The Interview yesterday with Alan Welles, Commercial Broker Extraordinaire…was terrific.

REPLAY: If you missed the call, listen to a replay here

Had a few question come that we may not have fully answered on the call:

 

Here you go:

 

1. Commercial Property & IRAs:

 

ANSWER: Yes You Can. Just like any other property, you can purchase, flip, rent, lease or do just about any type of commercial inside your IRA accounts.

 

2. Are there Commercial Brokers who work nationally,if I want to sell to a Walmart or national chain?

 

ANSWER: Yes most definitely. Do a Internet search for “Largest commercial brokers in us” You’ll get several listing sources. Here’s some of the biggest ones:
-CB Richard Ellis     -Cushman & Wakefield   -Marcus & Millichap   -Grubb & Ellis   -Jones Lang Lasalle

 

3. Is there still opportunity for regular investors:

ANSWER: Absolutely. You don’t have to be a big-time player to do some of these deals. You can wholesale-flip, do Master-Leases, partner, do options and many more.

Is it the Right Time to Be looking into Commercial Deals?

I’ve been doing commercial real estate for a while now…Self storage and multi-family mostly.

And maybe you’ve done your share of them also.

In the last 6 months, there has been an awful lot of talk about now being the perfect time to ‘graduate’ into doing bigger deals.

But, before you ‘jump in’ or ‘chase the carrot’ that’s been put out there by ‘How to get rich in commercial deals’ training courses, why don’t you take some time to listen to some facts from a non-biased commercial real estate broker who’s got nothing to sell you, has no training courses, no seminars and has got no hidden agenda for providing good, quality information on this topic.

I’ll be having an interview with Allen Welles, a commercial real estate broker from South Florida.

The guys got a substantial business, does million dollar deals every week.

And I’m going to get him to cover 3 primary things:

1. State of the Market (commercial)
2. What types of properties are selling..what’s not selling at all.
3. Is now a good time to get in the game

If you want to see if the commercial game is right for you, or even if you’re already doing bigger deals and you want a pros prospective…

Join us next week for a no-charge, no-selling interview

http://propertyinvestinginformation.com/CommercialBroker

Have a great rest of the weekend

Norm Reid

‘State of the Market” From a Commercial Real Estate Broker in the Know…

Hey, if you’ve ever worked on a commercial deal where a broker was involved, you know how much knowledge they add to the process and how valuable a really good broker can be.

If you’re only familure with the single family market,  there’s no comparison between a single family realtor and a commercial broker when it comes to the importance. In a commercial deal, it’s very wise, if not critical to deal with a well versed commercial broker who really knows thier stuff. It can save you a ton of time, money &  risk.

So, a few weeks ago, I interviewd one of the big commercial brokers in South Florida, a guy who works on million dollar deals every week. He really knows his stuff!

After 90 minutes, I was in shock at the revelations he shared. As a commercial investor myself, I did’nt even know some of this ‘State of the Market’  stuff.

Anyway, I’ve never relased the interview to the public or to our TeleSeminar subscribers. But if there were enough interest from you and others, I could be conviced to have the audio edited, cleaned up and made ready for your learning pleasure.

So here goes…

If you wold like to hear me interview a very successfull and very interesting commercial real estate broker on the current opportunities available in the commercial investing markets, then ‘vote’ by commenting in the affirmtive below.

If there’s not enough interest, I just won’t bother. No skin off my back either way. But if I were intersted in commercial reale estate investing, (and I am) then I’d want to hear this and so should you.

By the way, the guy’s got nothing to sell, you can’t hire him, you can’t contact him. He can in no way benefit from you hearing this, he did this to me as a favor.

Comment below

Norm-

 

No one ever talks much about ‘wholesaling’ commercial deals, because…
(except for recently this guy)
I’m not sure why no one talks about it, sounds like a good strategy. We know it works in the single family market. Why not with commercial deals.

Of Course when we talk wholesaling, we’re talking about getting a deal under contract, then quickly finding a cash buyer who will buy the contract from us.

Let’s look at the pros of wholesaling:

1. Don’t have to buy the property ourselves
2. Quick cash if we’re able to flip
3. No risk if we can’t find a buyer
4. No credit since we’re not the ones’ buying it. (you’ll need a proof of funds letter, but those are not hard to come by)
5. Don’t have to manage it once you buy it
6. Don’t have to figure out how to make it profitable
7. There are probably more, but heck, those 6 are pretty strong.

To be fair, we sould probably look at the downsides of wholesaling:

1. You dont’ get monthly steady cash-flow (except the monster check you get the month you do the deal. I guess if you did one every month, you could actually consider that cash-flow??)
2. ..
3…
Uh, that’s about it.

Well, so I guess we can surmise that wholesaling commercial deals would be a good idea and put some cash in our pocket.

But what about the market, sellers and where to find the buyers?

Lets look at some facts:

1. Property prices are low (thats good for wholesaling)
2. Opportunists with cash are out there looking for good deals (that’s good since they’d be our buyers)
3. Business-start-up is WAY up (that’s good since they may need a commercial property
4. Rents are up and in high demand (given all the foreclosures) Which is good for buy & hold investors (also our buyers)

 

So to make money with this strategy we’d have to do what?

1. Learn the particulars, process and the numbers
2. Find super cheap deals
3. Know how to quickly and easily evaluate a deal
4. Know how to tie it up with a contract
5. Know how and where to get a PFL (proof of funds letter)
6. Know where to find these opportunist cash buyer investors

 

How much money are we talking?

Tie up a small commercial deal for $500,000 and take a$25-50,000 assignment fee. Pretty easy cash money
Do a $2million dollar property and net $100k +

Actually, do one or two of these a year, and you’ve just made some good supplemental income.

Anyway, just something to consider….

My first answer is for everyone to set up a Roth IRA  as soon as possible.

Most people have a retirement account at their job or place of employment.  That is most likely a 401K or some other similar retirement plan.  It is a good thing to take advantage of employer plans especially if the employer makes some sort of contribution.

It is good to have more than one way to save for retirement.  Making a contribution to your Roth IRA is a good way to have another way to save.

When should you set up a Roth IRA?  There are a number of different rules concerning Roth IRA as opposed to Traditional IRAs. 

 Since the money you put into a Roth IRA is after tax money, you can withdraw than money at any time without a penalty.  It is even a good way to save money for your kids college education. 

Even though you can withdraw the money you put into the IRA without any penalty, you do have to pay a penalty if you withdraw the interest or income that the IRA made if you withdraw before age 59.5.

Another really good reason to put money into a ROTH IRA is that the money is   protected from creditors and others.

For a traditional IRA, if you withdraw any of the money before age 59.5 you will not only have to pay taxes on that amount (if  the money was tax deferred)  but will have to pay a 10% penalty.

Because the money you put into a ROTH IRA was already taxed, the investment return will not be taxed.  But there are some conditions that have to be met for that investment to be tax free.

The IRS requires that the IRA be set up at least 5 years before the investment will be tax free.  This only means the first ROTH IRA that you set up will start the 5 year clock even if you only started with $100. 

 You can set up as many ROTH IRA accounts as you wish but the 5 year clock starts with the first account deposit. The 5 year clock does not start with each separate account or each deposit into an account.

If you ever close all your IRA accounts then the 5 year clock may restart, so keep at least one open all the time.

Don’t forget the advantages of being able to control your own retirement accounts.  You can even own real estate and other assets in your ROTH IRA.

I thought you may want to see what a person from the Small Business Association has to say about financing.  What I like about the article is that banks still like lending money to business that actually own and run the business. 

As bad as the economy is and even though the slow climb out of the recession is probably going to cause more small businesses to fail, one particular item that banks are still willing to finance is owner-occupied commercial real estate. Most other types of credit for small businesses – working capital being a prime example – have become very difficult to get. But for businesses that might be doing well enough to qualify for financing and are currently renting their space, this is one of the best times in a very long time to buy a building.

The commercial real estate crash, with overall commercial real estate prices down almost 40% below their peak in 2007, has created a large supply of buildings at prices lower than have been seen in recent memory. To a bank, a building occupied by a business owner is about as good a risk as can be found in today’s economy. Then add to that the fact that even though there may be a little more downside left in prices, there is much more upside potential as the economy continues to pull out of the recession. So add together an unusually large supply of buildings, and banks aggressively competing for this type of business, and a business owner has a real opportunity at this time to acquire space to grow their business.

Making it even more attractive for banks that are comfortable with SBA lending is the fact that banks can get 75% of their loans guaranteed, so SBA loans become even more attractive as a means to accomplish a building purchase. And for the potential business owner-borrower, the fact that SBA allows a 25-year amortization on commercial real estate usually means lower monthly payments on loans that also cannot be called. So for small business owners needing expansion, this is a very unique opportunity in recent economic history.”

Doug Carleton has worked in SBA lending since 1994, is a nationally published expert in financing for the bed and breakfast industry, and has spoken on bed and breakfast financing as well as SBA and small business financing as well as. He consults regularly with small business owners on matters related to financing.Article Source:

This is good news on the financing front for new commercial real estate investors.

Listen in on some valuable insight into commercial property investing

 

How is a non-recourse loan any different than other loans when commercial property investing?  According to a real estate dictionary, the lender of the non-recourse loan may take the property pledged as collateral to satisfy a debt, but has no recourse to other assets of the borrower.

Many commercial property purchases use the non-recourse loan strategy, most large commercial properties have this type of loan.  The lender and underwriters of the mortgages take a calculated risk that the business will make enough money to pay the debt.  The loan application is all about the property and the business instead of the owner. 

However, lenders are not as willing to make a non-recourse loan for smaller business properties.  Lenders will get every person involved in the business to sign that they will be personally responsible for the loan, if they can.  I know of a large doctor office group that every doctor signed personally every time they bought a piece of equipment, even if the equipment was not part of their personal office  (the group had been in business for more than 10 years and had always done well). This happened because the owners did not understand that there was another way to finance.

Just because there is an increase in the number of business owners defaulting on their loans does not mean that the lenders will not do any more non-recourse loans.  The lenders will be more careful when making the loans and will always try to get you to sign personally for the loan.

There are some tax advantages to having a loan that is guaranteed by your business or you,personally, but I do not think those tax advantages outweigh the  advantage of the lender not being able to attach my other assets.

If you go to a lender and they want you to sign personally for the loan, just tell them that you can not do that.  The lender could change their mind but if not then go to another lender.  You will eventually find a lender that will do the non-recourse loan for you.

You have to have a very good business plan and of all your numbers together plus any information that they may ask for if you expect to get any kind of loan, and even more for a non-recourse loan. 

Even though there are a lot of defaults occurring now, the bank still needs to make loans.  The loan business has hit bottom so you need to shop for a good small commercial property and a lender who will give you a good rate on a non-recourse loan.

How can you take advantage of the increasing number of business owners who are defaulting on their  mortgages?  Since the inventory of commercial properties is fairly high this makes it a good time for you to get into the small commercial real estate investing business.

Your question could be, how are you going to make it when so many others have gone under?  The answer is that the businesses that have gone under paid to much when the market was high.  Many businesses not only paid to much for their properties but expanded to fast which caused them to go into great debt. 

For those businesses to stay afloat they had to make more money because of the increased debt.  Of course they planned on the market to keep going up. 

Many of those business owners are very good business people.  Their projections for the future business were off.  A lot of the same business owners could restart their business today and do very well.  Since prices are lower in a lot of areas, not just property, they could make a lot of money, if their planning projections were more accurate.  They would be more careful about every line item in the budget, and not spend on unnecessary items, or pay to much for inventory or staff. 

It is curious that when the economy is doing really well that everyone spends like crazy, expanding, increasing staff, buying a lot of new equipment and a host of other things.  Even the local governments added more staff, planned big projects, buying big parcels of land for more new office buildings  (you would think that the local government is more responsible than the federal government, maybe the spending thing is contagious).

In any case, it is a good time for new property investors and past property investors to get into the business of property investing and learn from others past mistakes.

Do not blame all the down market on the government, the past investors, or the world economy, just take advantage of the present situation and make money.

Listen in on some valuable insight into commercial property investing

 

The small commercial property owner gets a break from the US Senate this week.  The new law will make more money available to small business.

The new law will also include some tax breaks,  although it is not clear exactly what those tax breaks will be.  Of course, the new  legislation will not be law until signed by the president, expected next week.

It is to your advantage to keep up with everything that you can.  You may be able to take advantage of some new laws or proposals. No law is written in isolation.  Every new law affects many other areas of business, including taxes. Keeping up with the changes could mean opportunities you might otherwise miss.

The people who make a lot of money are the ones who catch the changes before they are common knowledge.

It is difficult to tell at this point how easy it will really be to get lenders to actually lend the money.  In the recent past the government has loosened some of the lending standards but that did not seem to translate into more lending.

According to Forbes.com the commercial real estate market is on the upswing.  In August the volume was greater than in July.  One month does not equal a trend but it does give investors some hope.

As you have often heard, real estate is always local.  However when things change in one part of the country they tend to migrate to many other parts of the country.

Commercial real estate transactions may become more structured  and the days of a deal being closed with a handshake are mostly gone. The need to do more due diligence and future-casting will become the norm.

The international real estate market is getting more active. This is a good sign overall.  However, if you have no experience in the country you wish to buy real estate, it is not usually a good idea.  Even in this country you need to stay close to the areas you know well.

With good planning and due dilligence there is a lot of  money to be made in careful commercial investing.

Listen in on some valuable insight into commercial property investing