Loan Agreements: Everything You Need to Know

Winston Rowe & Associates

A loan agreement is a very complex document that can protect the two parties involved. In most cases the lender creates the loan agreement, which means the burden of including all of the terms for the agreement falls on the lending party.

Unless you have created loan agreements before, you will likely want to make sure that you completely understand all of the components so you do not leave out anything that can protect you during the lifetime of the loan.

This guide can help you create a solid loan agreement and understand more about the mechanics behind it.

Why You Need a Loan Agreement

Before you lend anyone any money or provide services without payment, it is important to know if you need to have a loan agreement in place to protect you.

You never really want to loan out any money, goods, or services without having a loan agreement in place to ensure that you will be repaid or that you can take legal action in order to have your money recouped.

The purpose of a loan agreement is to detail what is being loaned and when the borrower has to pay it back as well as how. The loan agreement has specific terms that detail exactly what is given and what is expected in return.

Once it has been executed, it is essentially a promise to pay from the lender to the borrower.

Borrowing money is a big commitment no matter the amount, which is why it is important to protect both parties with a loan agreement in place. A loan agreement not only details the terms of the loan, but it also serves as proof that the money, goods, or services were not a gift to the borrower.

That is important because it prevents someone from trying to get out of repayment by claiming this, but it can also help you ensure that it is not an issue with the IRS later.

Even if you think you may not need a loan agreement with a friend or family member, it is always a good idea to have this in place just to make sure there are no issues or disagreements over the terms later that could ruin a valuable relationship.

If you are trying to determine whether you need a loan agreement, it is always better to be on the safe side and have one drafted.

If it is a large sum of money that will be repaid to you, as agreed upon by both parties, then taking the extra steps to ensure that the repayment takes place is well worth your time.

A loan agreement is designed to protect you so when in doubt, create a loan agreement and make sure you are protected no matter what happens.

There are several components of a loan agreement that you will need to include in order to make it enforceable. These are a few of those components that are true no matter what type of loan agreement it is.

To help explain how a loan agreement is broken down, we have divided it into sections that are easier to comprehend.

The Basic Information Needed

With every loan agreement, you need to have some basic information that is used to identify the parties that are agreeing to the terms.

You will have a section that details who the borrower is and who the lender is. In the borrower’s section, you will need to include all of the borrower’s information.

If they are an individual, this includes their full legal name. If they are not an individual but a business, you will need to include the business or entity designation, which must include “LLC” or “Inc.” in the name in order to provide detailed information.

You will also need to include their full address. If there is more than one borrower, you should include the information of both on the loan agreement.

The lender, sometimes also called the holder, is the person or business that will be providing the goods, money, or services to the borrower once the agreement has been agreed to and signed.

Just like you included the borrower’s information, you will need to include the lender’s information with just as much detail.

Additionally, you will need to include a section that details any guarantor information, if you have one. A guarantor is also known as a cosigner.

This individual or business agrees to pay back the loan in the case that the borrower defaults. You can add more than one guarantor to the loan agreement, but they must agree to all terms set forth in the loan just like the borrower.

Just like you included the borrower’s information, you will need to include the information of each guarantor, and they must sign the agreement. You will need to include their full legal name as well as their full address.

If you do not include a guarantor, you will not need to include this section as part of the loan agreement. Lastly, you will need to include a section that includes the date and location of the signing of the agreement.

In this section of the loan agreement, you will need to include various information such as the date the agreement is effective, the state where any legal proceedings are required to take place, and the specific county within that state.

This is important because it details when the loan agreement is active and will prevent you from having to travel to another place if there are any disputes or nonpayment on the agreement.

The Specific Loan Details

Once you have the information about the people involved in the loan agreement, you will need to outline the specifics surrounding the loan including the transaction information, payment information, and interest information.

In the transaction section, you will detail the exact amount that will be owed to the lender once the agreement has been executed. The amount will not include any interest that will accrue during the lifetime of the loan.

You will also detail what the borrower is getting in return for this sum of money that they are promising to pay to the lender. In the payment section, you will detail how the loan amount will be repaid, the frequency of the payments (e.g. monthly payments, due on demand, one lump sum, etc.), and information on the acceptable payment methods (e.g. cash, credit card, money order, wire transfer, debit payments, etc.). You will need to include exactly what you will accept as a form of payment so there is no question on the forms of payment allowed.

In the interest section, you will include information for any interest. If you are not charging interest, then you will not need to include this section.

However, if you are, you will need to detail the date when the interest on the loan will begin to accrue and whether the interest will be simple or compound in nature.

Simple interest is calculated on the unpaid principal amount while compound interest is calculated on the unpaid principal and any interest that is unpaid.

Another aspect of interest you will need to detail is if you will have a fixed or variable rate of interest.

A fixed rate interest loan means that the interest rate will stay the same during the lifetime of the loan, whereas a variable rate loan means that the interest rate can change over time based on certain factors or events.

You may also want to include information about prepayment in case the borrower is interested in paying the loan off early. Many borrowers are concerned about prepayment and you would be wise to include a clause in your loan agreement that talks about prepayment options, if any.

If you are allowing prepayment, you will need to include this information and detail if they are allowed to prepay the entire amount or only a partial amount, and if you will be requiring a prepayment fee if they choose to do so. If you are requiring a prepayment fee, you will need to detail how much that will be.

Traditionally, lenders require that a percentage of the principal is paid early before they can pay the remaining balance. If you are not allowing prepayment, then you will need to detail that it is not allowed unless written permission is provided by you, the lender.

Securing the Loan and Dealing with a Violation

You have the option of requiring collateral in exchange for your loan. If you wish to do this, then you need to make sure you include sections that address this.

For collateral, if you are requiring it to secure the loan, you will need to have a specific section. Collateral would be an asset that is used as a guarantee of repayment.

Examples of assets that can be used include real estate, vehicles, or other valuable goods. If you are requiring collateral, you will need to identify all collateral that is needed to secure the agreement. Another section you need for this is one regarding the security agreement. If you are not requiring collateral, then you can omit this from your loan agreement.

Signing Date

In regard to the collateral, if each party is signing a separate security agreement for it, then you will need to include the date that the security agreement is signed, or will be signed, by each party.

No one ever thinks that the loan agreement they have will be violated, but if you want to make sure that you can deal with the matter in case the terms are not followed, then you need to have something addressing it.

This is just one reason why it is so important to include this section no matter what. Typically, lenders include a personal recourse provision. This will allow the lender to seek recovery from the personal assets of the borrower if they violate the agreement.

Additionally, you should include the number of days that the borrower has to remedy any breach of the agreement.

If you include this, you cannot provide notice of recuperation until this time frame has passed. It does not, however, prevent you from reaching out to them for an update. The notice period that is standard is 30 days, but you can adjust this as you see fit.

Make sure you include all of these details in this section so there is no question about the actions you should be taking in case you are not paid back by the borrower.

Additional Items

In addition to the main sections detailed above, you have the option of adding additional sections to address specific items as well as a section to make the validity of the document unquestionable.

Every loan agreement is different, so use the additional terms and conditions section of the agreement to include any additional terms or conditions that have not yet been covered. In this section, you will need to include complete sentences and ensure that you do not counteract anything that has previously been put in the loan agreement unless you are stating that a specific section is not applicable to this specific loan agreement.

When executing your loan agreement, you may be interested in having a notary notarize it once all parties have signed, or you may want to include witnesses. The benefit of including a notary is that this will help prove the validity of the document in case it is ever disputed. Having a witness is an alternative to having the document notarized in case you do not have access to a notary; however, if possible, you should always try to include both.


3 Common Myths Around Online Rent Collection

Tenant Rent Collection Strategies

Myth 1 – It’s Complicated

Sure, you’ve been doing it by hand for years, and despite all the time, effort, and headaches, it eventually gets the job done.  We get it.  But did you know, online rent collection software is easy to set up and flexible enough to support your current business processes?

Just think how amazing your life could be if you could instantly reduce the monthly stress of collecting rent. No more texts, calls, or emails chasing after rent. Technology does it for you… automatically… for every tenant… every month.

Whether you manage your properties by yourself or with a team, online rent collection automates invoice creation, rent reminders, payment collection, and direct deposits. No need for excess reporting or tasks to CYA.

Are you still having to track down tenants after the fact to collect late fees? If your tenants are late paying rent, rent collection software will automatically calculate the late fee, add it to their invoice and send continuous reminders until rent is paid or you decide other action is necessary.

Support When You Need It

Most online rental management solutions have support teams ready to help you and your team during the transition. In some cases, these support teams can even help your tenants set up the software so you can focus on your work instead of playing the role of customer service.

When searching for the best solution, we recommend checking out their website, make a list of questions and schedule a demo. Once you’re on a call, you’ll be able to share your specific needs and challenges to ensure you’re choosing the best online rent collection solution for your business.

Myth 2 – My Tenants Don’t Use Technology

A common misconception is that tenants don’t have access to technology or worse yet, don’t have an email address.  Did you know that according to a recent 2019 study, 96% of Americans own a cellphone and over 70% of Americans use some form of social media?

To pay rent online all a tenant needs is an internet connection and an email address.  If they use a smartphone and log into Facebook, Twitter, Snapchat, LinkedIn, or any other form of social media (and there are lots out there) they have an email address.

Technology isn’t Scary When you Communicate

Introducing change can sometimes seem scary, especially if you’ve been doing the same thing for a while.  However, when we communicated that we were switching to an online payment option, we found that our tenants were not only relieved, but grateful to finally have a more convenient way to pay rent.

These days, people are used to the convenience of digital payment methods for everything like paying credit cards, car loans, utilities, online shopping and student loans.

Why not add rent to the list? Once we introduced online payments, not only did our late payments decrease, but 30% paid before rent was even due.   With the ease of automated email and text rent reminders, it takes less than one minute to pay rent.  Making things more convenient for your tenants is a benefit to them and a benefit to you. We call that a win-win.

Myth 3 – My Tenants Don’t Have Bank Accounts

Just because your tenants pay you in cash or money order doesn’t mean they don’t have a bank account. According to a 2017 FDIC survey, 94% of Americans have bank accounts yet only 40% actually write checks.  Because of debit cards and ATM’s, fewer people own checks.

Before offering an online rent payment option, our tenants had to make a special trip to the bank to get a money order, or worse, because rent was more than $500, they had to make multiple trips to the ATM to get cash.  We never realized what a hassle it was for our tenants to pay rent.

With online rent collection you give them the option to use the free digital check service or pay with a debit/credit card (for a small fee), all from the comfort of their home.  No more trips, no more hassle.

What About Credit/Debit Card Fees?

Many rental management solutions offer the ability to process credit or debit card transactions with no cost for you. Tenants pay the transaction fee along with their rent payment. And although it’s an extra cost, often it’s less than a late fee.

It’s Expensive

There are many solutions available that you can quickly work into your budget without breaking the bank. And with the amount of time you’ll save using an online solution, you’ll more than cover the cost in free time…and as everyone knows, time is money.

Your time is valuable and equates to real dollars. That’s why an online rent collection software is designed to not only save you headaches, but also help you streamline processes, which saves time and money across your operations.


Choosing a Commercial Property Management Firm

Choosing a Commercial Property Management Firm

In today’s complex real estate markets, selecting the right commercial property management firm is one of the most important decisions investors can make. Trained, experienced, and creative real estate managers can obtain the maximum return on an asset by improving cash flow, retaining tenants, and increasing value. With more than 10,000 property management firms in the United States, investors are often at a loss about how to select one that will meet their personal investment objectives.

Frequently, investors seek advice on property management firms from commercial brokers who represent them in transactions. Recommending a qualified real estate manager may be part of your contract with a client or an added service that is especially helpful to out-of-state or foreign investors who are not familiar with property managers in your area.

Whoever you recommend naturally will reflect back on you, ideally enhancing your clients’ perception of you. Although you are probably familiar with the basics of property management, this may be a good time to acquaint yourself with the process of evaluating real estate property managers. It may be particularly timely if you are thinking of putting your own property in the hands of a qualified professional-a decision that may lead to more-profitable use of your time. Whether you’re lining up a firm to recommend to a client or seeking the services yourself, these guidelines will help you find the right fit between property and management service.

What to Look For

For the perfect fit, a management company’s expertise should match an investor’s needs. Is the real estate investment an office, an industrial building, a multifamily housing complex, or a suburban strip center? Does the building have a vacancy problem, a maintenance problem, or a marketing problem?

Investigate the experience of a firm by asking what other properties like yours (or your client’s) it manages, how long it has managed the properties, and what have been the results of its management.

Find out the type of investors with whom the property management firm usually deals. Does it manage for individual investors or does it specialize in working with institutional investors? The firm you are considering must have expertise in serving your type of investor as well as your type of property, because the reporting requirements of each investor type will be different.

Reputation Counts

A good company will have positive word-of-mouth in the industry, so ask around and determine a firm’s standing in the business community. It should have a solid reputation for providing professional management services, as well as for integrity and honesty.

Though the number of years in the business is not necessarily a determinant of professionalism, it does reflect experience and longevity. However, do not assume the best service always comes with age: a company new on the scene may make up for lack of experience through aggressive management or thorough attention to detail.

Organizational stability is a related matter. How long have individual members been with the firm? Do you deal with the same manager or group of managers who bring continuity to the property, or is there considerable staff turnover? Lack of stability could signify poor company management or lack of financial stability; whatever the cause, you want consistent service and familiar faces that tenants recognize and get to know, so rapid staff turnover should raise a warning flag.

Look for Accreditation

As in other areas of real estate, a property management firm that is accredited is set apart from other firms as having met higher standards. Some CCIMs specialize in property management and many of them may also have specialized designations such as Certified Property Manager (CPM), Real Property Administrator (RPA), and Certified Shopping Center Manager (CSM). The Institute of Real Estate Management (IREM) awards the Accredited Management Organization (AMO) designation to firms that meet its criteria.

Look for a firm with accredited staff and leadership. These members must meet stringent education and experience requirements in fiscal and operational management.

Of course, firms whose employees hold other, related designations of expertise are likely to have a broader, deeper understanding of the many aspects of managing investment real estate. The property management company with whom you work should be experienced and flexible; knowledgeable about accounting, architecture, leasing, sales, law, appraisal, marketing and maintenance; and honest and forthright in dealing with clients, tenants, and their own employees. Ask about the workload of the manager who will be assigned to your account. You should know how often the manager will make site visits.

Check Insurance

Inquire about a firm’s insurance coverage and make sure that the management staff is familiar with loss prevention and risk management programs. Make sure the firm has a fidelity bond to protect against the loss of money or property through the fraudulent or dishonest acts of employees. It must also carry depositor’s forgery-and-alterations insurance to protect against loss due to forgery or alteration of checks, drafts, and promissory notes. A firm also should adhere to requirements for professional liability insurance.

Finally, avoid property management firms with conflicts of interest that may prevent you or your client from getting the most value. Ask the firm to disclose any companies that it may own or use exclusively, such as landscaping or maintenance firms. Where there is potential conflict, make sure the management firm employs competitive bidding procedures and is willing to provide evidence of this. The firm should make every effort to take full advantage of discounts, purchasing opportunities, and other ethical means at its disposal when purchasing or contracting for supplies and services on behalf of the client.

What Services to Expect

Property management firms can provide a broad array or a limited number of services, depending upon a client’s needs. Do not assume that a certain service is provided automatically by the firm. Ask what specific services it will provide and, once you or your client decides on a firm, work out a comprehensive written management agreement with the firm. The agreement will outline services the firm will provide, letting the owner know exactly what to expect from the property management firm and what the services will cost.

Commercial property management firms typically provide the following services.

Management Planning. A commercial management company can analyze the business environment and the specific property within that environment, set out a marketing strategy, and recommend how a client’s objectives can best be fulfilled.

Financial Reporting. Record keeping and financial reporting are key services provided by management firms. Ask to see samples of the firm’s reporting documents.

Budgeting. The management firm develops and monitors the property’s budget, which covers everything from maintenance to marketing, personnel to operations. As the year unfolds, the manager should inform the owner of any necessary budgetary adjustments and explain why they are needed.

Maintenance Programs. Commercial property management firms provide monthly maintenance cost monitoring and the development and implementation of preventative maintenance programs.

Market Rent Analysis. Management firms will provide an analysis of market rents and those of the competition, changes in area demographics, and anticipated absorption levels.

Marketing Programs. Firms can develop and implement marketing programs that improve the image of properties and ensure successful leasing. A comprehensive program may include such essential marketing tools as brochures, advertisements, special events, property newsletters, videos, maps, and site signs.

Rent Collection. The collection of rent, including a daily record of deposits, is a basic service provided by management firms. A cash management system, which includes investment returns on rental dollars collected, should also be implemented.

Lease Negotiation. A firm is usually responsible for negotiating all tenant leases and renewals, or, in the alternative, for recommending the best leasing company in the area and coordinating leasing activities with that company.

Tenant Relations. The professional property management firm is attentive to tenants’ needs and responds to their concerns immediately. It should have a written policy for receiving and resolving tenant concerns.

Purchasing Procedures. Firms establish procedures for the purchase of all equipment, supplies, contracted building services, and insurance coverage.

Contract Specifications. Commercial property managers prepare specifications for all contracted work (such as tenant improvement construction), obtain competitive bids, and supervise the projects.

Documented Procedures. Commercial management companies establish documented procedures to ensure compliance with all federal, state, county, and local governmental statutes as well as administrative regulations, ordinances, and fire, health, and safety codes.

Making the Final Selection

Whether evaluating firms for yourself or your clients, look for a commercial management firm that provides the type of management services needed. Not all management firms manage all types of properties. As you get close to making a final decision, meet again with the selected firm to review its proposal and specifications. This is the best time to clear up uncertainties and negotiate the management agreement-don’t wait until after the contract has been signed.

Remember that property management fees are directly proportional to the quality and quantity of services provided. Management fees generally are based upon a percentage of collections, though they vary in different parts of the country for different types of properties and are strictly negotiable between the parties. Percentage fees can be based on different portions-or all-of the income stream. For example, with shopping centers, the fees for basic services can be a percentage of net rent collections, gross rent collections including triple net expenses and advertising and marketing fees, a flat fee up to a certain level of income and a percentage after that, or some other calculation. There can also be a percentage administrative fee applied only to triple nets, in addition to a basic percentage of net or gross income.

Alternative fee structures include a flat fee or a flat fee plus a percentage of income. Factors for consideration include the size of the property, average rent level, difficulty in managing the property, location, amount of time needed to manage the property, and any special reporting required.

More than ever, investors must select commercial management teams with care. The right property management firm will provide the management expertise, financial stability, professional excellence, and integrity required in today’s competitive real estate market.

Commercial Real Estate Investing & What You Need to Know

Commercial Real Estate Investing

When you think of real estate investing, commercial property is usually the first thing that comes to mind. After all, commercial development is where the money is at. As lucrative as it may be, commercial property is not the type of investment you want to dive head-first into without an education.

How Commercial Real Estate Investing Works

When people invest in commercial real estate, they’re investing in real property, and that property is used to generate a profit.

Commercial real estate can include:


Apartment complexes

Shopping malls

Industrial property

Office buildings


Medical centers


Any property that is used for commercial purposes, or to run a business, is considered commercial property.

Investments generate money in two ways:

Leases, which generate rental income

Appreciation of property value over time

Finding property in an in-demand area is the key to making a smart investment.

The Pros and Cons of Commercial Property Investing

Any kind of property – whether commercial or residential – can be a good investment. But in most cases, commercial properties offer a better return on investment. Still, there are drawbacks that need to be considered. Before you make a decision on whether to invest in commercial real estate, you should understand the pros and cons.

The Pros of Commercial Real Estate Investing

There are plenty of benefits to investing in commercial real estate. These include:


The most obvious advantage is income potential. With commercial real estate, the income-generating potential is generally much higher than with residential property investing.

Commercial properties typically have an annual return of 6%-12%, depending on the location. Single family home properties usually have a return of 1%-4% at most.

Fewer Active Responsibilities

Residential properties usually require more hands-on management. As a landlord, you’re on the hook for maintenance and other management responsibilities 24/7.

With commercial properties, your tenants will typically only be on the premises during business hours: 9am-5pm. Property insurance and maintenance may also be the responsibility of the tenant, depending on the commercial lease. These are called triple net leases, and they’re favored by larger brands that want to maintain a specific image, such as Starbucks or Walgreens.

Commercial tenants will be more likely to sign longer leases, which will save you the hassle of having to find tenants on a regular basis.

Better Financing Terms

Financing terms are usually more favorable and flexible for commercial tenants. Some owners can obtain 100% financing on a first or second mortgage, which is something you can’t do with residential properties.

Professional Relationships

The relationship between commercial property owners and tenants is usually a professional one. You’re dealing with a business – not a family or individual. Interactions are usually more courteous and professional as a result.

Better Price Evaluation

Commercial property is usually easier to evaluate in terms of pricing because you can see the current owner’s income statement. That statement will give you a good idea of a fair price for the property.

With residential properties, pricing is usually based more on emotion than anything else.

The Cons of Commercial Real Estate Investing

While there are plenty of advantages to investing in real estate, there are also some disadvantages that need to be considered.

Bad Management

Do-it-yourself property management may be okay with a residential property, but you’ll need to hire a professional to manage a commercial property. Special licensing is typically required to handle the maintenance tasks associated with commercial real estate.

What happens if you get stuck with a bad management team? If they slack on their responsibilities or treat tenants in an unprofessional manner, this can reflect badly on you as a landlord and may even get you in legal trouble.

The fact that you have to hire a professional to manage the property may also be a disadvantage to some investors. Hiring a management company comes with added expenses and other concerns that you wouldn’t have with a residential property.

Property management companies usually charge between 5% and 10% of the rent revenue in fees.

Fierce Competition

Commercial real estate can be fiercely competitive, depending on your location. With more competition, you may wind up paying a lot more for property than you had anticipated.

Greater Risks

Unlike with residential properties, commercial properties have public visitors. The more public visitors on the preemies, the greater the risk of someone getting injured. Liability concerns may be a turn-off to you as an investor.

Big Initial Investment

By nature, commercial real estate is more expensive than residential real estate. That means you’ll need to make a bigger initial investment.

The large initial investment makes it difficult for some investors to get their foot in the door with commercial real estate.

How to Secure Good Deals

With any real estate investment, being able to spot a good deal is the key to finding success. The top real estate professionals know exactly what to look for when combing through properties.

First, make sure that you have an exit strategy. A good deal is a deal that you know you can walk away from.

Along with having an “out,” you also want to learn how to properly assess a property. Know how to look for damages and estimate the cost of repairs. Learn how to assess the risk of investing in each property you look at. And don’t forget to estimate the costs of buying and managing the property to make sure it fits your financial goals.

As for finding a good opportunity, that part is more of an art than a science. But if you’re just getting started, you’ll want to look at the neighborhood the property is located in. Is the area in high demand? Is the local economy thriving, or slacking?

Talk to neighbors. Get a feel for the area. Trust your instincts.

When evaluating a property, there are a few things you can look at to assess its value:

NOI (Net Operating Income). This is calculated by subtracting operating expenses from the first-year gross operating income. You only want to consider properties with a positive NOI.

Cash on Cash: This involves comparing the first-year performance of nearby competing properties.

Cap Rate: A property’s capitalization rate can be used to calculate the value of the property. This method is often used when evaluating apartment complexes and small strip malls.

How Commercial Properties are Sold

Commercial properties are sold much in the same way residential properties are sold. But instead of considering the wants and needs of families and individuals, you need to consider the investor’s perspective.

What type of buyer are you aiming for? Someone looking for a 100% turnkey property, or someone who wants to make improvements on the property?

The purchase process may take longer than with a residential property, and the evaluation process is certainly more complex. But generally, properties are sold in the same way any other real estate property is sold.

If you’re thinking of investing in commercial real estate, weigh the pros and cons carefully and take the time to educate yourself on the process. When it comes time to search, look for sellers who are motivated and ready to sell for less than the market value of the property. Unmotivated sellers are far less willing to negotiate, which will make it harder to secure a good deal.

Real Estate 101 How Investing In Commercial Real Estate Works

Real Estate 101 How Investing In Commercial Real Estate Works

Commercial real estate is a broad term describing real property used to generate a profit. Examples of commercial real estate include office buildings, industrial property, medical centers, hotels, malls, farmland, apartment buildings, and warehouses.

Historically, investing in commercial real estate as an alternative asset has provided millions of investors with attractive risk-adjusted returns and portfolio diversification. But, many investors still don’t understand how commercial real estate works as an investment vehicle.

There are some key differences between commercial real estate investing and traditional investments such as stocks and bonds. Unlike stocks and bonds traded frequently on a secondary market, real estate is a scarce resource and holds intrinsic value as hard asset. Most often, stocks are purchased for their selling potential rather than their capacity as a source of income, hence the “buy low, sell high” heuristic of the stock market.

The investment strategy for commercial real estate is simple: there is inherent demand for real estate in a given area. Investors purchase the property and make money in two ways: first, by leasing the property and charging tenants rent in exchange for use of the property; and second by appreciation in the value of the property over time. Let’s examine these two aspects of the investment opportunities a little more closely: ​

Rental Income

Rental Property Commercial Real Estate Investment

Tenants differ across all types of commercial real estate investment properties. With different tenants comes different arrangements, property management needs, and lease agreements. Here are a few examples:

Office: Cubicles and parking decks. Example tenants would be a law firm or start-up company. The company pays the rent, and has lease terms often in the five-year to ten -year range.

Apartment Buildings: Multi-family apartment buildings typically have individuals or families as tenants. Leases can be short term or long term, but most are not for longer than a year, and some can even be month to month. This building can have more tenants and leases to manage, and more payments to account for each month.

Industrial: Warehouses and smokestacks. A typical tenant might be a manufacturing or distribution company. These properties aren’t generally located in areas that would be very desirable for a residential or retail property. Lease lengths are typically for five years or more.

Appreciation and Value Add

Appreciate Value Added Commercial Real Estate Investment

The second opportunity for potential returns from a commercial real estate investment comes from an increase in the property’s value over the period that the investor holds it. Properties can also lose value, and even the most disciplined, proven investment strategies can’t ensure gains due to outside economic forces that may arise.

In general, real estate is a unique and scarce asset class. More land can’t simply be “created.” In the middle of a major city, this scarcity is increased by demand. If demand increases for your property, or in the area right around your property, there’s a good chance that tenants will be willing to pay higher rent, and prospective buyers will be willing to pay a higher price than you paid originally to take it off your hands.

Appreciation through demand isn’t the only way the value of a property increases. Many investors take an active “value-add” approach to commercial real estate, making improvements to the property to increase its intrinsic value or its ability to earn income. One example of this would be updating cosmetic details or appliances of a multi-family apartment building. Updates such as these can allow the owner to charge higher rent for nicer apartments. Methods outside of improving the property might include rezoning an adjacent parcel of land, say from residential to multi-family, so that more apartments can be built. Any money spent to renovating a building can potentially boost the selling price of the building in the future.

Real World Example: Doug’s Apartment Building

Let’s look at a commercial real estate investment in action. Doug buys an old, 40-unit apartment building in Philadelphia for $5 million. He earns a rental income of $500,000 in year one after all of his expenses. As with all properties, some tenants leave each year. Doug renovates vacant apartments before releasing them out at higher rates to new tenants. Doug’s improvements increase the property’s rental income by $50,000 each year for five years, so by the end of year five the property earns $750,000 per year.

Commercial Real Estate Investment Example

Doug then decides to sell the apartment building for $16 million. The buyer was willing to pay a higher price than Doug did 5 years ago for two reasons: First, Doug renovated the apartments, which now bring in 50% more income than they did when he bought the building. Second, economic growth in Doug’s city increased property values as new renters and entertainment venues moved into the neighborhood. Nice job, Doug!

The Bottom Line

Unlike stocks, commercial real estate investments often provide stable cash flows in the form of rental income.

Commercial real estate is a hard asset that is also a scarce resource. It always has intrinsic value, and usually appreciates in value over time.

The value of commercial real estate is derived by the larger growth of the economy as a whole.

Historically, direct commercial real estate investment has been out of reach for the everyday investor. This is because investments in commercial real estate are typically dominated by institutional investors as projects require millions of dollars in capital and a deep reservoir of expertise for improving and operating a property.

Key Investment Guidelines For Rental SFR Properties

Real Estate Investing

Whether you’re looking for a conduit, traditional or hard money funding solutions. Winston Rowe and Associates can meet both your individual and professional investment objectives. They have some of the most creative capitalization plans in the market that are designed meet the unique set of financial circumstances of each  transaction.

Choose the right property and you’ll reap the rewards; the wrong one will end up costing you dearly. You can minimize the potential for losses if you remember these four things to look for when evaluating a commercial property.

Property Location. The most important aspect of real estate investing is the location of the property. Properties in prime locations provide investors options such as resale, or rental. Those in poorly performing areas are limited and resale or rental may be difficult. The only way to really know what the area is like is to drive through during the day, at night and on weekends. Take note of activity that may discourage future buyers or renters.

Property Condition.  The condition of the roof, foundation, windows and mechanical components are big ticket items that will greatly affect your budget.  Make sure you have hard cost numbers from your contractor before you take the deal. Don’t be overly concerned by cosmetic issues that are easily fixed. Fresh paint, updated carpet, and flooring are relatively inexpensive.

Asking Price. The determining factor will be what the potential future value of the property is. The listing price is an important part of the equation. You don’t want to invest more than the property is worth, especially if you need to do a large amount of rehab. Look at other comparable properties, same number of bedrooms, square footage, etc., and determine the amount you’re willing to invest. Don’t be surprised, sometimes your offer will be more than the listing price.

After Rehab Value.  When it comes to investing, look at the location, condition, sales price and after rehab value. When all of these things are in line, you’ll be on your way to a profitable deal. The combined total of the asking price, plus rehab costs will bring you to your total expenses. Determine the percentage of profit, or dollar amount, you want to make and evaluate whether your investment will fulfill your needs. If not, you will be wise to move on to the next deal. Evaluating the after rehab value of a property will help you determine whether the deal is one you want to take, or if it’s time to move on. However, this isn’t necessarily the value of the home. Once completed, it’s possible your investment will be worth far more.

When speed and experience are important and crucial to your SFR and multifamily investing success, a principal at Winston Rowe & Associates is always available to speak with prospective clients.

They can be contacted at 248-246-2243 or visit them online at

Data Needed To Make A Commercial Property Investment

As a commercial real estate investor you need to take a careful and critical look at the income and expense data of any property you are considering investing in.

To begin the analysis of income and expenses is to focus in the following areas.

Gross Scheduled Income is the total annual rent value of all units in the property. This amount includes the actual rent generated by occupied units, as well as the potential rent from vacant units.

Vacancy Allowance is usually expressed as a percentage of the gross scheduled income. As its name suggests, it is an estimate of the amount of potential income that will be lost due to vacancy. Some investors prefer to call this “vacancy and credit loss” so that it also accounts for uncollectible rent.

Gross Operating Income (GOI) is the gross scheduled income less the vacancy allowance. It is also known as effective gross income. In short, it is the amount you actually collect.

Operating Expenses are items such as property insurance and taxes, repairs, utilities, and management fees. Operating expenses include any costs that are necessary to keep the revenue stream flowing. Mortgage payments and depreciation are not considered operating expenses, or are capital improvements.

Net Operating Income (NOI) is the gross operating income less the operating expenses. In other words, it is what is left of your total potential income after all vacancy and expense have been subtracted.

Annual Property Operating Data (APOD) is the real estate equivalent of an income and expense statement.

Winston Rowe & Associates is a no upfront fee commercial real estate advisory and due diligence firm specializes in the financing of commercial real estate transactions.

That’s why Winston Rowe & Associates actually wants to speak with clients, so they can truly understand their business and its distinct needs.

The best funding solutions occur when they combine data with consultation and common sense.

They can be contacted at 248-246-2243 or visit them online at

Auction Financing For Commercial Real Estate

Real Estate Investing

Commercial real estate investors purchasing property through on line auction web sites often find it difficult to obtain proof of funds documentation that will enable them to participate.

Winston Rowe & Associates, a national full service commercial finance firm specializes in working with experienced commercial real estate investors through all phases; from the initial proof of funds documentation, to the hard money (bridge) financing then finally the long term conventional financing.

Commercial Property Auction Investor Program Highlights:

Their capital deployment is nationwide and starts at Two Million Dollars with no upper limit

Never an upfront or advance fee to process your transaction

Investors must have a verifiable cash down payment

A proven best practices business model must be in place

Major metropolitan areas are preferred

All commercial property types are considered

Loan to values (LTV) start at 60%

This program is only for direct investors, no brokers please

Winston Rowe & Associates always welcomes the opportunity to speak with clients directly. The can be contacted at 248-246-2243




Non Recourse Commercial Funding

Non Recourse Commercial Funding

Winston Rowe & Associates targets difficult-to-finance transactions – in which funding cannot be obtained from conventional lenders due to FIDC constraints on the bank, problems with the real estate, problems with the principals of borrower, problems with the transaction itself, or any combination.

Winston Rowe & Associates is a nationwide commercial real estate advisory and finance firm that offers a diverse mix of commercial real estate funding solutions to meet the individual borrowing needs and investment objectives of its borrowers, for both investment and owner-occupied commercial properties.

They can carefully structure the right financing solution no matter how small or large your transaction requires. Depending on the deal, Winston Rowe & Associates can offer recourse and non-recourse commercial real estate financing options.

Their knowledge and depth of expertise maximizes efficiency and becomes their client’s advantage.

Winston Rowe & Associates is a unique type of commercial real estate finance firm, they do not charge any upfront fees like their competitors to review or perform due diligence for your transaction, because of this savvy investors have been turning to them for their financing needs.

Winston Rowe & Associates considers the ensuing property types for capital deployment.

Apartment Building & Multi-Family

Office Building

Retail Centers

Industrial Property

Shopping Centers

Mixed Use

Assisted Living Facilities

Medical Centers

Hotels & Resorts

Winston Rowe & Associates always welcomes the opportunity to speak with clients directly. The can be contacted at 248-246-2243 or visit them on line at


Strategies Investing In Real Estate

Strategies Investing In Real Estate

Whether you aim to do a quick flip or you’d prefer to generate passive income over time, here are the details and resources needed to execute on each strategy.

Although buying and holding is the most common and traditional strategy used for real estate investing, there is actually a variety of different strategies used.

Some of these are simple and can be executed in just days, while others can be used on an ongoing basis to create long-term value.

How does each strategy work?

1. The Fix and Flip the first impression of a house is incredibly important. The flip involves buying a house that can be easily improved, and then making minimal cosmetic improvements and repairs to sell for a better price.

For the right property, taking the time to fix small issues with flooring, walls, landscaping, and paint can pay off almost immediately.

2. Buy and Hold this is one of the oldest strategies in the book, and it’s designed for long-term passive income.

By purchasing a property and leasing it to tenants, it creates a stream of monthly cash flows, and even offers potential tax benefits for the owner.

3. Wholesale this has similarities to flipping, but involves finding a buyer for a seller and taking a percentage off the sale. If done right, this can be done quickly and with minimal risk.

4. Buy, Renovate, Rent, Refinance, and Repeat likely the most complex strategy in real estate investing for beginners to follow, this can ultimately be used to provide benefits in both the short and long term.

It involves four steps: buying a property, renovating it, renting the property out to tenants, and then refinancing the mortgage later on. Then the process repeats itself.

This article was prepared by Winston Rowe & Associates.

They are publishers of Free eBooks and provide financing for a wide variety of commercial real estate

You can contact them at 248-246-2243 or visit them online at