Looking For a Great Investment? Ask Me About Senior Housing Development

If you are an investor looking to invest in a commercial real estate property, without a doubt, you want to make sure that brings you a profit and offers value to your tenants. Prospective tenants will be associated to your commercial location if you can ensure their safety and security. Whether you have an apartment…

If you are an investor looking to invest in a commercial real estate property, without a doubt, you want to make sure that brings you a profit and offers value to your tenants. Prospective tenants will be associated to your commercial location if you can ensure their safety and security. Whether you have an apartment building or a commercial office building, you want to make sure that your place is in top condition. You can easily do this by subjecting the property to a commercial inspection before you purchase it.

The question is: How would you know if that property is a potential money maker?

First, check the location of the property. If you are located anywhere near the bustling shopping areas or recreational site, then your property has great potential! This is the same with the housing properties everywhere. You may be surprised to know that a great investment as of this time is to put your money on senior housing development.

According to reports from the last quarter of 2012, the largest growth sector for community living came from the senior housing industry. It showed that there was an increase in the occupancy rate for nursing care facilities and the trend is continuously rising as of this moment. This is because America's elderly are becoming one of the fastest rising sectors in the society. According to News USA, the number of senior citizens is expected to double in numbers by the end of year 2030. Thus, there is quite a concern in regards to the availability of senior housing today.

As the population continues to rise, the demand for assisted facilities for senior citizen is increasing. At this moment, most investors are putting their money on hotel / motel construction and apartment and data centers. They are not aware that senior housing construction is becoming to be a great potential investment.

Once you decide to invest in senior housing, it is important that builders and investors alike should conduct commercial building inspections to ensure the safety and security of your prospective tenants and the community.

In fact, commercial inspectors are needed when you are preparing to expand, redevelop or buy a commercial property. Finding the right commercial inspector to perform a Phase I Environmental assessment , fire safety and sprinkler inspection or a municipal code inspection requires investigation over their certificates. It is expected that qualified and certified commercial inspectors do not charge cheaply especially if their eligibility includes certificates from different designs including the ICC (International Code Council) certification.

Investing in senior housing development that is located on a prime lot, plus, ensuring that the property has passed building inspections will certainly attract more senior citizens to stay.

This is certainly a great investment.

How to Profit in Commercial Real Estate

At the height of the housing bubble in 2007, investing in real estate seemed like a winning deal. When the recession hit however, home prices plummeted and the money for development dried up. Today, with the economy slowly recovering, investors are cautiously climbing back into the real estate sphere. If you're interested in getting into…

At the height of the housing bubble in 2007, investing in real estate seemed like a winning deal. When the recession hit however, home prices plummeted and the money for development dried up. Today, with the economy slowly recovering, investors are cautiously climbing back into the real estate sphere.

If you're interested in getting into the real estate market, now is a good time to make your move. Home prices are once again on the rise and rents in popular areas are as high as ever.

Of course, any investment is not without its drawbacks. Read on for three things to consider before buying commercial real estate and determine if it is the best move for you financially.

Is it a good idea to purchase a commercial property?

In a word – yes. But the caveat here is you need to have the capital; and like any investment, you need to be able to absorb some risk. Whether you pour your funds into a 401K, commodities, or land, that money is not in your pocket. Real estate is a reliably safe investment but it's not fool proof. Do your research, study the long term potential for profitability, and review the economic cycle of the area. When you're armed with information you can make the most intelligent decision for yourself.

How much time, effort, and money can you dedicate to a project?

Undeveloped land is typically less expensive upfront but requires more work to turn a profit. A commercial building filled with tenants will likely require less immediate work but cost considerably more to purchase. Figure out whenever you have the time or the team to oversee construction projects, acquire existing building space, or if you're better suited to simply purchase land and hold onto it. You can manage property yourself or hire a management company but again, you need to consider the cost benefits of that decision.

What are the risks?

Leaders in the commercial real estate market like Franklin Haney Company started small and built up their assets over time. Do not expect to profit immediately but rather invest in property for the long haul and you will likely reap the rewards.

Make sure you do your homework. What are the tax implications of the various properties you are considering? How will the area change over the next year? What about the next five years or fifty? Investing in real estate is typically a safer bet than investing in the stock market but there are always risks involved. Be aware of the potential drawbacks associated with the property you are considering before you're all in.

Commercial Real Estate Options in the Philippines

While there are currently many commercial real estate options in the Philippines, many major corporations often chose to locate their businesses in the largest business districts in the country. Why is this so? Most often, corporations prefer to locate themselves within well-established business districts because this provides the convenient procurement to other business that may…

While there are currently many commercial real estate options in the Philippines, many major corporations often chose to locate their businesses in the largest business districts in the country. Why is this so? Most often, corporations prefer to locate themselves within well-established business districts because this provides the convenient procurement to other business that may be complementary in nature. This means that if they are located nearby other businesses that could aid in their day-to-day operations then this could result in more efficient processes and extremely more profit at the end of the day.

One option for companies is to locate their businesses in one of the three business districts present in the country: Fort Bonifacio or Makati. Makati is the oldest business district in the Philippines, hosting the highest percentage of major corporations in the country. Some of these companies include Nestle, Del Monte Philippines, Inc., Smart Communications, Globe Telecom, and Standard Chartered Bank. This is why it is a bit more challenging trying to look for a commercial space for lease in Makati due to its high density of companies currently vying for taking up the space in the area.

Another option is to go through a real estate consulting and research company or a real estate broker (Philippines) who can lead you to properties in prime business districts such as Fort Bonifacio. Fort Bonifacio (other known as Bonifacio Global City or BGC) is another prime destination for foreign companies due to its strategic business location. The city has a very modern environment and a high standard of living for its inmates. Mostly populated with commercial office buildings and high-end residences, this area is very popular with new companies coming into the country as it boasts a more modern and up to date feel. Some of the companies already located in the area include Jaguar, Samsung, Hewlett-Packard, and JPMorgan and Chase.

There are still many commercial office spaces outside of these areas of course. There are still commercial spaces available outside the commonly known business districts in the country however being located outside of these districts does not offer you the distinct advantage of being located besides other major corporations. Also, away from the prestige of being located in a certain area, being located in a central business district may be good for your company as may facilitate business as well. These places are a good place to start looking if you want to get your business off to a head start above the competition.

Commercial Property Outlook

Commercial real estate is doing well at the end of the first quarter of 2013. Despite the best efforts of Washington to kill the recovery, existing businesses are expanding while entrepreneurs feel it is the right time to open new ones. After nearly six years of doom and gloom, people seem ready to look to…

Commercial real estate is doing well at the end of the first quarter of 2013. Despite the best efforts of Washington to kill the recovery, existing businesses are expanding while entrepreneurs feel it is the right time to open new ones. After nearly six years of doom and gloom, people seem ready to look to their futures optimistically. While there are still some lagging economic indicators, I believe that we will continue to have steady, if slow, growth for the next several years.

In the past manufacturing in the US was declining, but that is no longer the case. The lower of US wages, energy concerns and our continued productivity compared to the rest of the world make the overall sector on the edge of a growth spurt. Industrial real estate will have to be upgraded since the new plants will have many fewer semi-skilled workers but more robots and highly skilled employees. This knowledge-based manufacturing will be suited to the Northeast, West Coast and Midwest markets. Any new large-scale plants, such as car manufacturing, will be located in the south where there are cheaper land and labor costs.

The office sector will continue to improve. New York has shown that it has the resilience to adapt to changing times. Tech companies are coming into the City in increasing numbers. Along with other more traditional office users, the City has rebounded nicely from the depths of the recent recession. Other cities such as Atlanta and Los Angels has not yet turned around. Chicago is making steady, despite unspacular, progress in the office market. All in all, as long as the office property has modern infrastructure, there should be little problem in renting.

However, I do see continued problems for the retail sector. It was over-built at the time of the recession, and the supply is still greater than demand. Absorption of locations will be slow and, in some markets, it will be years before equilibrium has been achieved. Areas such as Manhattan or downtown Chicago have little to fear, but from strip centers to conventionalalls, I would urge caution before buying.

Finally the multifamily sector has been doing quite well. As more and more people were precluded from buying, renting became their only option. As rents rise and the economy improves, more people will want to own again. However I believe that the under 40 generation will not as eagerly want to tie up so much of their capital in home ownership. While their parents moved to the suburbs to have children, this generation is staying in the cities. As the job market changes from one where employees remained with a company for years, the evolving model means employment is more and more fluid. They may need to move much more quickly than their parents to take advantage of the changing market. The illiquid nature of owning a house or condo may prevent them taking the next job or assignment.

I believe that the commercial market will continue to do modestly well over the next three to five years. If the federal government can get its act together, it may prove to be a very good time for the real estate industry. In fact if the mortgage interest and / or the real estate tax deduction are cut back or eliminated, then owning a home will not be as financially appealing as it is now. This will lead to more people renting rather than buying. At the same time as the economy improves so too will the office and industrial sectors. All in all, it is a good time to be in the commercial market.

Things You Should Be Aware of in Commercial Property Purchases

With the host of cooling measures rolled out in the residential market by the Singapore's government to avert a property price bubble, investors are gleaning more investment potential in commercial properties. This segment of properties is exempted from Additional Buyer's Stamp Duty (ABSD), Seller's Stamp Duty (SSD) and restrictions on foreigners' ownership – all of…

With the host of cooling measures rolled out in the residential market by the Singapore's government to avert a property price bubble, investors are gleaning more investment potential in commercial properties. This segment of properties is exempted from Additional Buyer's Stamp Duty (ABSD), Seller's Stamp Duty (SSD) and restrictions on foreigners' ownership – all of which affect the residential market.

In Singapore, there are two ways to buy a commercial property:

  • As an individual or;
  • As a corporation [via private limited or limited liability partnership (LLP)]

The subregent sections proceed to highlight key points a budding investor in the commercial property landscape should take note of.

No utilization of Central Provident Fund (CPF)

If you are making the purchase as an individual, do bear in mind that you can not dip into the savings in your Ordinary Account of the Central Provident Fund to settle the downpayment or monthly loan installment for the commercial property.

This means the downpayment has to be wholly funded by cash.

For the loan repayment, you will have to be prepared to incur cash outlay if the rental yields are insufficient (assuming that you are planning to lease out the property).

Property tax

Same as for a second residential property, or an only residential property that is wholly rented out or left vacant, the tax is a flat 10% of the annual value of the property.

But if you fail to lease out the commercial space, you may apply for a vacancy refund of the property tax. This vacancy refund also applies to a residential property.

Goods and services tax (GST)

Unlike for residential properties, the buying of commercial spaces from a GST-registered company is subjected to a 7% GST. An individual making the purchase will have to bear the GST himself.

However, if you are a GST-registered company – all companies with a turnover exceeding S $ 1million have to register for GST – you can make claims for the GST incurred on your purchases. Thus shrewd individual investors may set up companies expressly for a financial transaction, termed as Special Purpose Vehicles (SPVs), to circumvent the GST payment.

For companies with turnovers below S $ 1million, GST-registration is on a voluntary basis, subject to certain requirements. Do note that being GST-registered comes with responsibilities. Check out what these are at IRAS.

Notably, the GST can not be financed by the property loan. Buyers will have to stump up cash for this.

Rental yield and capital gains opportunities

It is estimated by Colliers Internationals that the annual average gross yield of commercial spaces approximates 5%, compared to 2-3% for residential property. However, this higher gains can be offset by the steeper maintenance cost and renovation works generally required by tenants. Typically, the maintenance charge for a commercial unit is expected to be higher than for a residential property. Also, more may need to be splurged on basic setup, particularly for shop units left out for business.

An exception are HDB shops with their lower maintenance fees of S $ 170 to S $ 250. But these properties tend to come with more restrictions such as the type of businesses permitted. Applications must also be made for renovation.

Still, small supply and strong demand can drive up the asset value of strata commercial property, making them worth buys.

In land-scarce Singapore, strata-titled shops / offices are in limited quantity because most of the commercial spaces are owned by real estate investment trusts (REITs), and many of these REITs are in turn owned by the Government through proxies. As of 4Q2011, the supply of strata-titled offices in Singapore is estimated to be of 11.05 million sq ft, making up 14.2% of the total office stock ( Bright Spot in Singapore Property Market: Strata-titled Office , Colliers International, pg 2 ). The stock of strata-titled shops also faces a similar small supply.

In addition, the slew of regulations in the residential market has diverted investors' attention to the commercial sector. Together with today's low interest rate environment, the two have fueled demand.

Thus investors can make capital gains through direct sales.

Some investors are also looking toward en-bloc sales to make profit. In April 2012, in collective sales, strata office units at Parkway Center and Burlington Square sold for $ 1,043 per sq ft and $ 1,318 per sq ft, respectively.

Beside capital gains, investors may hiring to profit from rental yields. However, official statistics on the occupancy rates for strata-titled shops and offices are not available. This makes reliable estimation of rental demand in the past, present and future difficult. Here investors should be cautious if they are looking to profit from this avenue.

All in all, with more supplies coming on-board – either from strata or non strata developments – downward pressure on property values ​​and rental is possible. Here, only selective keys are recommended.

Tenure

Commercial / shop spaces in Singapore usually comes with 30-, 60-99-, or 999-year lease. Some may be freehold. For 99-year and tenant leasehold units, buyers should be mindful that financing institutions may quote a lower loan quantum for units running low on their lease.

Loans

Borrowers for commercial properties are allowed to take a loan-to-value ratio (LTV) of up to 80%, even with outstanding residential mortgages. The maximum loan tenor typically stands at 30 years. However, loans for commercial property tend to command a higher interest rate relative to residential property loans. Like the latter, these loans come in:

  • Fixed Rate Package
  • Variable (Floating) Rate Package

The requirements for a commercial loan, however, are more stringent. For example, the LTV ratio is contingent on whether the property is for owner-occupation or investment, with the latter subjected to strict criteria by some banks. The next section explains the approval conditions in greater detail.

Credit worthiness and approval for commercial loans in Singapore

For purchases made under your name only your income, outstanding debts and credit history will be assessed. The maximum LTV ratio for a commercial mortgage is set at 80%, even with existing housing mortgages. But financing institutions will take a holistic approach in deciding whether to grant you a 80% loan.

For purchases made under a private limited or LLP company, the financiers will evaluate if the company has a cash flow record over the past few years that is sufficient to fund this investment. For instance, a company earning a monthly profit of S $ 15,000 deposits it into the company's account in a timely manner, the lenders can, thus, lend up to 60 to 80% (typically) of this S $ 15,000. In other words, you can obtain a loan up to 60 to 80% of the debt servicing ratio (DSR). This is much higher than the DSR for residential property bought by an individual.

Conversely, buying under a private limited or LLP company without adequate cash flow or profit (or if the companies are special purpose vehicles), may result in the banks requiring that the directors guarantee any loans taken by the company under their individual capacity. The directors may also need to be Permanent Residents or Singaporeans. In many cases, these directors will need to furnish documentary proof that most of their incoming are derived from that company. If they earn their income from elsewhere, some banks will not grant the loan even with them as guarantors. While others may.

From time to time, credit officers of the financiers will imposes new rules and conduct additional documentation checks. Often, credit officers may ask for more supporting documents if they want to do tighter cross checks.

References

Michelle Tee and Koh Siok Hui, Bright Spot in Singapore Property Market: Strata-titled Office , Colliers International White Paper March 2012, Web

Cost Approach Method to Estimate Value of Property

'Cost Approach' is a method that is used to determine value of property. It is a logical way and proven analysis of replacement of costs. It involves value as well as depreciation of the property. Five main steps These five steps may be helpful to elaborate cost approach: Giving an estimation of site's value. Estimate…

'Cost Approach' is a method that is used to determine value of property. It is a logical way and proven analysis of replacement of costs. It involves value as well as depreciation of the property.

Five main steps

These five steps may be helpful to elaborate cost approach:

  1. Giving an estimation of site's value.
  2. Estimate the replacement cost on effective date of appraisal. Reproduction cost can also be used in specific situation.
  3. Estimate accrued depreciation that was caused by improvements due to any reason.
  4. Estimate total depreciated cost by deducting accrued depreciation from reproduction cost. Replacement cost can also be included, if it is applicable.
  5. Giving an estimate of property value by adding value of the site to the total depreciated cost.

These simple steps are involved in cost approach method.

Land evaluation

Evaluation of land is the most complicated and difficult calculation of all. A popular method is termed as different names like the following:

  • Extraction
  • abstraction
  • Allocation

In each method, value of property and tangible improvement is subtracted from the total value. It helps determine land value accurately. Objective and subjective value is taken, when cost approach method is used. Number-crunching to make calculations is objective. Site valuation is normally based upon subjective data, which is comparative analysis.

Land residual

Land residual method is used to estimate surplus productivity. It refers to subtraction of costs like labor and capital outlay. It is then attributed to the land. In this way, its value is determined by capitalization process.

Structure evaluation

Cost approach method is used to evaluate unique and special-purpose properties. It is used due to lack of comparable sales. Replacement costs per square foot are calculated using current market rates and materials.

when depreciation is calculated, reproduction and replacement costs are noted. Reproduction costs help estimate newer structure value. Replacement costs are used to determine value of older properties. The entire process is carried out by experts only.

Depreciation and obsolescence

Depreciation means loss in value or diminished utility because of any physical causes. Various factors can be the reason. These are functional obsolescence and normal deterioration of aging. Accrued depreciation is calculated to determine value in 'Cost Approach' method.

There are many factors that can lead to accrued depreciation or diminished utility. Careful cost and analysis is used to determine deficiency. Obsolescence can occur due to external as well as internal factors. They diminish property desirability or utility and its value as well.

Yield Capitalization Explained

Yield capitalization is a method for opinions of value. It is also known as discounted cash flows and pro forma modeling. It is one of the four most commonly used methods of determining the value of a property. Other three methods are Direct Comparison, Cost Approach, and Direct Capitalization. Each of these has a different…

Yield capitalization is a method for opinions of value. It is also known as discounted cash flows and pro forma modeling. It is one of the four most commonly used methods of determining the value of a property. Other three methods are Direct Comparison, Cost Approach, and Direct Capitalization. Each of these has a different procedure of implementation, and is suitable for varying types of commercial properties.

Difference between Yield Capitalization and Direct Capitalization

Main feature that differentiates yield capitalization from Direct Capitalization is 'time period'. The former takes more time for analysis. It produces more dynamic representation of cash flows, and not for a single year cash flow. In this method, calculation for several years is made rather than for a single year. It is shown in one pro forma statement that claims mortgage payment and all other related expenses in restructured income as well as expired statements.

What's included?

In yield capitalization, experts assess the value of a projected income stream from discounted cash flows. This procedure converts future income from a property into a present value. This is rented out by discounting the income from each year with an appropriate discount rate. For the assessment of irregular income streams, variables are anticipated and taken into pro forma statements. Rent increase is one of the most common variables in commercial real estate. In Yield Capitalization, the amount and timings of cash flow are considered. It also involves growth or decline in value of assets.

What is Cash flow?

It is the pattern of income and expenses of a company or an individual. It is the net income or cash receipts from a single or multiple assets in a given time period.

Popular among commercial real estate owners

Yield capitalization is highly popular. Realtors and investors relly upon this method of property evaluation. This is because it provides accurate estimates that are near to the factual data.

Statement sample

A typical statement in Yield Capitalization involves several calculations including mortgage, potential rental income, operating expenses, non-operating expenses, gross operating income, net operating income, marginal cash flows and so on. All calculations are carefully made to get accurate results.

Advantages and disadvantages

All methods of opinions of value have their pros and cons.If you implement Yield Capitalization method for property value estimate, you will notice that it results in higher prices for the sellers. It joins new buyers. It suits sophisticated customers only.

Investing in Commercial Real Estate – What Is the Cap Rate?

The cap rate is a vital but often misunderstood key to successful real estate investing. When evaluating an opportunity, your first question is likely: What is the cap rate? To use it wisely, however, it's important to know what the capitalization rate actually means and where it adds value. The cap rate, short for capitalization…

The cap rate is a vital but often misunderstood key to successful real estate investing. When evaluating an opportunity, your first question is likely: What is the cap rate? To use it wisely, however, it's important to know what the capitalization rate actually means and where it adds value.

The cap rate, short for capitalization rate, measures the ratio between the first year's net operating income and the property's purchase price. The ratio is expressed as a percentage and involves three variables: value, interest rate percentage, and net operating income. For example, if you purchase a property for $ 1 million at a 9 cap, you can expect to make $ 90,000 in net operating income within the first 12 months. This investment measure tells you what percentage of your cash purchase you can expect to earn back in the first year.

The lower your capitalization rate percent, the lower your net operating income return will be in the first year. As interest rates decline, it is not uncommon to see rates go down, but when interest rates go up, rates will follow.

Advantages

What is the cap rate best used for? Investors apply this common investment measure as an initial screening to quickly evaluate, on an all-cash basis, whether a property is worth a closer look. You can also use it to further characterize marketed properties. For example, if you know only the rate and the sale price, you can determine the net operating income. You can also plan your exit value with a terminal cap rate.

Pitfalls

Cap rates are only as valuable as their accuracy, and you should be aware of the shortcomings of this approach. Unfortunately, many property marketers miscalculate rates and inflate the investment potential. Many inaccurate cap rates, for instance, result from a faulty net operating income figure. Also, it can not tell you some information vital to evaluating an investment opportunity. This common investment measure will not reveal performance after the first year or if people are willing to pay your rate. It also does not take into account your taxes, debt, and transaction costs. Above all, the widespread errors in advertised figures make it difficult to discern which are accurate.

Your best defense is to know your target cap rate, which is a number unique to your investment situation based on your own debt and cash on cash return assumptions. Well-established formulas can help you determine the right investment measure independent of market trends. By owning the calculation process, you can more accurately value properties and set appropriate exit calculations.

4 Tips on How to Find Commercial Real Estate

Many investors believe that commercial property is one of the most lucrative fixed assets. People can build houses almost anywhere, but there is a limited inventory of commercial buildings in suitable locations. However, these properties remain somewhat harder to find than single-family homes or condominiums. Some owners and real estate agents do not advertise them…

Many investors believe that commercial property is one of the most lucrative fixed assets. People can build houses almost anywhere, but there is a limited inventory of commercial buildings in suitable locations. However, these properties remain somewhat harder to find than single-family homes or condominiums. Some owners and real estate agents do not advertise them in many places. These tips can help investors learn how to find commercial real estate:

1. Newspapers, magazines and booklets often contain advertisements for commercial properties. Some ads appear in business journals and other publications that investors read. Major newspapers typically have commercial realty categories in their classifieds. Look under “land” or “acreage” for undeveloped lots. Some buildings may appear in box ads that are separate from the categorized listings. Do not forget to search for commercially zoned homes that businesses could use.

2. Some buildings have remained on the market for several years. The owners or brokers may have stopped buying newspaper ads on a regular basis. To find these properties, walk or drive through a nearby commercial zone. Make a list of lots or buildings with “for sale” signs, and write down the phone numbers. Be sure to take notes about the size, condition and features of each building.

3. Investors can ask local real estate agents to help them find suitable properties. Many firms offer a mix of commercial and residential real estate. Some large towns and cities have agencies that specialize in commercial realty. Keep in mind that some sellers do not list their buildings with agents. It is more difficult to find ads for these properties, but the prices tend to be lower.

4. Use a computer or mobile Internet device to find this type of real estate. Many major classified and realty websites provide commercial listings. Consider using websites that list foreclosure properties as well. Look for news articles about businesses closing. The buildings may soon be available for purchase. Smartphone users can download commercial property search apps. This software makes it easier for people to obtain property data when they're on the road.

Investors need not limit their investment searches to properties that are currently for sale. Many people own land or buildings that they might sell if someone expressed interest in making a purchase. After discovering how to find commercial real estate, it is helpful to learn more about selecting properties and submitting offers. Online investment courses provide a convenient source of information.

Property Asset Management – Property Appraisal Reviews and Value Tracking

The value of the property investment is the single most important piece of information to the Property Asset Manager. True mark-to-market value of each position in a portfolio is critical to the property fund's market-timing strategy. I find that a significant number of property appraisals are either incomplete or have biased values. The essence of…

The value of the property investment is the single most important piece of information to the Property Asset Manager. True mark-to-market value of each position in a portfolio is critical to the property fund's market-timing strategy.

I find that a significant number of property appraisals are either incomplete or have biased values. The essence of the desktop assessment review is to ensure the logic and procedures used in the valuation report are valid and lead to a sound value conclusion; and, the assessment report is complete and properly conveys the approach and data. The assessment review consists of two steps; initially a desktop audit and then a field review if the appraisal is determined to be problematic.

A desktop audit is a low-cost initiative to review the appraisal report without a field inspection of the property and it is usually limited to the data presented in the valuation report. Specifically, the audit confirms:

  • The property appraisal complies with the instructions provided by the client;
  • There are no inconsistencies observed in the appraisal report;
  • There is no faulty reasoning observed in the report;
  • The appraised value is reasonable as compared to market benchmarks.

While desktop audits can be expensive through traditional channels, there are several business process outsourcing firms that do an excellent job at a very reasonable cost. If the appraisal desktop audit reveals the property or market data is questionable, a field review is performed through traditional property supply chain channels, or alternatively, a new assessment report is ordered utilizing a different property appraiser / valuer.

Once the appraisal report is fully understood, I advocate that property fund managers perform a quarterly appraisal review by updating leases and by doing a mathematical construct to update the discount rate to reflect capital market conditions. In rapidly changing markets, annual valuation updates by an independent appraiser are recommended; but, in stable markets, the quarterly update process is normally sufficient to perform value trending for up to two years without having to independently value the property. For institutional property funds, governance rules most often dictate valuation timing.

In conclusion, Property Asset Managers should not assume property appraisals are correct and should always initiate proper due-diligence measures. An assessment desktop audit is an inexpensive initiative to confirm the assessment report is properly prepared. Once the value shown in the property appraisal is verified, quarterly updates can easily be managed to regularly estimate property values.

‘Income Approach’ Method to Determine Property Value

The income approach is a method by which you estimate the value of a property. It involves capitalization. Net income of a property is capitalized into a specific value. Types of capitalization Two forms of capitalization are used in commercial real estate. These are: Direct capitalization Yield Capitalization Direct capitalization is calculated from one year…

The income approach is a method by which you estimate the value of a property. It involves capitalization. Net income of a property is capitalized into a specific value.

Types of capitalization

Two forms of capitalization are used in commercial real estate. These are:

  1. Direct capitalization
  2. Yield Capitalization

Direct capitalization is calculated from one year income projection. Yield capitalization is determined through analysis. This involves extended time period. One-year income and expense statements provide basis for estimates. This helps form opinions of value on direct capitalization. In yield capitalization, cash flow predictions of several years are considered.

Cap rate

Cap rate or capitalization rate is an important tool in commercial real estate. It is used to compare investment properties. To assess cap rate, a simple calculation method is used. The net operating income (NOI) of a property is divided by its fair market value.

Six steps

Mainly these six steps are involved in the Income Approach:

  1. Estimating potential rental (gross) income.
  2. Calculating effective gross income.
  3. Calculating gross operating expenses.
  4. Calculation of net operating income (NOI).
  5. Choosing appropriate capitalization rate.
  6. Capitalizing NOI (net operating income) into a value estimate.

The most vital element that is needed for the six steps of the Income Approach is restructured statement. It shows income as well as expenses.

A one-year analysis of property income and its expenses is calculated. All important adjustments are made that are based upon comparable properties. This method is also used to produce extended cash flow forecast for a duration of many years.

Things included in 'reconstructed operating statement'

In a typical restructured operating statement, income and expenses that includes property taxes is considered. Mortgage payments are excluded.

Net operating income (NOI) of a property is determined and divided by its fair market value. This is carried out to assign cap rate or capital rate. These things are included in a typical appraiser's reconstructed statement:

  • Rent collection
  • Additional income (parking, laundry)
  • Total gross income potential
  • Effective gross income
  • Operating expenses: realty taxes, superintendent, janitor, electricity, fuel, water, maintenance and repair, insurance, painting and décoration, elevator maintenance, management, supplies, legal and adult and so on.

Opinions of value are estimated by experts only. They use typical and prevalent methods to determine exact value of a property that is near to the factual data. Having an expertise in commercial real estate is crucial to make the right estimate on time. Get professional services to carry out this method accurately.

What You Should Know About ‘Opinion of Value’?

'Opinion of value' is term often used in real estate market. It refers to the estimates that realtors give about value of the property. Several methods are used to reach at a realistic figure and precise conclusion or value. This is usually the beginning of the listing process. Direct comparison 'Direct comparison' is the most…

'Opinion of value' is term often used in real estate market. It refers to the estimates that realtors give about value of the property. Several methods are used to reach at a realistic figure and precise conclusion or value. This is usually the beginning of the listing process.

Direct comparison

'Direct comparison' is the most commonly used method of all to estimate property value. This is a simple way in which you compare desired property with similar properties in the same location or in equal locations that are geographically similar. To see important disparities in various features of the subject property, dollar adjustments can be made. This helps give value of each property to the subject property. When these differences are carefully taken into consideration, you can reach at a meaningfulful solid estimate that is near to the fact.

Main differences

When doing direct comparison, these differences are usually noticed:

  • Location
  • Age of the building
  • Income and expenses
  • Time adjustment for conditions in market
  • Added features such as escalators, elevators, recreational areas, parking facility and so on.

To find these values ​​accurately, you must have ample market knowledge as well as real estate expertise. It will create precise 'opinion of value'.

Why use direct comparison

So far, 'The Direct Comparison' method is the most commonly used of all in real estate. It helps make the most accurate estimate when two conditions are fulfilled.

  1. A property market should be active to give data that is reliable and can be verified.
  2. Similar properties should exist in the same region, where subject property is located. It will help make genuine and real comparison perfectly.

In case these conditions are not met, you can use other methods to produce a valid estimate. Cost Approach is another way.

Direct comparison method is the most commonly used of all because of several reasons. It is easier to understand for buyers as well as sellers. It is also legally approved by the law, which means it is admissible in the courts. Conclusion may not be as good as the data; therefore, some other sources can be used to make correct analysis. Other options can be brokerage files, mortgage brokers, land title office records, industry publications and sales record taken from the relevant department or agency. These will help make the right estimate that is near to the real facts and figures. Direct comparison method is used by experts only.

Real Estate in Egypt – Make the Most of the Boom

Real estate in Egypt is looking up these days and there are plenty of fantastic options available to buyers or renters. When it comes to real estate Egypt offers a very wide price range. There are plenty of compounds in new Cairo where discerning people can find the perfect place to live in, albeit at…

Real estate in Egypt is looking up these days and there are plenty of fantastic options available to buyers or renters. When it comes to real estate Egypt offers a very wide price range. There are plenty of compounds in new Cairo where discerning people can find the perfect place to live in, albeit at very high prices. Of course, there are many options for affordable rent apartment in Cairo as well.

People looking for luxurious villas and apartments for sale in Cairo need to know where to search. As a matter of fact, the task will be made much easier if they have the assistance of a good real estate broker.

There is a growing trend to go online to locate the perfect villa or apartment for sale in Egypt. This too is very useful and convenient and can help the house hunter save a great deal of time and effort. One needs to examine many different options before narrowing down to the apartment of villa to be purchased.

A person looking for a luxurious villa for sale in Egypt should look in Cairo's upmarket districts of Maadi and Heliopolis. Not only are the houses here beautiful but there are many schools, colleges and fancy retail options within very easy reach. In fact, there are many international schools within easy reach of these places. The people living here tend to be very cosmopolitan and this makes either district a good choice for a person who is moving to Cairo.

People who like the security and convenience of a luxurious gated community should look no further than Cairo's Katameya Heights . This fancy new development is located in New Cairo City and is a mere 20 minutes' drive from Cairo's International Airport. It is also equidistant from Maadi and Heliopolis.

Real estate in Egypt is anticipating a big jump since the economy is looking up these days. An investment in an apartment or villa is sure to give very good returns within a reasonable period of time. Since the economy is fairly robust it should be very easy to get renters for a house that one owns.

The services of a real estate broker will come with a fee but most experienced investors do not mind that at all. The estate agents fees are to be considered an investment that will provide good returns since it enables the buyer to pick up the best possible real estate in Egypt.

Mortgage Debt – Commercial Property Mod Or Home Loan Modification Leads To Mortgage Foreclosure

When it comes to commercial property or home mortgage debt, the risk of downgrading is a constant threat. In general, the refinancing loan or modification will have a lower interest rate in the short term. With a mortgage loan modification, within a period between 2 to 4 years, the interest rate will become higher than…

When it comes to commercial property or home mortgage debt, the risk of downgrading is a constant threat. In general, the refinancing loan or modification will have a lower interest rate in the short term. With a mortgage loan modification, within a period between 2 to 4 years, the interest rate will become higher than it is currently and your monthly payments will increase. This is due to an interest rate increase hidden in fine print of a mortgage modification.

Let it be known that the bank servicer, soliciting your monthly payment, or trustee, doing the foreclosure, are just third party debt collectors and do not hold or own the note and mortgage and are not authorized to give the commercial property or home owner a mortgage loan modification.

It's a true, but disturbing fact.

Too many people are being harmed or ripped off by the bank servicer or trusting pretending to be the holder and owner of your commercial mortgage or home mortgage and promissory note. These private entities are nothing more than 3rd party debt collectors just like credit card debt and other debt collectors under Federal law. Debt collectors are not authorized to collect monthly payments or to foreclose on a home or commercial property.

It is also important to know that your existing mortgage interest and payments, in the course of time, may lead to mortgage foreclosure. A mortgage loan modification, as the name suggests, is to modify the terms of an existing mortgage contract. When the Lender sold your note and mortgage into a trust or to another bank entity, this fulfilled and completed your original mortgage contract and note, because the lender received full payment just like your mortgage contract states. Look at the “Release” section of your mortgage contract and you will know the truth.

Your mortgage contract will also inform you that the note and mortgage must stay together to be legal and legal under Federal and local laws that govern it. Your note and mortgage were unlawfully separated just after your closing. Why else would the lender record the mortgage contract without the promissory note? This is because the note was approved and cased, just like a check, in order to securitize it to sell it multiple times to get the face value of the note many times.

What you may not know is that when your mortgage and note were sold by your lender into a trust, that the note and mortgage were most likely separated and you would need a securitization audit to determine if this were true.

Changing the terms of the mortgage loan, not the note, the borrower has a large disadvantage. There are many foreclosure procedures and fighting the foreclosure with an administrative procedure that is binding and legal under both Federal and State laws that has worked for homeowners and commercial owners.

There is only one notary administrative procedure, combined with two other steps, that satisfies the four corners of court pleadings and the clean hands theory and is a proven process to obtain a satisfaction of mortgage and a mortgage lien release signed by a Judge. At the present time, this administrative process is flying under the bank foreclosure if you do not have a date of sale.

Commercial Real Estate and Water Features – Don’t Forget Water Clarity and Visibility

More so now than ever homebuyers and those who may purchase commercial real estate are quite concerned with the local environment. They will drive around the block if they're going to a purchase let's say an apartment complex and look around in the alleyways for graffiti and trash. They will go to the local Park…

More so now than ever homebuyers and those who may purchase commercial real estate are quite concerned with the local environment. They will drive around the block if they're going to a purchase let's say an apartment complex and look around in the alleyways for graffiti and trash. They will go to the local Park and make sure there are no bums sleeping on the benches. They will drive by the bus stops and look at what sort of characters are waiting to get on the bus in the nearby area. They will look at the water features and ponds, looking for trash and debris. This very much matters.

Every commercial real estate person knows this, and has inherently considered these facts when showing property. Sophisticated and accredited investors and buyers of this type are not easily fooled, they will drive around themselves and look in see what's going on, and they will have aerial photos, look at Google Earth, and they will check in every nook and cranny. They will look at police reports, city master plans, nearby superfund sites, EPA violations at companies, air quality, and everything else, they leave no stone unturned.

There was an interesting paper in the American Real Estate Society Journal, ISSN: 0927-7544, titled; “A Survey of House Price Hedonic Studies of the Impact of Environmental Externalities,” published in December of 2009. The research paper noted much empirical evidence, as the paper “reviews existing studies that have used the house price hedonic technique to estimate the prices that consumers are willing to pay for environmental goods such as air quality, water quality, and distance from toxic or potentially toxic sites. ”

This is known, and after reading this paper it reminded me of a friend who wanted to sell his commercial property along a man-made lake out here in California. Certain times of the year the algae growth is abundant and the water outside the patios of the office complex and errant restaurants is murky. Not so impressive to someone who might sink $ 10 to 20 million to purchase and upgrade the location.

To make a long story short, he needed a viable solution, very quickly. Our think tank was able to provide him with such, a special paddlewheel set into the water to help it better circulate. Also, a waterspout feature was put in which helped move the water around even more so would not become stagnant. This alone helped increase the value of the property almost right away. Something which is very important if you want to get patrons to the restaurant, and to show off your water features which accents your commercial property. Indeed I hope you will please consider all this and think on it.

Second Citation: “A Survey of House Price Hedonic Studies of the Impact of Environmental Externalities,” by Melissa A Boyle and Katherine A Kiel. 01/01/2001 Journal of Real Estate Literature 117-144.