In commercial real estate, your ability to ask leading questions of the property owner will generate much more business for you. In simple terms the more you ask, the more you get. Desperation is not necessary, just questions. The business will follow. Most real estate agents and brokers do not ask enough questions.

Asking is not pushing; it is just getting the right information that you need and to decide if any action is appropriate. Asking is a mindset that should be encouraged as part of your constant contact with all those people in your database and in your prospecting.

When you ask, you then know that you may have information that is relevant, then ‘Pandora’s box’ opens. Then needs can be discussed and qualified questioning can occur.

The sorts of questions that you should be asking every day of property owners and tenants should include:

When will properties vacancies be an issue for you? Have you considered changing the property focus for potential sale and the future and would you like help with that? What stability do your tenants bring you and would you like help with that? How can the leases be improved to match your property holding and medium term strategy? If I could help you improve your rental returns would that be of some assistance in the future sale for the medium term? When will you need to consider further property portfolio changes? When is the property best suited for sale? What type of property do you consider as your priority in any purchase or acquisition and why? What is the rental profile like at the moment and can it be improved prior to any sale?

So these questions are just a sample of the approach that you can take with a property owner.

Prospecting for new business is sometimes viewed incorrectly. Salespeople think that they have to do a pitch every time they prospect just to attract the business. Nothing could be further from the truth. The reality is that prospecting is simply a process of identifying need. When you know the need exists, then you can ask for the listing or find out some more information.

So let’s move on from the stage one questions above, to something that that opens the door a bit more. I like the questions of:

‘Mr. Client on a scale of 1 to 10, where do you believe you are right now in your investment or property plan, given the trends of the market?’ ‘Mr. Client, if I could show you some attractive property activity locally that is coming up, when and how would you like me to make contact?’

Asking questions is the only way to generate the business in real estate agency and commercial property. Property Investors require both leasing and sales support at differing times, and you need to make sure that you are available to them at the right time.

Simply ask more questions and have a great database to keep you on top of the information that you gather. Constant contact and asking questions are the processes that you must adopt to be successful in the property game.

Commercial real estate as an investment can provide great returns, but it can also cause some serious headaches if you do not do your homework and go into the deal with your eyes wide open. Commercial property can include residential multiplexes and apartment complexes as well as more traditional business and warehouse buildings. Whether you are buying commercial real estate for profit or simply to house your own company, before you buy you should do all you can to avoid the following common pitfalls.

Have a Thorough Title Search Performed

Before making any real estate purchase, whether it is residential or commercial it is essential to get a complete title search to identify any liens or other problems with the title. The title of a property is basically the history of the deed changing hands and whether or not there are any unresolved claims to the deed by previous lenders or contractors.

A title company can research the entire history of the deed from the first loan ever made on it and make sure that any liens against the property have been paid off. They also need to make sure that no one has prior claim on the property because loans or services were not completely paid for.

Understand All the Loan Terms

There are many important terms and clauses included in a commercial real estate mortgage contract. Some of the fine print may interfere with your plans for the property.

For instance, many real estate loans require you to keep your net equity up to a specified level at all times, and other call for large financial penalties if you pay off your loan, either by paying off the principal or by refinancing, before the designated years are up.

Be sure you understand exactly what your lender is requiring of you and that the terms match your own desires as well before you sign your name on any dotted lines.

Avoid Zoning Problems

There are lots of laws and statutes governing the use of land for certain purposes. If you want to operate a business in your commercial real estate, you will obviously need to make sure to buy a property in an area that is zoned by the city for business.

You should also check the surrounding areas to see how they are zoned and if the location is accommodating enough to bring in all the traffic and customers you are hoping for.

Plan for Market Fluctuations

There are no guarantees in the real estate world. The value of both residential and commercial properties is subject to ups and downs based on economic conditions and on changes in nearby development.

You have to be prepared for fluctuating tenancy rates if you use your real estate as an investment property, or for possible changes in customer base and the values of properties around yours.

All of these factors influence the worth of your real estate as well as your ability to make your mortgage payments. Make sure you choose a property that you can easily afford even during months (or years!) when the economy is not in your favor.

The important factor that can help you predict the state’s economic achievement is its capacity to expand major industry sectors. And when it comes to this matter, everyone knows that Florida stand on the top.

Now due to the continuous influx of people in the city, there is lots of business opportunity that you can take advantage of. Most of the tourist who influx in this city gets interested with the potential business opportunity that the city can offer. This is also one of the reasons why the real estate market is booming as well as the Florida commercial real estate. With the growing population in the city, the needs and wants of people are also increasing tremendously. This give way to those people who want to establish their own business. And thinking of Florida as you business place, for sure you will never go wrong putting up your own business here. And because of the increase in business opportunity, Florida commercial real estate is also becoming very in demand.

Though there is lots of commercial property that are available in the city, it is still very important that you have to pay attention with the property that you are planning to buy. It is very important to consider all of your options with this matter. Here are some of the things that you have to keep in mind when buying a commercial property.

-Make sure that you are buying a Florida commercial real estate property in the best location. You have to make sure that choose the best location for your business. You have to choose the location where your target market is. In this way, it will be a lot easier for you to earn profit.

-Choose the commercial property that can cater the operation of your business. Choose the one that can accommodate your employees as well as your clients and customers. Make sure that everyone can move freely so that everyone can comfortably do business with you.

-It will be an advantage if the commercial property has its own parking area. Expect that there are isomers of your clients who bring their own car as they transact with you. With this it is more convenient for your customer if you have enough parking space and with this there will be a great chance that they will be back to do business with you.

Keep in mind that there is lots of Florida commercial real estate property that are available in the market. You just have to search hard so that you will be able to pin point which is best for you.

Mention the word property and most people immediately think of personal real estate such as the home they live in. There is, however, a second category of property out there known as commercial real estate and it has been in the news lately as the economic problems have spread to it as well.

Commercial property is often referred to as business property. You probably visit a structure of this sort at least once a day. It is a type of property that is very unique and important because it is a very accurate gauge of how our economy is doing. This is because it is affected by the number of people that are working, the growth of the economy and the health of the banks. When any of these factors have problems, it shows up in empty stores like we are seeing now.

The first type of commercial property is generally considered the multifamily unit. Put in more simple terms, we are primarily talking about apartments. The definition, however, can also include duplexes and other structures where multiple rentals are occurring. Multifamily properties tend to be fairly sold investments in good times and bad as people always need a place to live.

Retail stores are our second type of commercial properties. They range from small and hug malls to the local stores in your neighborhood. These stores are very indicative of the overall health of the economy. When people are out of work, these stores start failing. One needs only look around at all the empty store spaces in the malls to know things are tough now.

Office buildings are the third form of property. These properties are more stable than we see with retail properties. As such, they are an indicator of whether an economic problem is a minor glitch or something major. Given all the empty and open office spaces these days, you can tell the Great Recession and “recovery” has been a real dozy.

Commercial real estate is often given little thought as an investment focus by most people. This is a mistake. It can be a huge money maker. The key is to understand the types and how to do the investing. If you get that right, you can position yourself to make a ton of money over time. The current recession has been brutal, but it has also created a ton of opportunities given the low prices. This presents you with an opportunity to buy a steal of a deal, so don’t let it go by.

We are again coming to the time of year where budgets are being considered for commercial and retail properties. Most particularly that is the months of February to April in each year. Ideally the building budget should be completed by May in every year if the building is structured on the financial year of operation. If you keep to this time schedule, the accuracy of the budget can be checked and cross referenced with the landlord. Notices required to be sent to tenants can then be handled effectively and on time.

A good property budget in a complex building will take a number of days if not a few weeks to create accuracy and finality. This means you should start early. It is worthwhile noting and considering the other impacts of local legislation and the lease documents themselves when it comes to building outgoings and building budgets. In some circumstances, legislation and or leases dictate that notices must be given to the tenants regards their building outgoings and operating costs contribution in the coming financial period. Take care to find these situations and comply as necessary.

So the commercial property manager and the landlord need to work in harmony as part of the process. At the start of the financial year, the building budget needs to be accurate given the known information at that time.

Having a checklist for the process will always help. Consider the following as a potential checklist in a large complex building:

The tenancy schedule for the building should be checked for accuracy before you start. The only way to do this is to reference back to the leases and occupancy documentation. A poor tenancy schedule can throw you off the track when it comes to the building budget. Look for any critical dates or alerts which will come up in the next financial year for matters which affect the income side of cash flow. That will normally be rent reviews, options, lease expiries, and lease renewals. Look for changes in any lease incentives which could still be active within the tenancy occupancy. That could influence an adjustment in rental payments and any concessions. The history of property performance over the previous 12 months is critical to the establishment of a new budget. Understanding what the property has achieved over the last 12 months will have relevance to the next 12 months. An analysis of arrears and tenant defaults over the last 12 months will be useful in budgeting. The next period of 12 months should have an allowance for bad debts. The property expenditure and operating costs over the last 12 months will also have relevance to the next 12 months. When you analyse these items of expenditure, look for things which were unusual and may have inflated unnecessarily the expenditure within certain categories. Seasonal escalations of outgoings such as energy should be reflected in the relative months of the year. It is not appropriate to average expenditure across 12 months and index it upward by a CPI index. That budget is virtually useless when it comes to tracking monthly results. When looking at the history of the property, look for items of capital expenditure nature which should not have been included in ordinary operating costs. They need to be removed before the new budget is considered. Any items of capital expenditure can be handled separately in a building budget outside of standard building operating costs. Capital expenditure is a cost of the building owner after the net income has been determined. Given the nature and type of property, understand the averages of building outgoings and expenditure as they apply in your location. Importantly, your building has to stay within the averages unless there is a very specific reason to do otherwise. An in depth study of lease documentation is important when you are considering building budgets. The terms and conditions of lease documentation can have elements which impact cash flow. The property manager has to have the ability to read and understand property leases at a high level. When questions arise and any uncertainty exists, the matter can then be referred to the solicitor for the landlord for an interpretation. Given the elements of income and expenditure in a property over a predictable 12 month period, it is important to consider the levels of inflation or escalation in each case. The question really is just how much should the items of expenditure be escalated in the future budgetary period. History will give you some guidance. Care needs to be exercised when it comes to expenditure because some categories will have contracts which dictate escalations of a fixed amount. The same applies to the levels of escalation which should apply to the income from the tenants in the building. In the case of income it is easier to assess growth by consideration of the rent review terms of leases in each separate case. The rent reviews may be based around fixed percentage, fixed amount, or market reviews. They are easy to determine from an income perspective. That is where you need to read the leases and completely understand them before the budget is set.

In summary, the building budgets in a commercial building need to be carefully compared to previous financial periods and then escalations applied given the assumptions of the future. When a building budget is carefully prepared it is great management tool for property managers. Always keep notes of assumptions and findings in any budgets; they are invaluable when you have to review matters during the year.

Once the budget is set, it should be checked and assessed each month as the financial year progresses. If the budget is expected to be outside of actual performance, then adjustments should be done during the year so that the landlord knows how the building is performing.

Commercial Investment Property is usually complex in its function hence requiring a variety of skills to service. Whilst Industrial Property is more ‘basic’ in most ways, the attributes of an ‘office’ and ‘retail’ property are not as easy.

For example the elements of property investment performance that come together in Commercial include:-

Property Analysis Lease Negotiation Valuation Awareness Outgoings Analysis Tenant Negotiations Service Contracts Property budgeting Maintenance Response and planning Legislative Awareness Rating Objections for council and municipal rates Insurance Awareness and Risk Management Vacancy marketing and controls Arrears response and controls Lease interpretation Tenant placement

When all these aspects are considered, it is common to see a number of skilled people working in a Property Management Department of a Real Estate Agency to support the diverse needs of the portfolios.

The fees of a Property Management Service can and should be reflective of the high personal involvement of the broader Property Management Team. As your business grows the list of Commercial Clients and portfolios, so also should the skills and people that support the Clients.

Risk Profile of Your Investors

Investors will usually have a risk profile which must be identified in early onset in the provision of your professional services. Essentially a risk profile will be high-risk or low risk.

A high-risk property will be one that is aggressively rented with strategically high rental figures applying to the tenancies during the duration of the leases. The danger of high-risk profile properties is that the aggressive levels of rental pursued by the Landlord can become difficult for Tenants to support financially during the total duration of the leases. This can and will invariably lead to the collapse of the Tenants business and the creation of an unwanted vacancy. Consider this:

Is your Client willing to accept such risk? Can the Client’s cash flow tolerate the income volatility? Are high vacancy levels acceptable to the Client?

Some Investors prefer to take a position low risk with the establishment of more conservative rentals to produce income stability over the maximum time of the established leases. Obviously it can be said that the potential return in a low risk profile building is less by comparison to the former ‘High Risk’ profile property but the associated low volatility of the Tenant profile provides Investors with a stable long-term result. This means less active threat of unwanted vacancies. Commonly the less active vacancies in such a property, give the Investor a better cash flow.

Expansion and Diversification

Commercial Property will nearly always fall immediately into the type of category of either Office, Industrial, or Retail. Such single property for that Investor will feel the effects of any changes in the market, occupancy changes and the economy.

By example, a downturn in the national economy will quickly effect businesses and hence the Tenants in any property. This can restrict their ability to trade and pay the rent. Industrial Property is the first property type to feel pressures in a shifting economy due to the direct link to small business.

Portfolio expansion and diversification is therefore a useful and important future strategy to lessen the volatility that can occur when you own one property of a singular type. Wise Investors and their Agents encourage expansion and diversification of the portfolio as a means of spreading and reducing risk. This can form part of a true investment service to your Clients, positioning them more favorably on a variety of properties. Diversity for your Clients can mean stability.

Obviously their financial position and available cash will govern their timing and ability to do so. Your guidance in the process is both important and professional.

One of the first questions you’ll ask yourself when you are looking at a new property to purchase is: What is this property worth? That is a different question then: How much can I pay? And it’s still different then: What can I get this property for? But all of those questions need answers before you put in an offer to purchase a new property.

How an investor chooses to value a property can depend on the size of the property or the sophistication of the purchaser. We rely on the simple methods, both because we are new to commercial investing, and because we’re looking at small properties. But, simple doesn’t mean less reliable or less accurate when it comes to commercial valuation.

Essentially, there are three ways to value a commercial property:

1. Direct Comparison Approach

2. Cost Approach

3. Income Approach (which includes the DCF method and the Capitalization Method).

The direct comparison approach uses the recent sale details of similar properties (similar in size, location and if possible, tenants) as comparables. This method is quite common, and is often used in combination with the Income Approach.

The cost approach, also called the replacement cost approach, is not as common. And it’s just what it sounds like, determining a value for what it would cost to replace the property.

The third, and most common way of valuing commercial real estate is using the income approach. There are two commonly used income approaches to value a property. The simpler way is the capitalization rate method. Capitalization Rate, more commonly called the “Cap Rate”, is a ratio, usually expressed in a percent, that is calculated by dividing the Net Operating Income into the Price of the Property. The cap rate method of valuing a property is where you determine what is a reasonable cap rate for the subject property (by looking at other property sales), then dividing that rate into the NOI for the property (NOI is The Net Operating Income. It’s equal to income minus vacancy minus operating expenses). Or, you could figure out the asking cap rate of the property by dividing the NOI by the asking price.

For example, if a property has leases in place that will bring in, after expenses (but not including financing) an NOI of $10,000 in the next year and comparable properties sell for cap rates of 6% then you can expect your property to be worth approximately $166,666 ($10,000/.06 = $166,666). Or, said another way, if the asking price of a property is $169,000, and it’s NOI is estimated at $10,000 for the next year, the asking cap rate is approximately 6%.

Where this gets tricky is when properties are vacant, or where the leases are set to expire in the upcoming year. This is often when you are forced to make some assumptions. (We’ll save how you deal with this for another day.)

The other income method is the DCF method, or the Discounted Cash Flow method. The DCF method is often used in valuing large properties like downtown office buildings or property portfolios. It’s not simple, and it’s a bit subjective. Multiple year cash flow projections, assumptions about lease rates and property improvements and expense projections are used to calculate what the property is worth today. Basically, you figure out all of the cash that will be paid out and all of the cash that will be brought in on a monthly basis over a specific period of time (usually the time you plan to hold the building for). Then you determine what those future cashflows are worth today. There are computer programs like Argus Software that help in these types of valuations because there are many variables and many calculations involved.

For the small investors, like us, using a combination of comparable property sales and income valuation using cap rates, will provide a reliable valuation. The real issue is convincing the seller that they should sell based on today’s income and today’s comparable properties. In the case of a mixed use commercial building we just tried to buy, the seller was pricing their property based on assumptions that leases will renew in the next 6 months at substantially higher rates and that the area of the property will continue to improve making the property more desirable. Unfortunately, we don’t buy properties hoping for appreciation. We buy properties today because the property will put more money in our pocket each month then it takes out, and the property fits within our investing goals.

Analysts are bracing themselves for a stream of highly negative news in the Commercial loans department very soon. Failing businesses who have pre-existing loans agreements and are not meeting their rent payments are causing development companies and other banks a lot of drama.

The Federal Reserve and other officials have done their best to try and cool down the problems but as the economy tumbles so to to peoples job and incomes. This is only going to make the situation worse. Like a domino effect almost all industry sectors will be affected, both commercial and industrial.

Some of the lenders are totaling up their losses but these have not been reported in the mainstream media just yet. As residential foreclosures mount up what no one realizes is that at the same time businesses have been suffering just as bad and there was a big surge in commercial property carrying organized mortgages that were sold as bonds on wall st many years ago. Before the market crashed at the end of 2008 there was allegedly $700 billion dollars in these mortgage securities and now some of them have lost as much as 40% of their value.

Officials are still tallying up all the numbers and analysts say that when these figures come out in the media it won’t be pretty. It could even be the next catalyst for a downturn / sell off on the equities market again.

Those with bigger loans in the commercial industry realize that if the economy takes anther bigger hit at the end of this year (as feared), they are at a bigger risk of not only losing their business but their livelihoods as well. Time will tell.

In commercial real estate, the leasing process is the foundation of the cash flow for investors. On that basis if you as a real estate agent lease more property successfully then you can achieve more sales over the longer term. The landlords will come to you at sale time because you helped them at lease time.

On this basis, the best sales people in commercial real estate are also very good leasing people. They know how to negotiate and structure a lease that can help the property owners sell the property at a future time.

If you want more commissions overall in your career in commercial real estate then the focus should be for you to lease and sell. Become an expert in both.

Many leases when they are negotiated carefully and correctly will set the property up for future sale. That will be through well negotiated factors such as:

Rental types Rental growth and rent reviews Option terms Minimisation of vacancy threat Optimised tenancy mix Leases that relate to the landlords plans and property Leases that underpin and strengthen the landlords position and investment Leases that protect the property improvements and performance

So to lease more property than your competitor real estate agents you have to follow a plan that works for you given the demographics of the area and demands of the local business community.

To lease more property than other agents, the following 10 point strategy and plan will help you.

Know who all the major business leaders are in the area. Talk to them on a regular 60 to 90 day basis about their property needs. You must establish personal rapport with these people if you are to be successful in leasing commercial property. Understand supply and demand of new lettable space to come onto and that exists in the local market. Watch the local precinct plans for zoning changes and development regulations that can impact the area. Understand access and transport corridors for the local businesses. Look for any threats and changes. Understand the supply of raw materials for the local businesses. Look for any threats and changes. Get involved with finding new development land or redevelopment opportunity for local property developers. These new sites can be a source of major project leasing over a lengthy period of time. Understand the rental types and rates that the recent lease deals are showing. Rent can be gross or net, and the choice will impact the recovery of outgoings for the landlords you serve. Monitor the lease incentives in both type and amount so that clear market alternatives are available to landlords when the next lease deal arises. Create a database of leads and information from all the people that you talk to. If done well this will be the main source of future business for you. Monitor all the local businesses and their leases for expiry and option dates. This will be high value data to market new vacancies into.

Commercial property leasing is a significant source of new business for real estate agents. If done correctly your leasing services will underpin just about all other parts of your sales and property management services.

Real Estate is often referred to as the safest investment haven. Investments in real estate when done with proper evaluation of the property (its market value), can lead to mouth-watering profits.

When you hear Property Investment, what comes first to your mind? Is probably investment in homes,office complexes or factories? There are more to these.

Commercial real estate - Any property having more than four residential units, recreation centers, shopping mall, health care centers, warehouse and retail structures are all good examples of commercial real estate or commercial property. It is profitable for sure. The only issue here is that its financial attractiveness is less conspicuous than that of residential property. But profit from it can be real big (in fact, much bigger than you would expect from residential property of the same proportion).

How do we participate in Commercial Property? This starts by building and selling out in blocks, of once property to make profit. We could acquire and resell after a period of appreciation or we could acquire and rent out for annual income.

When to invest in Commercial Property? When signs in the economy and government policies foretell a recession and fall in stock market or government is giving tax breaks.

In regions where there are signals of commercial property growth, then one can go for a good deal. If the asset (land or property) to be developed is too big for you to acquire, you may pull resources together with other interested investors and split the profits later. In some cases, e.g. when a rental boom is expected in a region, you might find it profitable to buy a property that you can convert into a warehouse for the purpose of renting to small businesses. So, commercial property presents a whole plethora of investing opportunities, you just need to grab it.