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Feb 16
0

Commercial Property Values

By | Real Estate Investing | No Comments

 
 

When a commercial property is for sale, you will want to determine the value to see if the list price is accurate. It’s important to not assume that the list price is the value of the property. Here are the steps to figure out commercial property values using the capitalization rate method.

How to Determine Commercial Property Values

The value of any commercial real estate is based on the amount of net operating income the property creates each year.

Each additional dollar of annual income increases the value of the property by roughly ten dollars, depending on where the property is located, and the age of the property. This extra net income can come from either receiving additional revenue in rents, or from reducing expenses by managing the property more efficiently.

How to Determine Income and Expenses for a Commercial Property

You will want to look at a rent roll to determine the income of a commercial property. The rent roll is a list of the rental income for each unit such as an apartment, self storage unit, mobile home lot or office. Be sure to look at the rent roll and not the pro-forma rent roll. The reason is that a pro-forma rent roll shows an expectation of the rent in future years and not the current rent.

Common commercial real estate expenses include real estate and personal property taxes, property insurance, commercial mortgage, management fees (on or off-site), repairs and maintenance, utilities, and other miscellaneous expenses (accounting, legal, etc.). You will want to consider the age of the property and consider any unexpected expenses you may incur with maintenance.

Keep in mind that you are trying to determine the actual amount it will cost you to operate the property, and not the seller’s current expenses. An owner may try to emphasize the income generated and minimize the operating costs involved in order to sell the property. They may also have unnecessary expenses that you would cut if you were the owner of the property.

Once you have identified the income and expenses and calculated a number for net operating income, you will want to look at the capitalization rate.

Capitalization Rates

A capitalization rate or “cap rate” is the ratio of Net Operating Income (NOI) to property asset value. For example, if a property was listed for $1,000,000 and generated an NOI of $100,000, then the cap rate would be $100,000/$1,000,000, or 10%.

The final step of the process is to divide the net operating income by the cap rate.

Don’t Skip This Process when Buying a Property

Since buying commercial real estate is a large investment, it is important to not overlook this step when you are buying a property. If you assume that the list price is the value of the property, you may overlook a property that you deem too expensive or overpay for a property. By spending time to go through the process of calculating commercial property values, you will ensure that you have the accurate information to make an informed investment decision.

 
 

Jan 02
1

Rental Property Management Tips

By | Property Management | No Comments

Managing your rental properties can be a challenge considering the fact that it involves a great amount of patience and requires you to make the right decisions to minimize headaches and avoid pitfalls. Affordable real estate prices have lead to an increase in the number of investors, and so have increased the responsibility of rental property management professionals.
It can be tough to be a good landlord. You will have to face various types of tenants; some will be easy going, while others will be nerve-racking. You’ll be running after the tenants who delay payments as well responsibly dealing with maintenance issues.

Rental Property Management Tips
Here are a few tips that will help you to manage your portfolio.

• You will have to ensure that you have measures in place to deal with any maintenance issues or repairs, sometimes immediately. Keep a good contractor on standby so that you can deal with such issues on a timely basis.

• Once a tenant is evicted, you must ensure that you renovate the property as quickly as possible and with the bare minimum expenses. The longer the renovation takes, the more you’ll skip on money earning opportunities, so make sure you get it done quickly.

• Finding tenants is not an easy task. You’ll have to take measures to advertise in classified ads, signs and through flyers.

• One error that many investors make in managing their rental property is that they have a lack of communication with their tenants. You should keep in touch with your tenants as this is important for building a strong relationship.

• Without a doubt, no one can care for your property like you will. This is why regular property inspections are important. Keep an eye on your property to make sure it’s being taken care of.

• There are various federal and provincial laws that outline your responsibilities and liabilities. If a problem arises regarding these, ignorance of such laws will further aggravate the situation. This is why it’s essential for you to read them thoroughly; after all, spending 10 hours reading is better than 10 hours in court.

• Joining a Landlords’ Association can provide you with lots of experience and guidance as well as copies of sample leases, laws and regulations, lists of good lawyers, contractors and inspectors.

• Ensure you have the right insurance in place. An insurance professional can help you select the right package for your specific rental property.

• Get acquainted with a lawyer and a commercial mortgage broker – you may need legal assistance or help with commercial mortgages.

• While it is understandable that you will be expecting a positive cash flow, be reasonable with your expectations.

• Don’t forget to run credit checks on your prospective tenants. It is not recommended to rush in filling vacant properties as it is better to have an empty property than have a tenant that defaults on their payments.

May 20
0

Waste Management Sustainability Services

By | Green Initiatives | No Comments

 

Before opting for waste management sustainability services, it is important to analyze what type of waste your building generates. Offices primarily generate great amounts of waste paper, whereas other commercial buildings will have specific types of wastes generated depending on the nature of the building. Effective waste management can greatly reduce operational building expenses.
 
The question is, how can waste management reduce costs? It is interesting to know that garbage disposal is more expensive than recycling waste, so by recycling, you’re effectively reduce your waste costs.
On the other hand, it can considerably streamline a building’s day-to-day operations. For example, an office building generates a great amount of paper waste. By separating paper from the other waste, you’ll have a small quantity of decay-able waste to handle. Besides, you’ll be doing your part to save the environment.

 

The Process of Waste Management Sustainability Services

One of the major hindrances you’ll have to face as a building manager will be to find the time to put into practice a well-planned waste reduction program. You should know that there are a few simple measures that once taken, can make a big difference.
 
1. First and foremost, you should review what type of waste is generated in your commercial buildings. A quick walk through the waste room will answer this question. What you need to find out is the major component of the waste.
 
2. Various studies that looked into the garbage of an office building found that:
• A lot of paper that was in the waste was recyclable;
• Most of the papers were printed on only one side;
• A large amount of new or barely used stationary items were disposed off.

To reduce waste costs, you should recommend the use of both sides of paper to reduce the waste quantity, as well as setting up a paper recycling system.
 
3. There are numerous ways to implement recycling systems in your commercial buildings. This would require you to have the specific equipment, as well as cooperation from your tenants and the correct training of the cleaning staff.
 
4. Correct labeling of all recycling bins is important. Put these labels on all bins before handing them out to the tenants.
 
5. Educate the tenants regarding the new waste management system through posters and flyers.
 
6. You should consider providing training to the cleaning staff so that they can efficiently sort out recyclable material from other waste.
 
7. As for waste management sustainability services, they offer a balance between quality and cost – the ideal situation would be to have a service that is flexible with great customer service. When signing a new contract, make sure all terms are clear and that there is no element of confusion.
Once the tenants get in the habit of the new recycling system, you’ll be surprised at the decrease in your building’s waste footprint.

 

Apr 28
0

Commercial Building Costs

By | Property Management | No Comments

 
 

Operating a commercial building can have significant monthly expenses. It is a challenge for building managers to reduce these monthly commercial building costs, of which the energy bills comprise a greater proportion. Proper maintenance and energy saving measures can go a long way in bringing down a commercial building’s costs without compromising on the operational efficiency.

Generally, the ratios of operating cost categories to the total operating cost are stable in most parts of the country. Total utilities including electricity, water, steam and natural gas adds up to approximately 25% of the Total Operating Costs, according to the statistics by Institute of Real Estate Management (IREM).

Retro-Commissioning to Reduce Commercial Building Costs

Altering a building’s operational timing can significantly reduce energy consumption. For example, there is no need to run the air conditioner at night, especially when the building is not occupied.

Meanwhile, as the buildings get older, the overall efficiency also starts to decrease. Energy efficient designs cease to be as efficient as they were initially. This is when a retro-commissioning process can go a long way in restoring efficiency to the intended amounts.

Steam Trap Maintenance / Replacement

Steam systems that are poorly maintained are a common issue for old commercial buildings, especially those that rely on larger boiler systems. Such buildings usually have hundreds of steam traps that regulate the condensate inside the steam system. These can get stuck open, thereby returning steam back to the boiler. The ultimate result is an excessive usage of energy.

Professional maintenance crews can work to solve these issues with the steam system and restore efficiency to previously high levels.

Optimization of HVAC Systems

Chillers and boilers consume large amounts of energy in commercial buildings. This can account to as much as 20% of the total energy costs. If your building is located in a cold region, then you’ll have to ensure that boilers work at their peak efficiency. Same goes for buildings in warm climates – their chillers should be replaced with newer, more efficient models.

Controls of Energy Management

Incorrectly programmed controls can make a building owner assume that their building is running as efficiently as possible, whereas the building may be performing poorly. It is wise to replace, or upgrade such components and reprogram the energy management system of the building; thus allowing the building to run at a peak efficiency rating.

Lower Financing Rates

The expenses of a building aren’t only limited to its running costs. Commercial mortgage borrowing costs can also form a significant part of overall operating costs. Partnering with reputable, experienced commercial mortgage brokers can ensure you arrange low cost borrowing while including the added benefit of saving you time negotiating your mortgage terms. Lower financing rates can significantly reduce the overall operating costs for all businesses and help redirect capital to fulfill a company’s individual goals.

 

Dec 23
0

Apartment Flooring

By | Renovations | No Comments

 
When renovating apartments it is important to make decisions that will tend to increase the property’s value, regardless of whether you want to sell it or rent it out. One of the major changes you can do to your apartment is to install the ideal apartment flooring that will considerably increase the rental rates. You may be wondering, what exactly is the ideal type of flooring? The answer is flooring that does a good job of making your apartment look great, is affordable and durable. Read on to find out what type of flooring you should install for your particular apartment.

Value of Your Apartment

Firstly, you should find the market value of your apartment before settling on a specific type of flooring. It would be impractical to spend an exorbitant amount of cash on flooring if the market value itself is of an average value. If you own a high-end apartment, then without a doubt you should opt for the best possible type of flooring that would further add to the value of your property.

High-Value Apartment Flooring

For a property of a high value, you should consider the following flooring:

High-End Wood Flooring
When it comes to wood flooring, nothing comes close to hardwood flooring. In the United States, The National Wood Flooring Association carried out a survey in which they asked real estate agents about the results of installing hardwood floors in their properties. Eighty-two percent stated that hardwood floors increased the value of their property and fetched a greater rent. This supports that installing the right flooring is an excellent way to increase the property cash flow and help pay off any apartment loans that may be registered against the property.

Carpeting
If you prefer going for carpeting, then ensure that you install a high-quality plush carpet rather than a builder’s grade one. Premium quality carpets will increase rental rates of your apartment.

Tiles
Tiling is another option that is both beautiful and durable. For your premium apartment, go for a deluxe stone option, such as marble. Marble comes in various exotic designs and who wouldn’t want to live in an apartment that features exotic Mediterranean-style marble tiles that leave an impression?

Mid-Value Apartment Flooring

You should expect a high turnover rate at mid-value apartments; therefore consider options that are durable and long lasting.

Affordable Wood Flooring
Laminate flooring and engineered hardwood flooring are excellent options that are both affordable and extremely durable. These will not only add beauty to your apartment, but will also go a long way in adding value and getting you handsome rental rates.

Carpeting
It is recommended to avoid carpeting as they can retain odour and get stained easily, especially if you have a high turnover rate with new tenants coming and going. You want to make an investment that will last.

Durable Tiles
Tiles are among the best options for your flooring. You should opt for tiles that are made for use in high traffic areas so that they do not crack or get damaged.

Conclusion

Renovating your apartment flooring is a great way to add value to your property. You should consider the above options when choosing the type of flooring for your apartment. You will be surprised at the increase in value of your property and the rental rates once you’re done with the renovations!

 

Dec 19
0

Commercial Property Purchase Checklist

By | Real Estate Investing | No Comments

 

You have the funds, and you’re all too eager to invest in some commercial property. However, before dishing out such a large sum of money, as a real estate investor, you really need to ascertain the condition of the property in question and what it would take to make repairs. Presented in this article, is a brief commercial property purchase checklist that’ll help you determine what shape your investment is in.
Until and unless you’ve properly researched the commercial property, you shouldn’t jump the gun and enter a purchase agreement. Purchasing commercial property is a rather costly proposition that requires careful consideration. Be sure to incorporate this checklist.

What’s on the Outside?
A commercial assessment is necessary for determining if the building is in good shape structure-wise and what the cost-estimate would be, in the event “touch ups” or more extensive repair work is needed. Exterior areas typically include landscaping, the roof, parking as well as the building foundation and structure. Hire an inspector who has access to experts in the form of building code specialists, as well as roofing and construction contractors. When it all comes together you’re going to have a good idea of where your property stands, literally!

Building Systems
A commercial building inspection in this case typically includes the heating, mechanical, electrical, plumbing, ventilation systems and air conditioning. It’s the inspector’s job to ensure all systems are in good working order. If one of the systems is not up to standard, an inspection report will clearly state what needs to be replaced or repaired and the total cost. A commercial building inspection includes looking at the building alarms and sprinkler systems in addition to fire safety systems and security systems. Whether you’re taking advantage of commercial mortgages or not, you need to make sure all of this is in good working order as your investment must be protected in the long run.

Take a Peek
An interior inspector provides you with information on renovations or how much it would take to make interiors look more current and presentable. Inspections will determine if there are any safety issues that may arise. There are certain local building codes the interior spaces must meet. Interior elements such as the floors, bathrooms, offices, walls and kitchen facilities, among others, are evaluated for safety and living standards.

The Paperwork
Commercial building inspectors are also tasked with reviewing documents like certificates of occupancy, building plans, appraisals, construction permits, citations, surveys, maintenance records, environmental studies, floor plans and evacuation plans. The Document Review includes the emergency and fire safety system records – test documents, fire detection maintenance, inspection reports, fire extinguisher service documents and fire door inspection. Documents for an apartment complex pertain to rent records and inspection reports from local code enforcement.

It’s always good practice to take a look at past utility and tax bills before signing a purchase agreement. When determining an accurate value of the commercial property and going over your commercial property purchase checklist, do take elements like historical expenses and renovation/repair costs into account.

 

Nov 27
0

Steel Building Construction Costs

By | Development | No Comments

 

Steel building construction costs are lower than many alternatives and as a result are now becoming more popular because of the many advantages that they offer. Generally these buildings are fabricated out of steel for both the interior and exterior spaces. One advantage of these buildings include steel being an environmentally friendly material and therefore it can easily be recycled.
 
Steel also requires less maintenance, as opposed to wood or other materials. Installation is easier, and offers easy modification as it is quite flexible when it comes to the design. It also does not have the common problems of other materials such as mold and mildew.
 
However, although it is seen as a cost-effective solution in construction materials, there are building construction costs that are only present when it comes to building steel structures. This is something to think about when looking into construction loans. As well, some of these costs are important to recognize up front. While overall steel building construction costs are still lower than many alternatives, it is important to consider these factors. If your company or business thinks that these costs are more than they are looking to spend, you may opt to contract some construction loans to help you finance a steel building infrastructure.
 
Steel Buildings Generally Cost Less
One of the most popular advantages of these types of buildings is that steel building construction costs are less than other buildings. They roughly cost $15 to $20 per square foot. This is indeed considerably less compared to using wood, concrete, and other materials. When looking to source construction loans, the overall cost of the building is something that will need to be seriously considered. Also, because of the special components of steel, some people often forget about the other factors that affect their expenses when it comes to construction.
 
The Quality of the Steel
There are many kinds of steel. Typically, less expensive ones might initially save you money, however, maintenance costs after a few years would be considerably higher. Some people find it better to invest in more expensive, yet high quality steel to lessen the maintenance time and costs in the future. Using a poor quality steel could also result in a weaker structure and the inexpensive materials may not even pass city inspections for building safety.
 
Proper Building Insulation
Steel is a conductor. With the incorrect types of insulation, heating or cooling the interior of these buildings could easily cost thousands of dollars. Likewise, the wrong insulation makes it less energy efficient. In addition, it can also result in excessive noise. Rain on a steel roof is quite loud. Without proper insulation these are the problems that you may encounter.

Proper building insulation ensures that the building is energy efficient. Although implementing the right insulation processes can increase the initial cost, it is a long term investment to make a building greener and more energy-efficient. The building will be quieter, it will save energy costs, and it will considerably increase the resale value of your building.
 
The Right Building Ventilation
Just like insulation, the cost for ventilation is also a consideration with steel buildings. Without the proper ventilation, temperatures in the building may be too hot or cold during certain times of the year. Even with the right insulation, you still need to have proper ventilation to allow air to freely circulate, and keep your building within the right temperature to keep it energy-efficient and comfortable.

 

Nov 19
0

Commercial Properties for Sale

By | Real Estate Investing | No Comments

 

Investments come in many shapes and sizes and people invest for all kinds of reasons. They invest in precious metals, foreign currency, financial stock and bonds, and in real estate. Some people invest short term and look for quick profits, while others invest in the long term in order to financially secure their future.
Regardless of the type of investment, or the reason behind it, the single purpose of an investment is to deliver profits, and very few investments provide returns like commercial properties. They provide a considerably higher income potential, lower competition, reduced risks, tax benefits, equity build-up, long term capital appreciation, and much more. Qualified commercial mortgage brokers can help you make the right decision and get you the proper financing required for such investments.
 
The Flip Factor: Investing in commercial properties and ‘flipping’ them for quick returns is a resurgent trend in the industry. The popularity of commercial real estate investments is due to the fact that they often provide positive returns. An investor can raise debt, either through banks or through private investors, purchase a property, renovate it, and resell it for considerable profits. A great way to access these sources of financing are through commercial mortgage brokers.

 
Talks of Finance: Compared to residential real estate, it is often more challenging to find financing for commercial properties. Options can include finding a private investor, or using a combination of financing from a bank or other lenders. The down payments required for commercial real estate are larger than those needed for residential properties, and therefore, you will usually need someone to finance your acquisition. You could also raise capital by placing new commercial mortgages on your existing properties, a great way to access the built up equity in your portfolio.
 
The Property: There are various types of commercial real estate, and you need to consider carefully which one to invest in. You could opt for office buildings, residential towers, industrial property, self storage units, and even retail stores. These properties can then be renovated and rented out to generate a regular stream of income, or sold to harvest quick and substantial returns.
 
The Land: There are tremendous benefits to investing in commercial properties for sale. Not only do they provide current income and spendable cash, but they are incredible securities for your future as well. If you happen to choose the location wisely, you can earn income indefinitely even if the property reduces in value. This is because the land it sits on will continue to provide intrinsic value and revenue generating opportunities.
 
Due Diligence: There are several factors that you need to consider, most particularly your ability to repay the loan. A detailed conversation with your commercial mortgage brokers will be necessary. You also need to ensure that you can recover the full amount of the loan from your investment, including the interest accrued. The due diligence process is also extremely vital when purchasing investment properties.
 
Once you have carefully evaluated all the relevant factors and have avoided the potential pitfalls, you can put pen to paper and begin to reap the plethora of rewards from investing in commercial properties for sale.
 

Nov 11
0

Investing in Commercial Real Estate

By | Real Estate Investing | No Comments

 

In an increasingly complex and competitive business world, more and more people are searching for ways to supplement their income. The days of a single breadwinner in the house aren’t as common, and even multiple earners are working to manage the household finances. Of the many avenues available through which earnings can be improved, investing in commercial real estate remains one of the most secure and profitable.

 

The Reasons to Invest

The Economy: Commercial real estate makes perfect sense as an investment choice. It is a relatively secure financial venture, compared to most other options, and it adds a lot more zeroes to your bottom line as you can enjoy plenty of economies of scale. You can effectively manage a considerably larger number of offices, apartments, etc. compared to residential houses, and you can do it all at reasonably low costs.
 
The Value: There are considerable differences between the valuation of commercial and residential properties. The income derived from a commercial property is based on its usable square footage. Commercial real estate leases last longer than residential ones, and the yield per square foot is also higher, which lends commercial properties with greater cash flows.
 
The Finance: A major benefit of investing in commercial real estate is that you can start with virtually no money and still purchase multi-unit properties. This can be achieved through private money investors, or a combination of bank loans and owner financing. Commercial loans also tend to be considerably more lenient compared to residential ones. The biggest benefit however, is that you can take out commercial mortgages which allow you to acquire new properties through equity raised from your existing portfolio.

 

The Tips for Investing

Take Your Time and Give Your Time: It is essential when investing in commercial real estate, to take as much time as you need in order to avoid rushing this important decision. Remember that commercial properties are a long term investment and that you will have to devote significant time to them if you want any profits.
 
Think Big and Then Bigger: If you are going to use commercial financing one way or the other, then why settle for small properties? You can benefit from economies of scale by purchasing more units, and of course, earn more money at the end of the day.
 
Learn, Learn, and Learn: Although investments in commercial real estate have a high probability of being profitable, there is still a lot you need to learn about the business before you reap its rewards. Arm yourself with as much knowledge as you can, learn all the rules of the trade and make sure there are no surprises in the details.
 
Relationship Matters: It is critical that you maintain good, long term working relationships with your investors and lenders. This will help when looking for commercial mortgages. The very nature of commercial real estate investments often demands that you work closely with partners, and a strong established network can only help you find more and better deals.
 
The Finance Equation: In matters of finance, as in most other things, it is better to be well prepared. Commercial loans differ from residential ones and usually require larger down payments. Therefore, you need to find good, solid financing for commercial mortgages well in advance and you need to make certain that you find the best lenders in your area.
 

The global marketplace is an increasingly volatile place, with high risks and no guarantees. It is always wise, in such situations, to plan and prepare and investing in commercial real estate can be one of the most reliable ways of ensuring a secure financial future.
 

Nov 01
0

How to Make a Building Green

By | Green Initiatives | No Comments

 

Companies and corporations, as well as residential buildings, do their share in helping the environment. Some of them ban the use of plastic and Styrofoam products within their premises, while others ensure that they maintain greener surroundings. However, these are just simple things that everybody can do. When considering how to make a building green, a better idea is to actually make your building more environment-friendly to lessen its negative impact.
 
Green buildings can be started from scratch as new developments, or can actually be renovated buildings. They are usually energy efficient as these buildings effectively reduce the energy that they need for heating or cooling purposes. The design itself affects these factors, as well as the proper pieces of equipment to be used to efficiently maintain the coolness or warmth of the building.
 
Making your building green may actually entail renovation and construction. Hence, it may cost a significant amount of money. If your building is not yet green and you need funds for its renovation, consider the various types of commercial mortgages that are available. Think of it as an investment. Although at first, renovating a building to be greener would be more expensive because of the materials and equipment, you actually save money in the long run from reduced operating costs and expenses.

 

Factors Affecting the Building’s Energy Efficiency

If you’re looking at how to make a building green, one big factor that affects energy efficiency is a building’s actual architecture. The shape and the orientation of a building can affect a building’s provisions for warmth and air. It affects the air tightness, the insulation and the ventilation of the building. Other factors to consider include waste management and the use of electricity.

 

Benefits of Switching to High Efficiency Equipment in Commercial Buildings

• Save Energy: High efficiency equipment saves energy. The right equipment helps the building maintain a better cooling and heating system, allowing it to use less energy than it previously consumed. Greener air conditioning units, as well as heating systems tend to be more expensive, but in the long run they use less energy, gas or electricity.
 
• Save Money: There is always some misconception that going green is more expensive than the alternative. However, while the more efficient equipment might initially cost more, it is actually an investment. You spend less as time goes by. High efficiency lights and appliances may cost more, such as inverter air conditioning units or refrigerators, but they consume considerably less energy and electricity. At the end of the day, you save money because electricity bills reduce. In a few months, the additional cost of that expensive, yet highly efficient appliance, would already be equal to a few months energy cost savings.
 
• Improve Pollution and Waste Management: There are some buildings that have great designs and equipment for waste management, including recycling wastewater and garbage. When considering how to make a building green, switching to better equipment that can handle a commercial building’s waste not only can save hundreds of dollars per month, but also effectively reduces the waste that you release to the environment. Water conserving faucets and toilets conserve water and in turn also help to improve efficiencies.