one, depending on the type of real estate agent you become and the area in which you live. If you don’t think commercial or residential real estate is the right move then consider the other types of specialties that might be just the right fit. You have to spend a lot of time in your career so make sure that you are making a choice that is going to be in your best interest for the long term.
Sell and Rent Back
Sep
01
Commercial Property “Value Add” Investing Secrets
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The concept of the “Value Add” property is central to success as an individual Commercial Property Investor.
“Value Add” means a property where you can do something as the Property Owner that allows you to increase the Net Operating Income (NOI).
- You “Add Value” to the property
- This drives up the NOI
- Which serves to “Add Value” to the price of the property at the sale.
The Added Value is reflected in your Profits over the life of the project.
If you look at these three bullet points carefully you will see they follow the age old rule: “You must sow before you reap.” You have to put Value In before you can pull Value Out.
And there are two MAJOR keys to success with a Value Add Property.
1) The Property Has To Have Problems You Can Fix.
Classic Value Add Properties are ones with Problems. The bigger the problems the larger the opportunity for adding value and realizing profits.
The obvious example is the abandoned, half burned down wreck of an 80 unit apartment complex. When you take it from zero NOI to 80% occupied and looking good … you will realize a major profit at sale.
More typical examples are the 1980’s complex with a 25% vacancy rate in serious need of a makeover.
In every case the problems have to be ones you can fix. An inexpensive property with lots of opportunity to add value will lose you money if you and your property manager can’t fix the issues that beat down the previous owner.
2) You Must Buy At The Right Price.
In this world where every agent and seller wants your purchase price to be based on on proforma – what the property’s NOI would be if it were fully occupied – the biggest danger in Value Add Investing is overpaying for the property.
Remember to always buy on actual numbers.
No matter how much the seller points out to you that this property’s NOI would be $100K/month if it were fully rented … if the NOI is now just$60K/month … that is what you pay for AND you get an additional discount from Market Cap because of the amount of rehab needed.
Just think… If you overpay for the property you have to add value just to get your money back at the sale. Drive a hard bargain. Use Due Diligence to ferret out every issue that will cost money to address and use this information to drive the price down or get other favorable terms.
Your Secret Weapon here is … Your Property Manager
A top notch local Property Manager knows what problems they can fix and what it will cost in time and dollars. They may even know this particular property and its historical issues.
If you don’t have a Local Property Manager on board who is confident in your ability to address the property’s problems and make a profit … Don’t Do the Deal !
And remember two more things about the concept of “Value Add”
1) You can add value to ANY Property.
Just think of all the ways you could possibly increase the NOI. What would you have to do to the property to give you a high probability of …
- Raising rents
- Raising occupancy
- Developing additional sources of income (RUBS, etc.)
- Bringing in higher quality tenants and decreasing turnover
- Lowering expenses (Utility contract, lower concessions)
2) Value Add Properties have Sellers in Distress.
These Seller’s are not selling for a profit. They are in pain and wanting out and can be very flexible. This is the property where you can often get an Owner Carry or other favorable terms on the purchase.
Here’s to your investing success.
Quick House Sale
Aug
31
Advice for Commercial Mortgage Brokers
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The other day a fight commercial mortgage broker wrote to me and begged me for advice. He was not the closure of one thing, and he was scared to death. This is what I told him:
Now stick exclusively to small business loans permanent. I do not work at just over $ 3 million unless you have a special relationship with the borrower (former client). Small business loans are those that close and feed his family.
Do not waste time working on large Commercial mortgage loan. Large loans not just close.
Do not waste precious time working on the construction loan. The world has a lot more homes and commercial buildings at the moment.
Never waste a minute on international loans. We never close. Ever. Ever!
Read my blog every day for suggestions.
Create a database of reference sources and send a periodic newsletter.
While it is not written in newsletters, subscribe to the newsletter of my service.
Learn how to create your loan packages using PDF’s.
Start driving the purchase of commercial mortgage Loan.
Get the signing of an agreement for payment on each front.
Do not waste valuable time marketing job offers with a low probability of closing.
Maintain 15 to 18 loans in process at all times. You only about 30%.
Only work with commercial mortgage loan officers b.
Becoming friends with key officials of commercial mortgage loan to various banks.
Need a business loan right now. Apply to 750 commercial mortgage lenders in just four minutes with a simple mini application and commercial mortgage Loan’s free by http://www.pro-bargainhunter.com.
Quick House Sale
Aug
30
Dubai Properties Exhibited at Mumbai Extravaganza Targeting Indian Investor
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Leading master real estate developer Dubai Properties has participated at the premium luxury show ‘Mumbai Extravaganza 2008’ in Mumbai, India to showcase its latest portfolio of realty developments including the latest to be announced ‘Mudon’ project, to an elite audience of high net worth visitors and top tier conglomerates.
Mohamed Binbrek, CEO, Dubai Properties, said, “Mumbai Extravaganza gave us an opportunity to present investors with instant information on the latest developments from Dubai Properties, as well as introduce our latest project launches to a new market.
Indian nationals are amongst the top investors within the booming real estate market in Dubai”.
In 2007, Indian Nationals spent Dh4 billion on real estate in Dubai and over the past 10 years, they have spent a total of Dh6.5 Billion on the Dubai property sector.
While the majority of these buyers were Indians living within the UAE, 10% of them were living in India or otherwise, proving the existence of a substantial demand for Dubai real estate from outside the UAE.
Quick Property Sale
Aug
29
Property Sales Plunge to Lowest Level in 30 Years
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Property sales are at their lowest level since 1978, according to the latest figures from the Royal Society of Chartered Surveyors.
Estate agents all over the UK reported property sales down for November – with most selling only 10 properties in the three-month period leading up to the survey – that works out at less than one a week..
Most estate agents reported having large numbers of houses for sale on their books – and the good news that 14% more prospective buyers signing up this quarter than last.
Sales were double the rate at the start of 2008, before the credit crunch started to drive prices down due to buyers facing difficulties in raising mortgages.
“Many are starting to see the current market as an opportunity to purchase a previously unaffordable property despite the worsening economic picture,” said RICS spokesman Jeremy Leaf.
“Unless people feel relatively confident about their job prospects, they’re unlikely to even try to obtain mortgage finance unless of course trading down or seeking to release capital.”
“Sellers still have to accept the inevitable fact that house prices are falling and re-price their property to suit current market conditions.”
“The rise in interest reflects both the drop in asking prices and recent cuts in interest rates.”
The lowest level of sales in the past three months was in London, with just seven homes per estate agent, followed by Wales and East Anglia.
With sales still slumping there has been a continued downward pressure on prices.
RICS found that 76.5% more of its members had seen prices fall locally than rise, only slightly better than the previous months’ negative balance of 81%.
Both the Nationwide and Halifax, two of the UK’s largest mortgage lenders have also recently reported falling house prices in November. The Nationwide index showed prices down at 0.4% and the Halifax down at 2.6%. The variance is due to different sampling methods.
This article was written by eCommerce Associates for Bank — Accounts and our Finance Blog
Sell House Quick
Aug
28
Negotiating A Commercial Property Lease In A Rising Market
Posted by: | CommentsThe 90’s was a golden decade for tenants & tenant representatives. Establishing leverage over your landlord was easy because office vacancies were steadily increasing and landlords were under the impression that if they didn’t do a deal today, the market would continue to erode. As a result, landlords were extremely aggressive offering large incentive packages that provided money for fitouts, & huge rent free periods. In short, getting a landlord to negotiate an existing lease was not a difficult job.
However, over the last few years the market has begun to change with steadily decreasing vacancies. Negotiations and how a tenant should approach their landlord have been forced to change also. There are two main reasons for change:
1) Because of smaller lease incentives, lease assumptions have decreased dramatically. Tenants trying to renegotiate a lease with several years left on the existing obligations lost the leverage that existed in the 90’s when they could threaten to leave for another building if the landlord didn’t restructure his lease.
2) Effective rental rates (the profit a landlord makes after netting out all costs of his concession package) are increasing. Many landlords would rather wait in what they anticipate to be a more favorable market for ownership than to restructure an existing lease today.
Although the above items have changed the face of negotiations, it is still a tenants market and there is no reason for tenants to simply accept market rates and above. As the market has changed, negotiating tactics must change also.
Here is some advice when you want to renegotiate your existing lease:
1. Know your landlord. As a tenant it is imperative that you know the goals and objectives of your landlords. Is the owner a passive holder of the premises & therefore less likely to give large incentives?
2. Be flexible. Sometimes landlords are not opposed to renegotiating a deal, they simply don’t like the structure and shape of the deal at hand. So be flexible so the deal is attractive to both parties.
3. Geographically expand your horizons. Some sub markets might be tight (i.e. Sydney A grade space) whereas the North Shore may have the capacity to deal with large space takers competitively. Smart tenants can effectively leverage various sub markets to suit their needs.
4. Seek creative solutions. Despite low incentives, one way to get a low cost alternative to your current premises, is to find space that is already fitted out, in addition try to find tenants who would be interested in your space early to avoid any make goods requirements.
5. Look to the future. Just because your lease is not up within the 12 months does not mean the owner wouldn’t be prepared to cut a deal now. In addition, you could seek an expression of interest campaign to tender your future requirements.
A tenants negotiating tactics and strategy must change with the market. Deals can be done now, more than ever, a tenant must be creative and understand the motivations of the other side when at the negotiating table.
Real Estate Professionals
