Complimentary Analysis of Your Property
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• Dean Analyzes It
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RESOURCES
Selling FAQs
Q: When is the best time to sell my commercial or investment property?
A: The best time to sell is usually when prices are the highest in order to maximize your profit. However, this is not always possible due to changing market conditions or due to a seller’s situation. For example, an investor may want to sell a property in anticipation of reinvesting the profit into another investment property. An owner occupant may want to sell in order to consolidate or expand their business into another building.
Q: How can I get the best price for my commercial or investment property?
A: No matter when you sell, one important step in getting the best price is to ensure that the property is effectively exposed to the market and promoted to potential prospects. Strategically developing and implementing marketing for the property enables you to target the ideal buyer and usually produces the best results.
Q: Should I hire a broker to sell my commercial or investment property?
A: There are definitely great advantages to hiring a broker. Brokers have local market and real estate knowledge, marketing resources and negotiating skills that you may not possess. Hiring a broker that has extensive commercial or investment real estate experience and expertise plus a history of success are key to attaining results.
Q: What type of questions should I ask a broker before hiring them?
A: You should ask a broker to provide details about their commercial or investment real estate work experience. Also, ask for specific and recent sale transactions that they were involved with and their roles in those transactions, as well as some details about their current exclusive listings. Client testimonials are also good ways to evaluate a broker’s accomplishments.
Q: What type of listing agreement should I want as a seller?
A: A listing agreement is an employment contract for professional services between the seller and the broker. It should always be in writing so each party understands the relationship. Though there are a few types of listing agreements, an ‘exclusive right to sell’ agreement appoints one broker as the agent for the seller. This arrangement is advantageous to the seller because this one broker is responsible for all marketing, communicating and negotiating on the seller’s behalf. A broker will also spend more time and effort on this type of listing since the seller has given a commitment to the broker.
Q: What should I expect from the broker?
A: You should expect the broker to represent your interests and to offer you practical advice. It is important that the broker has working knowledge of commercial or investment real estate, implements effective marketing for your property and communicates with you and prospects in a professional and timely manner.
Q: How does the broker price my commercial or investment property?
A: Methods used to price a property vary and the method used depends on the property type. Income-producing properties are most often purchased on their cash flow. This requires the broker to make income and expense estimates which will be the basis for accurately pricing the property. Owner occupied properties require a comparative analysis of like property sales to the ‘for sale’ property. This requires the broker to review the market for recent sale transactions and current listings and then to formulate a price from the data. So whether your property is an investment or owner occupied, both require a skilled analysis by the broker.
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Buying FAQs
Q: Does the listing broker represent the buyer?
A: The listing broker represents the interests of the seller, as do all other brokers involved in the sale, unless a relationship in writing has been established with a broker to represent a buyer's interests. If the buyer enters into a relationship like this, the broker becomes a buyer’s agent and has an obligation to represent his/her interests. This broker can be instrumental to the buyer in locating a suitable property, negotiating price and terms of the purchase, providing advice during the purchase process and assisting with mortgage financing options.
Q: How can I find a property to buy?
A: Brokers are your best source for finding a commercial or investment property. Brokers scan inventory daily and are constantly in contact with property owners. For this reason alone, it would be a mistake not to communicate your requirement details to a broker. An experienced commercial and investment broker can present buying opportunities that may not be available to you or even the public. The process of finding an ideal property may take weeks or even months, so utilizing a broker is invaluable.
Q: Once I find a commercial or investment property to buy, what is the next step?
A: If the property initially meets your approval, then start your due diligence. If it’s an income-producing property, request copies of the income and expense statements and review them. If you are going to use the property for owner occupancy, make sure its location, size, condition and features are acceptable to you. Also, among other items, request a plot plan to review the boundaries and building footprint, check the zoning to make sure the property can be used for your use and look into your mortgage financing options. It is important for you to evaluate the property and your financing options without delay.
Q: After looking the property over I want to purchase it, what should I do?
A: You need to submit a written offer to purchase to the seller with a monetary deposit. Among other items, it should include a purchase price, provisions such as dates of performance and any contingencies such as a satisfactory property inspection and mortgage financing approval. In circumstances where the buyer and seller come to an immediate agreement on price and basic terms, it is customary to proceed directly to a purchase and sale agreement. It is recommended that buyers consult with a real estate attorney prior to signing any legal document. A broker can usually recommend one if requested.
Q: Is financing difficult to obtain?
A: Today’s buyers of commercial and investment property have many options available for financing income-producing and owner occupied properties. Mortgage sources include savings and commercial banks, credit unions, insurance companies, pension funds, private lenders, mortgage brokers and even the seller. In obtaining a mortgage, the cash flow of an income-producing property can be used to help qualify a buyer for financing. Financing for the owner occupied property is usually based upon the business’s cash flow and assets and the personal financial condition of the buyer. In good economic climates, lenders tend to aggressively pursue loan business but when the economy weakens lenders will tighten credit. So, like the real estate market, the lending market also has an economic cycle.
Q: How long should it take before closing on a commercial or investment property?
A: For income-producing and owner occupied properties it should take about 60 days from executing a purchase and sale agreement until the closing. During this time, a buyer will secure mortgage financing and more due diligence is performed on the property. Fees and costs for these items are mostly borne by the buyer and have to be completed by specific dates. But, if the property involved is vacant land or a site that is being permitted for development, then the closing may take 90 to 180 days from executing a purchase and sale agreement depending on the scale of the proposed development.
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Leasing FAQs
Q: Is hiring a broker to lease my commercial or investment property a good idea?
A: Landlords usually don’t have the time necessary to effectively lease the space or a broker’s access to potential prospects. In some cases it can be more challenging for a landlord to lease a larger amount of space because tenant prospects may have hired an experienced tenant broker. Therefore, it is important that if the landlord hires a broker, the broker must have leasing experience. This will ensure the landlord of saving valuable time and being represented with confidence.
Q: What is the difference between a leasing agent and a tenant representative?
A: The leasing agent represents the interests of the landlord. On the other hand, a tenant representative (tenant rep) represents the interests of the tenant. The tenant rep will locate spaces for the tenant and advise them in negotiations. In most cases, the tenant rep is paid a commission by the landlord.
Q: What type of listing agreement should I want as a landlord?
A:
A listing agreement is an employment contract for professional services
between the landlord and the broker. It should always be in writing so
each party understands the relationship. Though there are a few types
of listing agreements, an ‘exclusive right to lease’ agreement appoints
one broker as the agent for the landlord. This arrangement is
advantageous to the landlord because this one broker is responsible for
all marketing, communicating and negotiating on the landlord’s behalf. The broker will also spend more time and effort on this type of listing since the landlord has given a commitment to the broker.
Q: How does the broker determine a rental price for the space?
A: This is done by identifying, collecting and reviewing recent lease and rental data in the competitive market for like space. For instance, if you have 30,000 square feet of warehouse space for lease, it can be priced based upon competitive data for warehouse space in the 20,000 to 40,000 square foot range. In addition, market conditions and inventory play an influential role in pricing any type of commercial space.
Q: What is the difference between net and gross rents?
A: Net rents pass expenses through the tenant while gross rents include expenses. There are several variations of net and gross rents. The most common net rent in our market is triple net rent. This rent is primarily used for retail and industrial space. In this instance, the landlord charges a base rent to the tenant. In addition to this base rent, the tenant pays for individual utility charges plus the tenant reimburses the landlord for expenses such as real estate taxes, insurance and common area maintenance (cam). On the other hand, the most common gross rent in our market is on a modified basis. This modified gross rent is primarily used for office space but can also be used for other types of spaces. In this case, the landlord charges the tenant a rent inclusive of expenses plus the tenant pays for individual utility charges.
Q: How do I estimate the amount of square feet I need for my business?
A: The amount of square footage you need for your business can vary from about 100 to 500 square feet per person. The type of space involved has the greatest impact on the amount of space required. For instance, office space users require a lower per square foot per person amount than other types of space. Also, if you are currently a tenant and your space requirements have changed, an experienced commercial broker should be able to assist you with an estimate of your space needs.
Q: How long of a lease should I sign?
A: There are a number of factors that influence a tenant’s decision to signing either a long term or short term lease. Long term leases as those that are five years or greater and short term are those that are less than five years. In any case, a long term lease is ideal for a tenant whose business is stable with no projected space changes. Most landlords will provide favorable rents and terms to long term tenants with financial credibility. Conversely, a short term lease gives the tenant flexibility especially if they have uncertainties about their future space needs.
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• Income Capitalization, The Cap Rate & Multipliers
• The Operating Statement & Net Operating Income
• Selling Tips for Maximum Results
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