Success Strategies For Commercial Real Estate Investing

WINSTON ROWE AND ASSOCIATES REVIEW ON LINE

 

There are two different types of real estate investors: those that are speculative and take higher risks and those that are more conservative and desire safe, long-term investments.
While speculative investing can be fun and exciting, it can also result in financial ruin. It is necessary that speculative investors thoroughly analyze investments before committing to property purchases.

The most common formula used in commercial real estate investment properties is the capitalization rate. Otherwise simply known as CAP, this rate compares a property’s annual income, factoring in operating and vacancy expenses, and ultimately equates this in net operating income (NOIP) terms, comparing sales price ratios. The CAP rate does not reflect the individual investment’s return percentage, but if no financing is involved, the CAP rate will be relatively close in number.

The CAP rate can be found by dividing the NOI by the price or value of the property. This number is expressed as a percentage. Many banking institutions and hard money lenders focus on the CAP rate when lending money to investors.

If a property investment has long-term tenants, lengthy leases and limited commitment for landlords (low building maintenance costs and repairs), then it may be sufficient for an investor to accept a lower CAP rate. If a property, however, has unstable tenants and a volatile local real estate market, a higher CAP rate is reflected. A higher CAP rate reflects a higher investor risk.

There are five factors that define good commercial real estate investments.

Income – Commercial properties produce income. Stockholders only see income when stocks are sold; however, real estate investors receive income through rent payments.

Capital Appreciation – This financial concept revolves around if rent prices increase, then property values by default also increase.

Leverage – With nearly 70- to 80-percent of commercial property funding in the form of mortgages, investors are able to free up other capital for additional investments.

Security – While stocks are based on the simple price-to-earning concept, real estate is based strictly on demand.

Diversity – Commercial properties often house diverse tenants, ranging from grocery stores, clothing vendors, restaurants and gift shops to retail businesses. This allows landlords to diverse their holdings, not putting all of their eggs in a single basket.

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About Winston Rowe & Associates
Winston Rowe & Associates, a national no upfront fee advisory and due diligence firm specializes in structuring complex debt, private equity, private capital (hard money), and agency commercial real estate financing solutions. Commercial real estate types include; Apartment Buildings, Hotels, Office Buildings, Medical Buildings, Shopping Centers, Assisted Living Facilities, Senior Housing, Student Housing and Mixed Use properties, no raw land please. CRE investors have been turning to Winston Rowe & Associates, across the nation because there is a shortage of reliable, ethical and honest capital sources in the current banking market place. Winston Rowe & Associates has strong relationships with a finite number of direct private capital, private equity, hedge funds, agency investors and regional and national commercial banks, each with a highly targeted commercial real estate financing practice. Their expertise adds value and speed, structuring solutions for their client's complex and challenging financing requests. In days, not weeks or months. Prospective clients with questions concerning their hard money loan programs can contact Winston Rowe & Associates at 248-246-2243 or visit them on line at http://www.winstonrowe.com

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