Monday, August 4, 2014

CRE: Commercial Real Estate 101

One of the "things" about selling Commercial Real Estate (CRE) is that I get to talk to a lot of different people from different walks of life from around the world.

Some of these people come with a lot of baggage; they are wounded internally and sometimes it takes me months before I realize the extent of their troubled life. Others present themselves as if they are an open book. And they talk and talk and usually have very little to say.

But, the client that I like is the one who is more of an explorer. They are on an adventure rather than they just wandered into CRE investing. They know that CRE will payoff in time and they want to start slow and small -- price wise -- which is good most of the time.

They tend to ask for your help as you go along and they fear that they might embarrass themselves for NOT knowing simple information? It's at those moments you need to remind them: There is never a stupid question! Especially when it comes to CRE investing.

So, in order to resolve the anxiety any novice CRE investor may have, I would like to invite you to read the following information that is absolutely necessary for calculating the annual income from a marketed CRE Net Leased Investment Property that you may be considering acquiring for the annual income.

A lot of you are truly lay people. And, whether you are a famous celebrity or you are just exploring this as a novice investor, this might sound foreign to you.  Just rest assured that just because CRE is a new area for you, it still is something you can get involved in -- even if to spruce up your usually normal day.

So, let's begin:

Now net income is also known as passive income. It's the type of income you earn monthly or quarterly as a dividend or investment. The good thing about this is: You pay a smaller amount in Income Tax on this  money. ***Please check with you Tax Professional to verify this!!***

As you will figure out, the main goal of CRE is to allow you as an Investor, to earn a usually stable predetermine (estimated) annual net income (the rent you receive) from a Net Leased Property that is being marketed either by a Sales Price or a Cap Rate.

Usually, the marketing entity for the property will only disclose what the Listing or Asking Price is; and they will state that, that List or Asking Price is at a certain Percentage of Return on the Investment (ROI); or, as it is better known as: Capitalization Rate (Cap Rate).

Now, from just these two disclosures, you will be able to get an idea of just what the (estimated) annual income should be and whether or not the acquisition of this net leased property will "fit" your investment income needs -- or not.

The formula goes like this:

Sales Price times Cap Rate equals Annual Income.  (SP x CR = AI)

For example: $315,000 x 9.5% = $30,000.00+/-. I don't know about you, but I could use an extra $30,000 per year.  This could help pay for a parent's care or supplement a child's college fund.

And once you have the estimated Annual Investment Income from the Asking or Sales Price plus the additional disclosed Cap Rate, you can figure out your Purchase/Sales Price by dividing the Annual Income by a Cap Rate you desire to acquire the property at; OR by a Sales Price you deem as a fair market value.

You take the Annual Income you figured by the formula, and divide by the Sales Price you feel is a fair price or by the Cap Rate that you want as an ROI.

Either way, you can figure out from just two disclosed items the third item in such as you can for the Physics Traveling Formula: Rate times Time equals Distance (RxT=D).

So, this is just a basic formula.  The Actual Annual Income should be disclosed in the current owners Financial Statements kept for this particular investment property.  AND, during due diligence it is absolutely necessary to review those statements carefully when considering the acquisition of a Net Leased Property.  And, most Sellers will NOT disclose actual financials unless there is an accepted offer and escrow has been opened.

So, hopefully, this will help most of you who are not that experienced in acquiring income producing properties.  And, hopefully, you will be at ease when considering the next step in actually making a purchase move in that direction.

Now, take a look at the property information buttons in the right column.  Click on one and try the formula out to see if you can calculate an offer price or acquire the property at a higher Cap Rate!

Contacting David Howes is easy -- either by email: david AT davidhowes DOT net OR call me at: 70 25 01 93 88 AND you can Follow David on Twitter: @DavidAHowes

Saturday, June 28, 2014

Las Vegas Resort Hotel Casinos For Sale II

A couple of years ago, I blogged that there were a few Resort Hotel Casino Properties For Sale. Now, I want to update you on this: There are Three For Sale and they are true Resort Hotel Casino Properties.

So, IF you have the prerequisite amount of money or financial capacity -- which means you are capable of paying $250 Million or more for a Resort Casino Hotel property -- send me an email with the proof of capacity. I will then reply with a Non-Circumvent, Confidentiality and Commission Agreement for your company's Authorized Officer's signature.

Once this Agreement is executed, I will then supply you the detailed information on the Resort Hotel Casino Property that "fits" your financial capacity and investment criteria.

The form can be down loaded from the column in the right under Las Vegas Casino Information.

Contacting David Howes is easy -- You can reach me at: davidATdavidhowesDOTnet OR call me at: 70 25 01 93 88 AND Follow David on Twitter: @DavidAHowes

Tuesday, June 10, 2014

8% Cap Rates In Las Vegas? Sorry, they're all gone!

For several months now, I have been working with a couple of Buyers who are still searching the Las Vegas Valley for an 8% Cap Rate.

Unfortunately, for them, they are ALL gone.

The 8% Cap Rates went away about a year ago when Owners began to realize they were getting multiple offers for their property and they no longer "needed" to sell.

But, Not all properties are in such a rosie position.  Several Owners that I know are still struggling to make their loan payments and are still upside down at the end of the month.

But, when you come to Las Vegas expecting a steal, and you find out that a 7.5% Cap Rate is the best you are going to do, then, you shouldn't be wasting RE Broker's time.

Walgreen's across the US are going for +/-5.5% Cap Rate.  Here in Las Vegas you might be high bidder at a 6.75% Cap Rate.  But, IF you think an 8% Cap Rate should do, you will be out of luck.  There are no Walgreen's in Las Vegas selling for an 8% Cap Rate.  AND, you are foolish to be thinking that for any property in Las Vegas right now.

IF you are truly interested in acquiring a Las Vegas NNN investment, then contact me and we'll start the search.  But, 7 or 7.5% is going to be the sales price.

Contacting David Howes is easy -- either by: davidATdavidhowesDOTnet OR call him at: 70 25 01 93 88 AND Follow David on Twitter: @DavidAHowes