Being in the position of being able to seek out a property investing dream is something that many people are never going to get to experience. Even if you do have the money to drop down on an investment property, you may not be in the position of being able to give up all of the money at one time. This is where a financing company or credit lender are going to come into play. You can take the money that you are putting down onto the property and take it to the lender as collateral. What this is going to do is allow you to borrow a loan for the rest of the money on the price of the home or even allow you to purchase a much larger home to invest in. As I am sure you are aware, the amount of money that you invest is directly related to the amount of money that you get returned to you once you sell the house. Before all of that though, consider the projects that you are going to be needing to accomplish on the house in order to properly notify the bank or lender to the amount of money you are going to need to borrow.

If you are planning on investing in properties that need large amounts of work in order to be sold on the open market again, then you are going to want to take this into effect before you begin negotiations with a bank over your loan. This is a solid investment strategy because you can often find these houses in dilapidated condition, often requiring massive amounts of work in order to be able to list it for sale again. If this is your case, you are going to want to determine exactly what type of work needs to be completed on the house in order to get it ready to sell, and then contact a few contractors to get some estimates. You are going to want to take these estimates to the creditor and show them what you plan to do with the property, as well as the costs you have projected for it. They can add this amount into the total cost of your loan so that you don’t have to pay for any of this construction work out of your own pocket, yet.

You will have to pay back the loan on the investment property you have chosen, either by means of you remaking the monthly payments, or by leasing out the property to tenants that can in turn pay the mortgage payment, and maybe even a bit more, to help you recoup the cost of the loan over time. If you have money that you can invest and leave sitting in one spot for a few years, investing in rental properties is a great way to make back your money. Seeking out financing for these types of investment properties is generally easier than finding loans for larger apartment units or commercial real estate property.

When considering a commercial property investment it is wise to set some standard rules for the review so that you can compare opportunities that the various properties bring you.

Investment properties typically exist in the retail, office, and industrial property markets. We will not go into the other property types of tourism and leisure here in this article as they themselves take more comment and lengthy review.

Here is a useful list to consider with investment property.

Some Key Property Concerns

Rent: The levels of the existing rent are important to the investor or landlord but more important are the levels of rent in the future. It is a matter of what rent escalation the lease allows for and in what time frame. A good lease with a good rent review profile in a sound and well managed property will always attract property investors. Outgoings: These are the property running costs. Importantly they should be in balance and in comparison to other properties of similar types in the same region. If the outgoings are out of balance to similar properties then you need to know why as any astute property buyer will ask about the outgoings. They know what are the averages of outgoings in the area and will not want to pay above the average unless there is a solid and sound reason to do so. Supply and Demand: How much other property is coming into the market in the next few years? Will that property affect the property that you are looking at? Could this impact on the tenant profile or interest in your property? This equation or consideration is called supply and demand. It will impact on buyer and tenant interest in the region in which your property is located. Location: Does the property give good exposure to passing traffic or customers and does it have good access for people and motor vehicles? Add to this the consideration and availability of car parking. Design: Is the property user friendly and attractive? A good property investment usually looks good and is well maintained. This is to maintain interest in the property from the tenant and the customer perspective. If these people feel good about the property when they visit it or use it, then you are well on the way to good property performance. As part of this process you can conduct interviews with people as they use the property to see and identify any latent concerns. In the case of retail property this is highly recommended as retail property is strongly geared to the sentiment of customers. Amenities: Are you providing everything that a modern business, tenant, or customer needs? Amenities are many things and it really depends on what the property is doing or serving. Most people that use the property expect ease of use and access to the amenities including toilets, car parks, common areas, etc. Retail property has a higher level of consideration in this category. Services: Are your property services modern and performing well? This would include water, gas, roads, electricity, lighting, telephones etc. Parking: Are customers and tenants well served with respect to the parking of vehicles? Ease of access to the property is critical and at a premium today. Motor vehicles are part of business and life for all people. If parking is not well catered for on the property then the interaction of the property with public transport is critical. Tenant Covenants: This relates strongly to the leases and documents of occupation on the property. The word covenant relates to the clauses or lease terms. Every lease can be different so it pays to read all occupancy papers or leases. Are the leases and tenant profiles strong and attractive to future occupancy? Tenancy Mix: Perhaps this is more critical in a retail property however it can have impact in an office property. Some landlords must be very careful as to the tenants that they select for a building. It is quite possible that a low profile and poorly selected tenant will detract from the customers that visit the building. Other tenants will also then become concerned and potentially have little interest in ongoing occupancy. This then says that not all tenants are good tenants for the property. Add to this another question of proximity and placement of tenants to each other. Are the tenancies well balanced to satisfy the customer demands? Can tenants that are located near to each other affect each others business through impact of customers, product, service, hours of trade, or staff? Management: The strength and processes of a property management team will make or break a property. The property management processes will impact on so many things including rent, operating costs, tenant sentiment, and lease stability. For this reason ask the tenants about the property management experiences that they have seen over recent time. Any negative comments should be explored for hidden problems. Lease Agreements: Are they landlord favorable and do they provide long term attractive and stable occupancy? What is the length of tenure or terms of all the leases and do they expire at the same time? Does this present an issue to the landlord as to property stability and exposure? Transport Routes: All modes of transport to the property should be looked at. Make your assessment as to whether they are convenient and modern. Do they serve the tenants and the customers to the property and how is that done? Source raw materials: In the case of industrial property the access to raw materials can be an issue for the tenant. What raw materials are needed by the business or tenant and can they get to them easily? Power Supply: Industrial property will usually need a serious amount of power for machinery on the property. Access to that power is a decision factor for the tenant that occupies the premises. Ask the local power authority if 3 phase or high tension power is nearby or available. Labor Availability: Business tenants need a labor source as part of their operation. This labor supply needs to be stable and convenient. This is why businesses are located near to transport corridors on the radial road points to a city or town. Is the labor market nearby and active? Can that labor supply reach the property easily? Public transport will enhance this situation. Goods end market: If your tenant is to manufacture anything, they will need to move it to their customers. How close is the product buying market for that tenant and how will they get to it? Is the market for the tenants goods or services growing and strong? Rent and Vacancies: These are always a concern in investment property and need monitoring. Shifts in population and zoning regulations regards property can quickly shift the attractiveness to occupy a property. Pre-lease market: These are the newer properties that are coming on the market soon. They are usually keenly priced or rented and will impact on other existing property in the area. The property investor or developer in the newer property has one goal only and that is to fully lease the finished property as quickly as possible. Expect them to chase the tenants in your building. Owner Occupiers: Investment property moves in cycles between renting and ownership. Many businesses will do either depending on what is more attractive to them in the economic conditions prevailing. Investors demand: The balance between the property market and the share market is interesting to monitor. Investors move into property when they need longer term investment stability. If the share market is volatile and unpredictable, then property investment moves to the front of the line and becomes the investment of choice. The only problem investors can have is in getting the finance from the banks when they need it. This movement between investment types says that you should monitor levels of return that are possible between shares and property. Corporate Businesses: Major businesses like to off-load capital from balance sheets. This means a potential sale and lease back of property from time to time. This is also usually done when the property is in the last stages of use or need for the tenant. They may sell the property and take a lease for a term of years whilst they create the next level of property strategy. Always look for tenants and businesses that are in the stages of change or flux. Mergers, acquisitions, expansions, contractions, etc. all create pressures on the property that the tenant may occupy.

Commercial property is like every other industry. The more you specialise, the more you bring value to your client, and the more ‘in demand’ you are. So what is your key market and how do you specialise to a point that you are better than the other real estate agents in the area?

Research must be specific to your customer and particularly your target market. Understanding and focusing on your target market is important to productive marketing. You cannot be good at everything in commercial property nor should you be. Decide the market segment in which you wish to work and then focus.

For example:

Office property sales and leasing Industrial property sales and leasing Retail property sales and leasing Specialised Leasing for corporate clients Tenant advocacy and relocations Corporate portfolio control or strategic planning Sales of specialist properties such as tourism related Property Management for offices, industrial parks, and shopping centres Corporate premises sourcing or relocating Small investors in building diversity in portfolio Industrial parks and regions New developments of special types

Specialising does build your personal brand fast. You get known for doing special things in a particular market and property type. Soon the market knows that fact and will seek you out. Providing that your market and location has enough raw stock in your ‘specialty’ then the process works well.

Today we are blessed with powerful yet inexpensive marketing tools such as the internet and telephone directories. Everyone can access them. The ‘Yellow Pages On-line’ is a good source of business opportunity for commercial sales and leasing people. This then becomes a significant and effective tool in the research process. Commercial property revolves around ‘businesses’ as occupants in property. The more you know about the businesses in your market, the more you will know about the property matters on the horizon of change.

Business people will tell you a lot about the landlord of their property, and their occupancy needs. If the business that you talk to happens to own the property in which they are located then they are an obvious target for future opportunity for sale or expansion of that property

The internet can be searched by the business type, name, or location. Putting all of these factors together your research becomes very specific to the people that you wish to talk to and in the areas of focus. By using the internet and the business telephone books, in just a short period of time a new commercial real estate person can easily create a list of targets for immediate action.

At present, there are already a lot of ways to gain money through having businesses. During the last couple of years though, a noticeable heightening in the area of property investments has been noticed around the world. Talking in safe estimation, it can be concluded that businesses in the field of real estate have incredibly made a mark on lots of investors all around the globe. The said reason of this increase, obviously, is the large profits that an individual can get by investing their money in properties. However, there are still a number of people who still feel apprehensive in putting money in buying stock exchange shares because of the unpredictable fluctuations happening in it. Unlike other business explorations though, investing in properties are said to be much more safe and promising if people will just take note of some suggestions to protect and maximize their money. The number one job in this area comes in the selecting of property which shows good potential in varying uses.

People who want to enter the world of property investments should already have some plans ready in using the property even before they purchase it. The main goal in investing in property should also be constantly remembered. Individuals should have goods for investment and not just to include it on their list of reserves considered as passive. Thus, the investor should constantly keep track of the pros and cons of the business they will enter before making any finalization of decisions. For example, it is very important to consider elements like the length of time a person is willing to keep the property and his level of willingness when it comes to maintaining it. When it comes to searching for properties the classified ads section in newspapers as well as websites advertising property information are very useful tools to start the hunt. Websites are very effective because they provide comprehensive information which may be entirely useful for people who have already decided on their investment programs. In some counties, property auctions are provided to investors which are very useful in giving information on competitive rates.

Once a person already have some property investments, he can now start adding more investment properties in his collection by using the equity in the first property in his purchase. The term equity refers to the market value of the investment minus the amount that the investor still has to pay together with the liens. It is usual to borrow equity against the property though the rates for loans like this is considered as competitive in nature because the property will be used as collateral for security of the loan. Consequently, the lower the risk in lending, the higher the possible rates will be. There are also times when invested properties are bought with a tax sale. This usually happens when the owner fails to pay fees for some time. In situations like this, the property he owns will be auctioned. In the auction, an investor offers a minimum bid that is appropriate to support the back taxes while still allowing the investor to buy the property at a low cost.

How much real estate math do you need to know if you are investing in real estate? There are computers and calculators for calculating interest rates or amortizing loans. What you need to know is a few simple formulas for determining if a property is a good investment or not.

The Real Estate Math You Don’t Need

The gross rent multiplier is one formula you don’t need. I bring it up because people are sometimes still using it, and there are better ways to estimate value. A gross rent multiplier is a crude way to put a value on a property. You decide that properties are worth 10 times annual rent or less, for example, and simply multiply the gross annual rent a building collects by ten to get your value.

There are obvious problems with this formula. You need to constantly change it to reflect interest rates, because a property might be profitable at 12 times rent when interest rates are low, but a money loser at eight times rent if the financing is expensive. Also, there are just plain different expenses for different properties, especially when some include utilities in the rent, for example. Gross rent doesn’t say much about the factor that makes a property valuable: the net income.

Real Estate Math You Need

Rental properties are bought for the income they produce, so this is what your real estate valuation should be based on. That is why your real estate math education needs to start with the how to use a capitalization rate, or “cap rate” to determine value. A cap rate is the rate of return expected by investors in a given area, or the rate of return on a property at a given price.

An example might make this clear. Take the gross income of a property and subtract all expenses, but not the loan payments. If the gross income is $76,000 per year, and the expenses are $32,000, you have net income before debt-service of $44,000. Now, to arrive at an estimate of value, you simply apply the capitalization rate to this figure.

If the normal capitalization rate is .10 (ask a real estate professional what is normal in your area), meaning investors expect a 10% return on the value of their investment, you would divide the net income of $44,000 by .10. You get $440,000 – the estimated value of the building. If the common rate is .08, meaning investors in the area expect only an 8% return, the value would be $550,000.

Simple Real Estate Math

Estimated value equals net income before debt-service divided by cap rate – this really is simple real estate math, but the tough part is getting accurate income figures. Is the seller is showing you ALL the normal expenses, and not exaggerating income? If he stopped repairing things for a year, and is showing “projected” rents, instead of actual rents collected, the income figure could be $15,000 too high. That would mean you would estimate the value at $187,000 more (.08 cap rate).

Besides verifying the figures, smart investors sometimes separate out income from vending machines and laundry machines. Suppose these sources provide $6,000 of the income. That would add $75,000 to the appraised value (.08 cap rate). Instead, you can do the appraisal without this income included, then add back the replacement cost of the machines (probably much less than $75,000).

No real estate formula is perfect, and all are only as good as the figures you plug into them. Used carefully, though, real estate appraisal using capitalization rates is the most accurate method for estimating the value of income properties. For putting a value on a single family home, you need another approach. Yes this means more real estate math to learn, but we’ll save that for another time.

Property managers are entrusted by their employers to rent only to tenants who are the most likely to respect the owner’s property and pay their rent on time. Their main job is to keep the rental property filled to capacity to earn maximum income for the owner. If you are a property manager, you need to know that the best way to do this is to require background checks on prospective tenants. Background checks can provide a great deal of information that you could not possibly know without one. An example of information that a background check can provide is; social security number check, date of birth check, evictions, liens and address verification. An applicant for rental property who is trying to prevent you from seeing their actual personal information may not even give you this basic information in its true form, but they may alter their information.

As a property manager, you may feel somewhat limited in making sure that those you rent to will make good tenants. Background checks can ease your mind, knowing that you have taken every possible step to ensure that you have rented to the most qualified tenants. With a background check, you can find out if the renter has any criminal record, as well as their rental and credit histories. Chances are that you may make a very wrong choice, if you were to rent to a *** offender or felon, yet if this information is discovered before the lease is signed, you then have a better gauge of this tenant. If you skip the background screening and this did happen, the consequences could become a nightmare for you as the property manager. The fallout of a bad tenant we all know. If you have hired a company to do a background check on all tenants, you are being more responsible, and have a stronger assurance that you have made a more informed decision

As a manager, the first thing that probably comes to mind is the extra expense that background screening will cost you. Many property managers and landlords charge an application fee to cover the cost of screening. The amount of the fee depends on how much information you need to gain. In the large scope of renting or leasing, the Fee for tenant checks is nominal. In my research you can find tenant checks for a very low investment. A background check will cost, however the cost will be less than 1% of the cost to evict a bad tenant.

If you are a property manager for commercial buildings, you can still hire a company to do a background check on the business that you might rent to. This is a commercial check, and is just as important as a check on individuals renting a one bedroom apartment. A commercial background check will let you know the credit standing of a small business so you can decide if it will be a risk to lease the property to them. You will be able to discover the company’s number of employees, annual sales, and information about the business owners.

In conclusion, 15 years ago, Tenant checks or background checks were harder to come by and certainly more expensive than today. In 2012, the way to security is being secure from day one. Spend a little and save a fortune with proper types of information. For a few dollars, you can sleep better at night, and save yourself time and money by doing a simple background screen.

Commercial property is often used as a source of profit for investors. It can provide great returns with a minimal amount of work. If you are interested in buying commercial real estate, it is important to determine how much the property is worth in terms of market value. This way you will know whether a certain piece of land will be a profitable investment or not.

What is a Commercial Property?
Commercial property consists of buildings and land that is specifically zoned for business uses, and not for residential living. This includes all sorts of establishments like industrial buildings, offices and hotels. Things like hospitals, malls, golf courses, self-storage units, and independent retail stores are all meant for commercial purposes. They generate profit for investors either through rental income or from capital gains, when resold at a higher price.

Use the Gross Rent Multiplier (GRM) to Determine Value
The value of a commercial property is based on several factors. For instance, more the building generates rental income the more valuable it is in general. This is affected by the location, whether it is in a busy popular area of a business district or whether it is on the outskirts of a town, easily accessible or just out of the way. The property’s worth is also determined by the value of neighboring buildings as well as how much of the similar type of real estate is available in a given area.

Certainly you can find out the market value of the commercial property by hiring a real estate professional, but you can make your own quick calculations to get a rough idea about the worth of a particular estate. This can be done by using this formula:

Market Value= Annual Gross Rent * Gross Rent Multiplier

To use this formula you will obviously need to find out some basic information about the land from the seller or from real estate agent listing the building. You will need to find out how much revenue the property brings in each year in rental income. That is the annual gross income.

The GRM is a ratio of a property’s sales price divided by its annual gross rents. To determine the GRM on your own, you need to get hold of a several listings for properties that are similar to the one you are considering. You find the GRM or each one and average them all together.

Once you have the GRM you will be able to figure out the approximate market value of an investment property. For example, if you know that the its rental incomes total is $100,000 for the year and the average GRM for similar properties is 8, than the value of your prospective investment land is $800,000. Using this formula is pretty accurate, and it will help you as you try to narrow down your selection of buildings to buy. Yet when it’s time to actually buy the building, you will need a professional appraiser to satisfy the requirements of your investment loan.

If you plan to purchase an investment property, you should consider getting a commercial property analysis before any real estate deal. Incomplete research can sink the deal on any real estate. You must understand everything about it before making the purchase.

Many individuals consider several factors when they get a property analysis. The location of the land is very important. Is the land in area that is appreciating? Are there other business property buildings around this place? Also, the price of the asset is very important. Are the taxes expensive? Are there any local government and zoning laws? Finally you should see if the investment property is a source of potential rental income.

All investors must realize that commercial real estate has different guidelines and regulations which must be followed different from residential real estate. You do not want to purchase investment commercial land to find out that you are not permitted to lease it to a specific type of business. You may also be prohibited from making certain improvements on your property which go against the zoning laws. As an investor, it is important to go to City Hall and educate yourself on the local governmental rules and regulations which will govern what you can do with the land. Make sure you are able to do all that you plan on the property in question. Taxes are very important to consider when you are conducting a commercial property analysis. Many local municipalities offer tax breaks or incentives for business property owners who fall under a certain business-type or industry. You may also be eligible for a tax reduction, if you meet the applied deadlines. If the region charges taxes on commercial real estate at a high rate, investors could be unpleasantly surprised…especially if they do not consider taxes in their commercial analysis.

Many lending companies participate in programs which fulfill a variety of different business and community needs. There are many issues lenders take into consideration which influence whether a loan can be granted. Such issues include zoning requirements or economic make-up of the community. Commercial property analysis professionals can evaluate many factors that can help you decide whether or not to pursue a loan for that particular site.

Since your time is very expensive, you should be efficient when contacting your sellers, lenders or brokers concerning a site. Evaluating analysis information can be time consuming, but may cost you the deal if the investigation is not done thoroughly.

Securing the appropriate documents and information for your commercial venture can be hard for you to accomplish on your own. This is one of the reasons why you may want to hire a professional. This person can allow you to maximize your time. You should be able to focus on generating profits from your investments. You should have your commercial land analysis conducted by a professional; consider employing a broker or using investment property software to help you get that commercial real estate you have always wanted.

Property-tax rates are a critical factor in real estate investment, especially for individuals seeking a vacation or retirement property, or a second home.

North Carolina’s property-tax rates, as compared to those of other states, prove to be quite attractive. To begin with, according to recent published data, interest is deductible on real estate worth up to a million dollars in appraised value — certainly a great incentive for the average-to-moderate real estate investor. Of course, it is always best to consult your tax advisors; if they are not familiar with North Carolina real estate taxes, they can most likely provide a referral.

Keep in mind that the NC tax system is regressive and was last updated in 2007. Some NC taxpayers, for example, can still deduct both income and property taxes from their federal income. Other tax advantages currently include a multiple-tax-bracket arrangement as opposed to one single rate for all.

North Carolina’s tax system is friendly toward homeowners who are over age 65. Property taxes are reassessed infrequently and remain relatively consistent. For example, between 1991 and 2000, property taxes stayed constant at 2.3%, according to published reports from North Carolina State University faculty member, Dr. Michael L. Walden. His findings further placed North Carolina 41st in tax-burden rating as compared to the other 49 states — one instance in which being near the bottom of the list is beneficial!

North Carolina also proves to be well-positioned among the fifty states with respect to tax considerations in investment and retirement planning. In this regard, North Carolina property-tax rates fall far below those of Georgia, Virginia, South Carolina or even Florida. Although this state has relatively high taxes overall compared to other Southeastern states, its property-tax burden when compared with these states is quite low. Other tax benefits become apparent upon examination of this state for either investment- or retirement-property purposes. In NC, no taxes are applied to Social Security, Railroad Retirement or VA benefits. The tax burden is further lowered for residents who are 65 or over, or who are permanently disabled. These individuals may claim a homestead-property tax exemption for the assessed value of a primary residence, or in some cases, depending on appraisal value, an even larger sum.

To appreciate a really interesting twist on property-tax incentives in this area, consider the actual tax for anyone who earns less than the eligibility limit in the current year. Essentially, the previous year’s income cannot exceed the current eligibility limit. In 2009, this limit was $26,600. If an owner’s income is higher than this amount, it can raise to only 5%. As with all investments, you should seek advice from your own legal and accounting professionals, as individual circumstances differ widely.

To sum up, there are many financial benefits available to those interested in the acquisition of land in North Carolina. Some of these are investment, retirement and tax advantages, including a property-tax liability significantly less than those of nearly forty other states. And that’s something to take seriously when considering real property ownership.

A commercial property should always be inspected first in order to comprehend its viability. After all, any given commercial property is undoubtedly a major investment that should be treaded carefully in order to avoid ending up with a money pit of sorts that has more expenditures attached to it than profit. With that said, in terms of inspecting a brand-new commercial property for your potential participation, paying close attention to the physical dangers that the piece of real estate presents or may experience is in order. Therefore, here’s a list of the risks, perils, and dangers that a commercial property can throw at you that you should watch out for as much as possible.

Asbestos Risk

Ever since asbestos has been identified as a hazard to residents inside commercial property, it has become one of the greatest challenges in selling older commercial property. The probable or established existence of asbestos in commercial property is quite dangerous because of its immediate and long-term negative effects on humans. To be true, an asbestos-ridden real property may prove to be more of a financial liability in the long run.

After all, asbestos was a widely available commercial property building product all the way to the early eighties, so if you’re getting an older commercial property, asbestos poisoning may be a very real risk. The financial burden of a property full of asbestos includes management and removal of the material as well, because in order for your commercial property to not become a health hazard, the asbestos must be eliminated post haste.

Tenant-Generated Risk

Yes, even your tenants may prove to be a risk for your commercial property as well. Obviously, caution, people skills, and foresight are required when it comes to mitigating tenant-generated risk. More to the point, there are tenants who may have high-risk businesses that could affect the overall property value of your commercial real estate. For example, they could have highly volatile chemicals in their storage vaults, so you might want to use the lease to manage that particular danger better.

A strong lease is required in order for you to lessen your exposure to liability; that is, it can be used to control and support occupancy factors so that you’re faced with less of a hazard because of your tenant’s activities. If anything within the property affects the local precinct in particular and the environment in general, then the state government or local council may be compelled to rectify the problem. A properly developed lease will allow you to avoid such hazards from implicating you with responsibility, protect your interests, and keep their tenants in line should an inopportune circumstance happen.

Precinct Risk

The precinct or neighborhood you’re in can also present some physical risks against your real estate and its occupants. Natural disasters such as flooding are among the primary risks you have to face whenever you look beyond the boundaries of your territory in order to find any potential pitfalls that can reduce the value of your given estate. Even though it’s a random occurrence, every time flooding happens, it can damage your property physically as well as financially. Ergo, investing in a flood-risk area requires a lease that holds you, the landlord, less liable if ever a flood occurs.