position realty

Results, No Excuses

Making A Success Out of Commercial Fixer-Uppers

Are commercial fixer-uppers worth the time, expense and effort? My answer to that would be that the right fixer-upper with numbers that make sense can be the right strategy to use. In fact, these types of properties can be an easy way to see an instant value increase in the property but like with any deal, only if the costs to rehab the property make sense.

Commercial fixer-uppers employ one of my favorite value plays called “repositioning”. That means that either the tenant base changes, the appearance of the property changes or that both of these options are exercised on the properties.

In residential real estate investments, the idea of investing in a fixer-upper is to acquire the property at a significant discount due its condition. In commercial property, the same still holds true but in commercial properties it can account for greater cash-on-cash returns. Perhaps you’ve found a property that needs some cosmetic care. Maybe the exterior needs to be updated with a new look. You’ll be amazed at how a small investment can net a high return in value.

How To Make Money Investing in Apartments

Apartment buildings can be a great opportunity for repositioning. In strategies like these, the first thing I usually change is the exterior paying special attention to the parking lot, roofing and sidings. I do other simple things like updating the landscaping and putting new signage on the property which are quick ways to give a new appearance to an older building.

I might also consider repositioning the tenant base with this same apartment building. I’ll replace tenants who don’t pay or don’t fit the target tenant profile with ones that do. This may take months to accomplish, but the increase in value can put the worth of the property through the roof!

When repositioning a commercial property, make sure you keep on top of excessive rehab costs. Have a plan and get estimates upfront. The lack of a rehab plan can cost thousands of dollars to fix especially if the rehab doesn’t produce the results you desire. Remember to also use professionals to get the job done. Trying to be cheap by doing it yourself may mean that you don’t end up with the professional upgrading that your property needs. This will not only waste your time, it’ll cost you the tenants or your building.

A lot money in the deal to help cover the expenses of repositioning. Taking too long to get paid is one of the reasons a fixer-upper investment will fail. If you aren’t collecting the necessary rents to cover the mortgage because repositioning is taking longer than expected, you could have a disastrous situation on your hands. Set a plan that is realistic financially before you commit yourself to any fixer-upper deal.

Commercial fixer-uppers may also be candidates for using a value strategy called “forced appreciation’. This means that property appreciation occurred because rents were raised or expenses were lowered. Was the previous owner afraid to raise rents because he felt the property was in disrepair? Did the property have expenses on the higher side and what will it take to lower the costs? Simple fixes to problems like these can increase the net operating income and the overall property value.

Get rid of your fears about working with commercial fixer-upper properties. By using sound strategies such as repositioning or forced appreciation, you can ensure that your investment will be a success.

Office: 480-213-5251

Know the Players in Commercial Real Estate

Every line of business has its pundits who like to refer to the business as being a sort of game. I don’t dismiss this notion, and actually am a believer that game theory has its place in real estate. Every game has an objective, a set of rules, a concept for what it takes to win, and of course players or participants. Who are the players in commercial real estate? This article explores that very issue.

First, let’s look at this from the investor side of things. Every market has investors, large and small, who are interested specifically in commercial caliber real estate. Some of these are what I call Tier One investors, who look for small to medium-sized commercial buildings. Tier Two investors look for even larger buildings (exclusively so) and Tier Three investors are perhaps the biggest players of all, responsible for developing new properties.

While this player breakdown is pretty loose and definitely unofficial, I think you get the general idea. Some investors are finders of properties and some are creators or developers of properties. Any and all of them may build funding for their projects through collaboration with others but all are people you would benefit from knowing in your area as you start building your own business. These players may have deals to offer and some may be interested in collaboration so these contacts are essential.

Next, we have professional players, who would include personnel like commercial realtors, bankers, appraisers, property managers, contractors, bird dogs and the like. As you can imagine, these players are also very important but they are more from a supporting role to help get things done in the world of commercial real estate.

It is no less important to know the professional players because, without them, you will find the business of commercial real estate much more difficult to navigate. A great way to build a business is to start assembling a team of professional players, who will both help introduce you to investor players, but will also give you more credibility when you make contact with other investors.

Last, we have the behind the scenes players, who would include city or county officials, code enforcement reps, planning and zoning specialists, architects, and engineers. These personnel are no less important to playing the commercial real estate game and are arguably the most integral, given that seasoned investor players regularly and effectively use behind the scenes players as a part of their successful formula.

When you embrace the game aspect of commercial real estate and recognize that there are indeed players you must recognize, your own ability to play and play to win will go up dramatically. When this happens in this business, profits are soon to follow.

Office: 480-213-5251

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