Do you know how to complete a successful commercial real estate transaction? Well continue to learn more here in Step 2 of this 7 part article series.
In step
one of this seven step process to completing successful commercial real
estate transactions, we discussed the importance of deciding what type
of property you are focusing on and completing research on those type of
property sales in your area.
The
major part of the evaluation process for completing successful
commercial real estate transactions is actually most often done in the
“Due Diligence” period, once the property is fully under contract. It
can just be too involved and require participation and cooperation of
the seller such that doing so before putting the property under contract
is sometimes not feasible.
However, there are some “Rule of
Thumb” indicators that are used as a down and dirty fast evaluation that
you should become familiar with as quick ways to spot potential good
deals quickly that you'd like to investigate further.
In the
Evaluation process, you are actually verifying that the assumptions you
used to make a decision to make an offer at a certain price were in fact
valid assumptions.
This is where you now look at the leases and
all of the various revenues of the property and verify that they are
accurately reflected in the information you were given by the seller.
The same process is done with all the expenses.
This is done so
you can be comfortable with the NOI (net operating income) figure you
used to apply your “Cap Rate” to so you could come up with a value, from
which you made your priced offer to purchase.
Since NOI is used
as the major factor in determining value, it is important to spend all
the time necessary to be comfortable that it has been accurately stated!
The “Cap Rate” is a factor applied to the NOI to actually determine the
value of a commercial property so it is important to have a firm grasp
on the evaluation process. Having the NOI accurately stated is critical
to completing a successful commercial real estate transaction.
ATTENTION:
Here's how to invest for phenomenal secured returns in large-scale
commercial real estate projects all across the country without
shouldering all of the cost or risk yourself. Take advantage of the
Infinite Returns™ program and invest together with the members of
commercial real estate buying group HIS Real Estate Network. Join Stew
Spence and the Real Deal Team for an upcoming educational presentation
online to get information or to get started now: commercial real estate investing
In 1989,
Stew Spence became a full time real estate investor, and has bought,
sold or been on the business end of hundreds of real estate
transactions, both large and small, numerous diverse types of
transactions totaling over $40,000,000 including commercial, mobile
home park, multi-family, condo conversions and land development projects
with a specialty in foreclosed properties needing rehabilitative
construction. Now semi-retired, Stew is still an active investor and has
trained thousands to succeed with real estate. Today, he is also
retained as a Board of Advisor member with HIS Real Estate Network, residential and commercial real estate buying group.
