Commercial Property Investment Mistakes

The value of commercial properties for sale is determined using a few simple formulas based on the amount of net operating income the property generates each year. So when you see a commercial property for sale, one of the first things you want to ask a broker is an income statement.

Some brokers who have listed commercial properties for sale may refer to this income statement as an IPOD, or income property operating data sheet. Once you get your IPOD, or income statement, you can then compare the information provided by the broker or seller with your other sources to help determine what the real figure is. The challenge when looking at commercial properties for sale is that brokers and/or owners will tend to overestimate the amount of revenue that commercial properties for sale generate while also trying to minimize the amount of reported operating costs.

How to Determine the Value of Property for Sale

The reason is simple. The value of any commercial real estate is based on the amount of net operating income the property generates each year. In fact, each additional dollar of annual income increases the property’s value by about ten dollars, depending on where the property is located, and how old it is. Note that this extra net income can come from getting additional income from rent, or from reducing expenses by managing the property more efficiently.

Once you understand that commercial real estate owners will tend to display unrealistic numbers in an attempt to get a higher price for their property, you’ll better understand why when looking at any commercial property for sale it’s important to know the market you’re in. invest in. When you know what rental rates in an area tend to be or what the typical cost ratio for a twenty-five year old apartment building is then it is much more difficult for a broker or owner of a commercial property for sale to try to pull the wool over your eyes.

Verifying Income and Expenses

The first step in verifying the income of a commercial property for sale is to request a list of leases. A rental list is a list of what each apartment, self-storage unit, mobile home lot, or office space is rented for. Make sure you get an actual rental listing because the owner or broker of a commercial property for sale may try to give you a Pro-forma rental list instead of an actual rental listing. Pro-forma means that there is an expectation, realistic or not, of getting a higher rent than the property is currently earning. My response to this has always been, “If you raise the rent to be pro-forma then we’ll use the higher revenue amount, otherwise we’ll base our assessment on what the property is currently producing in revenue.”

When looking at the expenses of a commercial property for sale, keep in mind that you are trying to calculate the actual amount you would spend operating the property rather than the seller’s expenses. So, despite knowing exactly how much the seller has cost me, I have learned NOT to rely on the information provided by the seller when looking at commercial properties for sale as this information is almost always inaccurate.

Simple Formulas Used for Expenses

Costs will vary depending on the type and age of the commercial property for sale. For example, if you want to buy a Class C apartment building that is at least twenty-five years old, your expenses will range from 45 to 50 percent of your monthly income. The accumulated revenue, known as Effective Gross Revenue, is what remains after the vacancy fee is deducted from the total rental amount on the list of leases of a commercial property for sale.

The final step in determining the value of commercial property for sale is dividing net operating income by the capitalization rate, which varies from about 6 to 12 percent depending on the type of property, age, and location of the commercial property. for sale. The quickest way to get an idea of ​​the capitalization rate you should use when looking at commercial properties for sale is to ask other brokers not involved in the transaction.

Using Escape Clauses to Limit Your Risk

Another way to protect yourself when looking at a property for sale is to make sure that your purchase contract gives you time to walk out of the deal if you’re not comfortable with anything you find. If done right, you can often tie up a property for 60 to 90 days so you have time to determine the true value accurately. This makes it easy to see commercial real estate, because you can get out if you have the right escape clauses.

Using Commercial Property Management Company

If you are a commercial property owner, you may be interested in hiring a commercial real estate management company. There are many reasons to turn to a professional to handle the management of your commercial property. Some of these reasons are listed below:

Commercial property management can relieve the stress of owning property
Sometimes, investors are reluctant to become landlords or own investment properties because they feel the task of renting and managing property will be too time-consuming. You may have visions of late night calls due to an emergency or spend your days showing properties to perspective tenants or dealing with tenant complaints.

When you trust a commercial management company, you don’t have to worry about this problem. The property management professionals you hire can handle all of the day-to-day tasks and obligations involved in renting and maintaining commercial real estate. Not only that, but if you develop an ongoing, long-term relationship with a property management company, managers can get to know your building and tenants and can make recommendations to you on repairs or operating policies.

Commercial property management can help keep your tenants happy
Many tenants, especially in commercial buildings, want to know that they have an expert available to help them with the problem. Rather than dealing with inexperienced landlords or with landlords who are self-employed, those who rent commercial real estate prefer to have a professional available as a manager. A commercial real estate management company can get to know your tenants and can deal with any issues or concerns, keeping things running smoothly at all times.

Commercial property management can involve an expert approach to maximizing profits
When you put your trust in a commercial real estate management company, they may be able to provide you with the essential tools to keep your investment profitable. This may include suggesting improvements to the property or changes to the lease agreement or rental terms that will allow you to better maximize your profits. Your commercial management company can also keep you updated on the financial situation of your rental property so you will know at a glance what the numbers are like and whether you are making a good return on your real estate investment.

A commercial property management company can help keep your rental space in good condition
By handling emergency situations quickly, commercial property management companies can help ensure repairs are made before damage occurs to the building. Furthermore, a commercial real estate management professional can keep tabs on what is happening in the building on an ongoing basis, suggesting repairs or maintenance that will prevent problems from developing. It’s a good idea to keep your building well-maintained at all times and it’s helpful to have an expert advise you on what to do.

Hiring a Commercial Property Management Company

Hiring a commercial property management company is important for all of these reasons. The bottom line is, when you own a commercial property, it can be a great investment – but only if it’s managed properly. Trust the experts to ensure that your investment pays off.

Business Manager – Vital Cog in Business Enterprises

A Business Manager is a professional who is entrusted with the job of managing a business firm or a corporate enterprise or a private enterprise on behalf of a company or individual with the outcome of earning profits and revenues. There are several areas where a Business Manager can use his or her knowledge and expertise to serve – accounting, auditing, budgeting and taxes, data processing and analysis, finance, HR and personnel, marketing and public relations, operations analysis, purchasing and so on. Besides there are also specific technical areas in which a Business Manager can have specialized knowledge and skills like computer programming, e-commerce, law, science etc.

Even small businesses or home businesses sometimes typically have Managers doing multiple roles that focus on the company’s marketability and reach. In such a scenario, the Business Manager shares much of the owner’s duties and responsibilities in running the business successfully and in some cases, earning a share of the profits.

There is no doubt that the role of a Manager is very essential and crucial to a business. As we have seen in the modern era, even artists and private individuals like musicians, dancers, painters, writers, sportspersons etc. have Managers who manager their business affairs, professional commitments and financial matters. Hence, the role of a Manager cannot be taken lightly. In the context of a governmental agency or a military agency, the position of Business Manager would be equivalent to that of an Executive Officer or a Chief of Staff.

Functions or Role

Overseeing the operations in small, large or private enterprises involves many specific functions. Generally, the duties of a Business Manager extend to:

• Developing and implementing budgets
• Fixing business goals and targets
• Hiring, training and evaluating employees
• Supervising and overseeing duties of support staff
• Handling payments and contracts
• Managing business commitments, travel schedules etc.

Qualifications

Most Managers require a basic qualification of a bachelor’s degree in Business Management which has many in-built modules in tandem with the duties listed above. They also need to have excellent communication skills, great inter-personal relations, be adept in promotional and marketing abilities and have contacts with media agencies and networks. In many businesses, salespersons who have worked through the company for many years handling several responsibilities are promoted to Managers levels and entrusted with greater responsibility.

Public profile

In a private enterprise such as a Manager handling the portfolio of an artist or sportsperson, the role of a Business Manager is very much in the public eye. Several past business managers have been caught in financial and personal scandals ranging from negligence of professional commitments to fraudulent practices in financial matters, illegal and unethical management of assets, swindling of revenues etc. which can be a serious setback to professional enterprise.