Video: A New Type of Crowdfunding

In this episode of  The Commercial Real Estate Show, Michael Bull interviews co-founder and managing director at ArborCrowd, Adam Kaufman. Now if you’re new to crowdfunding in commercial real estate this video with Adam Kaufman will help you grasp a better understanding of how sourcing funds for your CRE project works.

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Dalesmy Gonzalez is a graduate of Western Washington University where she studied Business Administration with an emphasis in Marketing.

She specializes in optimizing digital marketing websites for commercial real estate brokers and connecting buyers, sellers, and investors across the US.

Our Favorite Brokers on Youtube đź“ş

Youtube is home to millions if not billions of videos on a number of topics, making it easy for anyone to access a world of how-to entertainment at the click of a button. Youtube is just one resource among many for commercial brokers and investors to use when trying to learn the basics and even the most complex aspects of CRE.

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Dalesmy Gonzalez is a graduate of Western Washington University where she studied Business Administration with an emphasis in Marketing.

She specializes in optimizing digital marketing websites for commercial real estate brokers and connecting buyers, sellers, and investors across the US.

Video: Your How to Guide on Becoming a Commercial Real Estate Broker

If you’re new to commercial real estate or are considering taking the jump over from residential real estate, check out John Highman’s video “A Guide to a Career in Commercial Real Estate Brokerage.” His video will run you through the basics of the trade and what you need to begin your new career.

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Dalesmy Gonzalez is a graduate of Western Washington University where she studied Business Administration with an emphasis in Marketing.

She specializes in optimizing digital marketing websites for commercial real estate brokers and connecting buyers, sellers, and investors across the US.

Commercial Real Estate Crowdfunding

The playing field is becoming more level for small investors thanks to a slew of real estate crowdfunding websites sprouting up across the web.

The crowd-sourced investment websites have become an expansive trend in the industry. In the last year, an estimated half a billion dollars pooled into sites like realtyshares.com, realtymogul.com and realcrowd.com.

To keep it sweet, it’s the trend that’s here to stay for commercial real estate. And for the next week, MyNOI will be covering the details you need to know when getting involved.

Realty Shares commercial real estate crowdfunding

Just over a year ago the U.S. Securities and Exchange Commission (SEC) opened doors to permit the use of the popular investment platform in an effort to help small investors acquire capital and additional protections under the law.

Regulators adopted A+ Offerings, which in turn expanded asset classes to two tiers, ranked between $20 million to $49.9 million and $50 million and above.

Real Crowd commercial real estate crowdfunding

In a statement released near the time of the adoption of the final rules, SEC Chair Mary Jo White stated he following: “There is a great deal of enthusiasm in the marketplace for crowdfunding, and I believe these rules and proposed amendments provide smaller companies with innovative ways to raise capital and give investors the protections they need.”

And investors are noticing. For the first time, accredited investors — or, someone who’s valued at $1 million and makes equal to or more than $250,000 per year — aren’t the only ones who can have a stake in crowd-sourced campaigns.

Realty Mogul commercial real estate crowdfunding

The regulations have gone a long way. Based on my experience owning my own share in one of these sites, they’re growing in popularity because they’re reaping returns. By next year, I expect the number of dollars invested in these sites to double.

Now, I’ve already identified the top brass in the real estate crowdfunding sites today, but I’ll also recommend a valuable place to search for reviews and rankings as well as stats on fees or other features on the hundreds of crowdfunding options available.

It’s called realestatecrowdfundingreview.com and it offers readers the top 100 real estate crowdfunding sites on the web today. So if you’re looking for facts and figures, check it out.

commercial real estate crowdfunding review

You’ll find that many these sites have similar components. Often, you’re presented with several properties detailing the project, the developer or investment group as well as their investment and project history and return.

By law, parties leading the crowdfunding effort will need to disclose the amount of money they’ve put in as well as their intent for the property.  

As an investor, it’s your choice to drop a dollar in several properties or just one.

So take a careful look at your options and consider giving real estate crowdfunding a shot — I predict it’s here to stay.

Troy Muljat is a Washington State certified commercial appraiser and broker with over 25 years of experience in the commercial real estate industry. He holds the Certified Commercial Investment Member (CCIM) and Certified Property Manager® (CPM) designations through the National Association of Realtors.He specializes in brokerage, leasing, property management, development, and commercial appraisal.Visit TroyMuljat.com for more information about Troy.

How to Get Involved in Retail Investing

Retail property is one of the most sought after investments around today. Out of the four asset classes on the market, investors are paying large sums for small, multi-tenant and single-tenant retail properties in locations across the globe.

With such hot demand, it’s hard to get your foot in the door. That’s why I’ve put my practice in writing to present one valuable piece of advice to aspiring investors looking to network and make deals in retail.

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Troy Muljat is a Washington State certified commercial appraiser and broker with over 25 years of experience in the commercial real estate industry. He holds the Certified Commercial Investment Member (CCIM) and Certified Property Manager® (CPM) designations through the National Association of Realtors.He specializes in brokerage, leasing, property management, development, and commercial appraisal.Visit TroyMuljat.com for more information about Troy.

Real Estate Crowdfunding: A Trend That’s Here to Stay

The playing field is becoming more level for small investors thanks to a slew of real estate crowdfunding websites sprouting up across the web.

The crowd-sourced investment websites have become an expansive trend in the industry. In the last year, an estimated half a billion dollars pooled into sites like realtyshares.com, realtymogul.com and realcrowd.com.

To keep it sweet, it’s the trend that’s here to stay for commercial real estate. And for the next week, MyNOI will be covering the details you need to know when getting involved.

Realty Shares commercial real estate crowdfunding

Just over a year ago the U.S. Securities and Exchange Commission (SEC) opened doors to permit the use of the popular investment platform in an effort to help small investors acquire capital and additional protections under the law.

Regulators adopted A+ Offerings, which in turn expanded asset classes to two tiers, ranked between $20 million to $49.9 million and $50 million and above.

Real Crowd commercial real estate crowdfunding

In a statement released near the time of the adoption of the final rules, SEC Chair Mary Jo White stated he following: “There is a great deal of enthusiasm in the marketplace for crowdfunding, and I believe these rules and proposed amendments provide smaller companies with innovative ways to raise capital and give investors the protections they need.”

And investors are noticing. For the first time, accredited investors — or, someone who’s valued at $1 million and makes equal to or more than $250,000 per year — aren’t the only ones who can have a stake in crowd-sourced campaigns.

Realty Mogul commercial real estate crowdfunding

The regulations have gone a long way. Based on my experience owning my own share in one of these sites, they’re growing in popularity because they’re reaping returns. By next year, I expect the number of dollars invested in these sites to double.

Now, I’ve already identified the top brass in the real estate crowdfunding sites today, but I’ll also recommend a valuable place to search for reviews and rankings as well as stats on fees or other features on the hundreds of crowdfunding options available.

It’s called realestatecrowdfundingreview.com and it offers readers the top 100 real estate crowdfunding sites on the web today. So if you’re looking for facts and figures, check it out.

commercial real estate crowdfunding review

You’ll find that many these sites have similar components. Often, you’re presented with several properties detailing the project, the developer or investment group as well as their investment and project history and return.

By law, parties leading the crowdfunding effort will need to disclose the amount of money they’ve put in as well as their intent for the property.  

As an investor, it’s your choice to drop a dollar in several properties or just one.

So take a careful look at your options and consider giving real estate crowdfunding a shot — I predict it’s here to stay.

Troy Muljat is a Washington State certified commercial appraiser and broker with over 25 years of experience in the commercial real estate industry. He holds the Certified Commercial Investment Member (CCIM) and Certified Property Manager® (CPM) designations through the National Association of Realtors.He specializes in brokerage, leasing, property management, development, and commercial appraisal.Visit TroyMuljat.com for more information about Troy.

The Latest CRE News

We all know that weathering fast market conditions requires stamina, experience and, most importantly, knowledge. As an investor, it’s crucial to stay informed, but it’s not always easy to find the best place to look. (Besides MyNOI’s own news aggregating page.)

Lucky for you, I’ve already sifted through the multitude of options online and have compiled a list of the top five news outlets reporting on issues impacting commercial real estate investors today.

CoStar

co-star commercial real estate news

In all, CoStar Group Inc. leads the pack in providing investors market data and news impacting commercial real estate hubs across the nation. It’s a paid subscription service and is the largest publicly traded commercial real estate entity specializing in industry news and research.

The top news of the day often features a mix of high-stake commercial transactions, profiles on leaders in the industry and expert commentaries on market outlooks. The news team at CoStar is comprised of hundreds of researchers gathering the latest news on leasing deals, national trends, average expense rates and more.

A series of quarterly webinars are also published through the service and feature extensive analysis on the top four asset classes, including retail, office, industrial and multifamily.

GlobeSt

globe st commercial real estate news

Next is GlobeSt.com, which contains a plethora of original content about the latest in commercial real estate on both a national and local scale. The online edition of their business highlights real estate trends and analysis.

If you’re looking for news on some of the largest corporate players in the real estate game, look here.

Commercial RealEstate Direct

cre direct commercial real estate news

Since 1999, Commercial Real Estate Direct has acted as one of the most outstanding sources of news specific to the real estate capital markets industry.  

The daily news source is one of the top places to look for data, including its property sales database and others, detailing pricing surveys, a calendar of upcoming transactions and more.

The Wall Street Journal

wsj commercial real estate news

The Wall Street Journal is next on my top list of places to search for industry news. The seasoned team of real estate reporters produce work that is no less than exceptional.

The commercial real estate branch of the site focuses on the big picture, detailing market data, buyer trends and the latest stats on property stock. On a global scale, the outlet leads in highlighting some of the biggest transactions taking place on the market today.

CCIMccim institute commercial real estate news

Finally, I have to give a shout out to the CCIM Institute (Certified Commercial Investment Member Institute). A subset of the National Association of Realtors, the organization’s monthly magazine tackles industry-wide issues and sets forth on predicting trends for the future.

It’s an incredibly valuable source for analysis on a wide spectrum of issues. The website also provides an ample amount of professional resources for aspiring and active investors.

Troy Muljat is a Washington State certified commercial appraiser and broker with over 25 years of experience in the commercial real estate industry. He holds the Certified Commercial Investment Member (CCIM) and Certified Property Manager® (CPM) designations through the National Association of Realtors.He specializes in brokerage, leasing, property management, development, and commercial appraisal.Visit TroyMuljat.com for more information about Troy.

The Golden Egg of CRE – Absolute Net Lease

Investors prize after real estate deals that guarantee safety and high rates of return. These days it’s hard to know where to look. My advice to you: consider the absolute net lease, also known as the land lease.

Picture a prime piece of property on a high traffic corner, free of development — to put it simply, it’s an empty plot of land in a top spot in town. For a moment, pretend you’re the owner looking for a safe and lucrative investment.

What do you do? One solution is to build on the property and rent out the space to prospective tenants, but it’s a risk since you’d have to drop more money on the property. The other option is to pursue what I call the crème de la crème of real estate, an absolute net lease or — leasing the land.

Golden Egg absolute net lease

Find an accredited tenant that is willing to lease the space and build. This is a typical move in the retail industry and leads to decades-long contracts with reputable companies able to pay their rent. And if they default, your land will be worth more with the addition of a property paid for by the original leasing party.

Often, these accredited institutions, like McDonalds or Walmart as an example, will provide property owners with a letter of intent to lease the property. Most of the time, these institutions will sign a decades-long lease, spanning 20 or even 40 years.

mcdonalds absolute net lease

All costs associated with building on the property, including utilities, taxes, insurance and more are the burden of the leasing party. In essence, they assume the responsibilities of the property owner, but don’t legally own the land.

So if you’re a broker or have a client with land looking for a safe investment, get on the phone and start dialing retailers that are expanding in your market.

These properties are in high demand. Investors are willing to pay some of the highest premiums and lowest cap rates for these types of leases. In fact, I get calls on a similar property of my own about once every other week. It’s in hot demand and I don’t want to sell — It’s really the best problem to have in real estate.

Troy Muljat is a Washington State certified commercial appraiser and broker with over 25 years of experience in the commercial real estate industry. He holds the Certified Commercial Investment Member (CCIM) and Certified Property Manager® (CPM) designations through the National Association of Realtors.He specializes in brokerage, leasing, property management, development, and commercial appraisal.Visit TroyMuljat.com for more information about Troy.

Property Management Softwares Availible Online Today

Central to the business of brokerage, leasing and investing is property management. To maintain a smooth operation, it’s crucial to pick the right property management software.

As an owner of a property management company, in addition to my brokerage and development business, I can tell you which property management software options online are great and which are not so great.

Do: TenantCloud

tenant cloud property management software

The software is free to use for up to 75 units and operates on the cloud. With just a few clicks, you can access details on the property, rental regulations and more. Not only that, but the software allows users to pay bills in minutes. TenantCloud makes it easy to record payment information into a concise report that can easily be stowed away for record keeping.

The small team at TenantCloud also offers a service to renters, looking for an efficient application process and easier route of communication to landlords.

Do: Buildium

buildium property management software

Dubbed the “property management software designed by property managers,” the software excels in usability. Buildium is also cloud based and is an optimal option for all types of computer users, making it easy to introduce the software to employees and others new to the portal.

In 2015, the software received recognition by Inc. 5000 for the fourth year in a row and has grown its user base to more than 12,000.

Don’t: Yardi Systems Inc.

yardi property management software

If you’re looking to save a buck, don’t look here. The price point begins at $10,000 to $15,000 just to implement the property management software and an added $15,000 to $25,000 to purchase it. I’ve reviewed the trials and while it comes in handy for residential and commercial management, the barrier to entry is just too steep.

The company has a staff of 5,000 with offices in 30 locations throughout North America, Europe, the Middle East, Asia and Australia and claims to have set the standard for real estate software solutions.

Do: AppFolio

appfolio property management software

I’ve been using this software for more than two years and, by far, it’s my favorite. The software is managed through the cloud and can be easily accessed on a mobile device. At any time, I can login and get a clear snapshot of the status of a property, including details on delinquencies, rent collection and more.

To say the least, it’s a time saver. It even helps out with the dreaded triple net reconciliations which need to be completed by the end of the year. Before purchasing the software, which costs $1 per unit, my staff and I spent months tallying up the costs. Now, with just the tap of a button, it’s done in a matter of seconds—forget the pen and paper.

I recommend testing out all of the software I’ve mentioned on the list. Talk to people, do your research, ask the right questions and see what works for you.

Troy Muljat is a Washington State certified commercial appraiser and broker with over 25 years of experience in the commercial real estate industry. He holds the Certified Commercial Investment Member (CCIM) and Certified Property Manager® (CPM) designations through the National Association of Realtors.He specializes in brokerage, leasing, property management, development, and commercial appraisal.Visit TroyMuljat.com for more information about Troy.

How to Prepare a Letter of Intent

Before putting pen to paper on a fresh new lease, it’s often recommended to draft up a Letter of Intent. An LOI, as it’s called in the industry, helps prospective tenants edge forward to signing a lease that’s inclusive of their plans for the property in years to come.

These documents vary from deal-to-deal and can span the length of 10 to even 25 pages, depending on the scenario. With that in mind, I’ve put together a key list of components that can apply to any deal and skill level when preparing a LOI.

From the start, you’ll want to identify the tenant. Establish the interested party, whether you’re representing a company or an individual investor. Early on, you’ll want to note if you or your client is willing to personally guarantee the lease.

Next, pick a lease term and preferences for renewal. Generally, if a tenant agrees to sign a five-year lease, they’re offered a five-year option to renew.

Be sure to clarify the address and location. If there’s outlying space around the property, clarify its ownership in the letter in detail. Don’t be afraid to get technical.

You’ll want to identify both the lease and rent commencement. Landlords often are tasked with completing on-site projects or will start the rent dates later at the request of the tenant. Often, the lease and rental dates vary, so be sure to account for that in your letter of intent. Use the LOI to clarify the rental cost, method of payment and identify any potential provisions to rent as the lease ages. If the rent is projected to rise by a fixed percentage each year, put it in writing.

writing letter of intent

Tenants can also request to include an exclusivity clause in the letter of intent, meaning the landlord will be restricted from renting space to competing businesses in a surrounding plot of land. Keep in mind that malls and large retail spaces are especially challenging to pose an exclusivity clause and are often rejected by landlords.

It’s critical as an investor to consider expenses, especially prior to signing a lease. Consider suggesting a cap on triple net property expenses to, say, five percent to provide you with a safeguard down the road.

In the same vein, don’t forget to discuss a tenant improvement allowance, which guarantees repairs by the landlord prior to move-in. If you want plumbing, spell it out in a separate and detailed exhibition to accompany the letter.  

Now’s also the time to negotiate a security deposit. Publicly traded companies are often the largest opponents of the request and frequently use LOI to argue against them.

Money aside, a letter of intent allows you to detail aesthetics with the landlord, such as signage. Now’s the time to clarify what the landlord allows for the property. This can go a long way in marketing your business during the lifespan of the lease.

As an aside, remember to consult with an attorney during negotiations of this capacity. Try to establish timelines with the landlord and encourage an agreement to work together in faith to form a lease that’s mutually beneficial to all involved.

Troy Muljat is a Washington State certified commercial appraiser and broker with over 25 years of experience in the commercial real estate industry. He holds the Certified Commercial Investment Member (CCIM) and Certified Property Manager® (CPM) designations through the National Association of Realtors.He specializes in brokerage, leasing, property management, development, and commercial appraisal.Visit TroyMuljat.com for more information about Troy.

Top Websites to Search for Commercial Real Estate Properties

Search “commercial real estate” online and right away you’re inundated with thousands of portals vying for your attention. I know finding the right site isn’t always easy, so I’ve compiled a list of the top 8 websites to search on for commercial real estate properties. 

LoopNet

Loopnet.com is one of the best websites to search for commercial real estate, particularly in sales. The site is owned by the information-driven CoStar Group Inc. and has become one of the most used and valued tools in my real estate toolbox, and for many others in the industry as well.

loopnet Websites to Search for Commercial Real Estate

LoopNet generates an approximate 5 million visitors per month and contains 800,000 to 1 million listings at one time. About 400 to 500 billion is available for sale and at least 6 billion square feet is on the site for lease. The numbers are staggering, and that’s why they’re a leader in reaching brokers and investors online.

LoopNet is free for brokers to search, however a monthly subscription is required for investors looking to gather more information on listings in locations within the United States and beyond.

CoStar

The CoStar Group Inc. is also the driver behind its own site, costar.com. Specialists in compiling stats on the industry, the site is filled with a variety of data points for serious brokers and investors.

costar Websites to Search for Commercial Real Estate

The website shares some data with its subsidiary LoopNet, but provides more extensive research, including comp data, same sale data, and any data from the majority of commercial real estate on the market. CoStar also features information about lease terms, such as availability times and expiration dates. So if you’re looking to get serious about investing, I advise you to spend the $200 per month to access the site in-full.

Auction

Auction.com is another one of the great websites to search for commercial real estate. No surprise, Auction.com focuses on auctions for housing, commercial, multi-family and luxury real estate. You name the property type and they most likely have it covered on their site.

auction Websites to Search for Commercial Real Estate

Created by Ten-X LLC, which holds the tagline “where real estate is moving,” the site contains a calendar outlining a series of upcoming auctions. Often, especially in the last 10 years, property owners offer a minimum bid on items they want to sell through the site. Brokers pay a fee to participate, but all can gain access to the sites calendar which lists upcoming auctions throughout the nation.

Zillow

If you’re looking to search for multi-family properties, I recommend Zillow.com. Based out of Seattle, Washington, the team at Zillow provides online users with a comprehensive search tool to look for not only residential, but commercial properties as well.

zillow Websites to Search for Commercial Real Estate

Realtor

When a realtor lists a property through a multiple listing service (MLS), it will often get picked up by sites like Zillow or realtor.com. Specializing in multi-family assets, realtor.com is a great source for agents that participate in the commercial market but don’t want to pay for services like LoopNet.

realtor Websites to Search for Commercial Real Estate

Craigslist

Speaking of free, don’t forget craigslist.org. Craigslist offers users a look at a variety of mostly small and some commercial properties and investments. If you’re a broker and you’re looking for a for sale by owner or multi-family listing, keep Craigslist in your bag of tricks.

craigslist Websites to Search for Commercial Real Estate

RealtyTrac

If you’re looking to catch a glimpse at the latest foreclosures, I’d recommend realtytrac.com. The site features up-to-date listings and outlines the basics of foreclosure. Most properties listed on the site are single-family and sometimes multi-family. If you’re looking for retail or commercial office space, for example, I’d still recommend LoopNet and CoStar.

realtytrac Websites to Search for Commercial Real Estate

Commercial Brokers Association

If you’re looking to localize your search I recommend looking at your local commercial multiple listing service in your area. Here in the northwest, we have commercialmls.com, which encompasses Washington state as well as parts of Oregon and Idaho.

commercialmls Websites to Search for Commercial Real Estate

Remember that online search tools are crucial for serious investors — knowing where to look will give you an edge.

Troy Muljat is a Washington State certified commercial appraiser and broker with over 25 years of experience in the commercial real estate industry. He holds the Certified Commercial Investment Member (CCIM) and Certified Property Manager® (CPM) designations through the National Association of Realtors.He specializes in brokerage, leasing, property management, development, and commercial appraisal.Visit TroyMuljat.com for more information about Troy.

3 Ways to Value CRE Investment Properties

As a certified appraiser and broker, I know the best practices to value a CRE investment property. My go-to list boils down to three approaches related to cost, income and sales. So if you’re not so sure how to value your commercial property, keep on reading.

1. The Cost Approach

When you begin to value an investment property, start by identifying the cost to replace the property. This means accounting for all costs associated with construction and property value.

If you come across comparable properties that are priced above the cost to rebuild it completely, educate your clients — the same goes if properties are priced below the cost of reproduction.

If a property is listed 30 percent below its estimated value, for example, acknowledge the edge you have over new complexes on the market that require additional cost to build. Ultimately, they’ll have to charge a higher rent and you’ll have a competitive edge.

2. The Income Approach

Consider the Gross Scheduled Income (GSI), or the amount of rent collected for the entire property if it was completely occupied, even if some units are vacant.

You’ll need to consider external income generated through on-site laundry, parking or whatever else is accrued through tenant property expenses.

Next, subtract the stabilized vacancy rate from the equation. Depending on your market, you’ll want to stick to about 2 to 5 percent. I always consider vacancy because it’s so unpredictable. It’s rare that an apartment will become available the same day a tenant chooses to move out. Typically, it takes about 5 to 10 days to clean, fix damages and get a new tenant in an apartment.

Once you calculate the stabilized vacancy rate, you get the Effective Gross Income (EGI), which is then subtracted by expenses including taxes, insurance, utility costs, water, sewage, garbage — you name it.

From there, you’ll be able to calculate your Net Operating Income (NOI) which clarifies the amount you’ll profit each year before debt service, tax treatment and depreciation.

Finally, divide that figure into the cap rate, which is the annual return on a property paid for in cash. Simply take the cap rate and divide into the NOI to get the final valuation of your property.

3. The Sales Approach

Once you’ve identified expenses, you’ll want to break it down to a per-unit basis and compare properties. Compare properties on a per-square-foot basis or even a per-bed basis, depending on your market.

Reconcile the numbers and compare a handful of properties. You’ll then want to make adjustments to your property valuation based on what you find.

Weigh each of the above approaches and determine which works best for you and what gives you most confidence. It’s different for everyone, but it works.

Troy Muljat is a Washington State certified commercial appraiser and broker with over 25 years of experience in the commercial real estate industry. He holds the Certified Commercial Investment Member (CCIM) and Certified Property Manager® (CPM) designations through the National Association of Realtors.He specializes in brokerage, leasing, property management, development, and commercial appraisal.Visit TroyMuljat.com for more information about Troy.

7 Traits That Make an Amazing Real Estate Broker

I’ve been involved in commercial real estate for more than 25 years. Since then, I’ve come to understand what works and what doesn’t when it comes to the relationship between a client and their broker. I put together a list of 7 traits that make for an amazing broker.

Trait #1: Brush up on your Communication Skills

Communication is key to any successful relationship. It may seem simple, but it’s crucial to maintaining trust with a client.

If you’re a commercial broker, you need to be in contact with your clients on a regular basis.

Update your clients on new investment opportunities; be clear about what you are going to do once you take on the property as a listing; and inform your clients about the marketplace.

If you’re leasing a property for your client, generate a weekly report detailing activity, even if there is none. Don’t be afraid to explain why an office building, for example, leased in a certain market and not the one you’re representing. These conversations build trust and hold you, the broker, accountable.

The door should always be open.

Trait #2. Maintain Professionalism at All Times

Sure, this may seem pretty straightforward, but putting it in practice is a different story.

As a broker, you should constantly be willing to learn. Be ready to go the extra mile.

I, for example, am certified with the Certified Commercial Investment Member Institute (CCIM) — only one percent of brokers hold that designation. It makes me stand out and gives me the skills to provide a unique and improved service to my clients.

Commit yourself to excellence and hold yourself to a higher standard. Do something that adds value to the client experience.

Trait #3: Be Knowledgeable and Prepared to Answer Questions

commerical real estate broker notes

Are you prepared to answer client questions? Do you understand the intricacies of the market? Are you capable of advising your client to achieve the best outcome?

These are all questions you should be replying to with a resounding “yes.”
Being knowledgeable is essential. My CCIM training, for example, taught me how to define a cap rate, calculate a ten-year cash flow analysis and internal rate of return. If you’re able to answer those questions, you have an edge.

More specifically to you, be prepared to tell clients how many properties you sold in the last year, your total dollar volume and other details related to your professional experience and accomplishments. If you specialize in a specific asset class, tell investors.

Understanding the industry and having a specialty is key.

Trait #4: Always be Honest

Being transparent with clients has been at the forefront of my business practice for years. Breaching ethical standards to turn a profit or make a deal should simply be off the table at all times.

Even if you make a mistake, be honest with your clients. It’s your responsibility to build a trusting relationship so apologize for your mistakes and make it right. Don’t make up a story.

Client’s appreciate a broker that strives to maintain a high level of integrity at all times.

Trait #5:  Don’t Forget to be Tenacious

Do you prefer to work from 8 a.m to 5 p.m. or do you like to get out and knock on doors? Going the extra mile makes all the difference.

Half of my sales come from properties that aren’t even listed — I’ve sold everything from a movie theatre all the way to a hotel on properties that weren’t listed.

As a broker, it’s your job to stir up deals. Inform the public about the market and make moves.

Trait #6. Entrepreneurship Opens Doors

brokers

A mere 8 percent of brokers own a property outside of their own home. That means more than 90 percent of brokers don’t own an investment property. Run the numbers.

If you’re going to do business and encourage investment, you should know how to answer client questions from experience. That’s why I’ve invested in commercial real estate for years.

Not only has it generated tremendous opportunity for me, but it’s provided me with a unique insight that I can bring to clients. I know what it’s like to be a landlord. I’ve been in those situations and I can tell clients how I handled it on my own.

Being an entrepreneur demonstrates self-motivation and goes a long way in business.

Trait #7: Persevere When Times are Tough

Transactions that take months to finalize are one of the most challenging aspects about being a broker, but you’ve got to stick with it.

Face it, commercial transactions take time. You have to communicate with your client throughout the process, even if it takes months. Remain up to date on the information and send your client progress reports. You’ll need to continue providing assurance to your client and others involved throughout the process, despite how long it takes.

To counter that, know when it’s time to cut your losses. It’s acceptable to identify that a transaction is not working. Inform your client and choose what’s best.

Learn to persevere and you’ll be successful in the long run.

Troy Muljat is a Washington State certified commercial appraiser and broker with over 25 years of experience in the commercial real estate industry. He holds the Certified Commercial Investment Member (CCIM) and Certified Property Manager® (CPM) designations through the National Association of Realtors.He specializes in brokerage, leasing, property management, development, and commercial appraisal.Visit TroyMuljat.com for more information about Troy.

What is a Cap Rate?

Not so sure how to answer the above question? Here’s what you need to know:

A capitalization rate, or a cap rate as it’s often referred, is the rate of return anticipated for one year if the property was paid for in cash — It’s the ratio between Net Operating Income (NOI) and the property value.

If you pay $1 million on a property in cash with a 10 percent cap rate, for example, you should expect to see $100,000 rate of return per year.

For investors or brokers, you’ll have to calculate your Net Operating Income (NOI) to identify the cap rate. To do that, you’ll need to account for the Gross Scheduled Income (GSI) of potential renters and subtract the vacancy rates and property expenses to calculate your gross income. The net profit you generate before debt, divided by the purchase price of the property, is your cap rate.

Now, it’s not often that investors are buying properties in cash. Frequently, they’re incurring debt and placing a certain percentage down on the property.

If you’re intending to leverage the property, you’ll want to subtract total yearly debt costs, or your annual debt service, from your calculated NOI to identify net cash flow. Most often, your cash-on-cash return should be slightly above the cap rate if your borrowed interest rates fall below it.

Let’s say you’re a property owner and you want calculate the cap rate of your own property. First, hop online and look at property comparables. Let’s say you come across a 20-unit apartment building with a NOI of $50,000 and it sells for $1 million. That’s a cap rate of 5 percent. It’s as simple as that.

Remember, cap rates are extracted from the market, so keeping close attention to what’s selling today is crucial in determining the perfect cap rate for your property.

Read more about finding local cap rates. Or use our free service to discover your market’s cap rates!

Troy Muljat is a Washington State certified commercial appraiser and broker with over 25 years of experience in the commercial real estate industry. He holds the Certified Commercial Investment Member (CCIM) and Certified Property Manager® (CPM) designations through the National Association of Realtors.He specializes in brokerage, leasing, property management, development, and commercial appraisal.Visit TroyMuljat.com for more information about Troy.

Why Internal Rate of Return (IRR) is important?

In commercial real estate, it’s smart to think ahead and keep a close eye on the numbers.

As a commercial broker with more than two decades in the ring, I’ve continued to rely on a variety of metrics, including Internal Rate of Return, or IRR, to ensure my investments are sound.

IRR stands strong in its ability to identify the value of an investment over time. In essence, it quantifies the yield you’ll achieve after you invest in a property after an approximate ten year period — a metric used based on the average holding period of about seven to ten years.

The calculation accounts for the income generated by the property with expenses, or the Net Operating Income (NOI), and assumes you’ll sell the property based on future income on the tenth year.

calculating IRR

To calculate the IRR, you’ll need to identify expected cash flows for each year, accounting for outflows in the first year. To calculate cash flows, or the Effective Gross Income (EGI), you must subtract potential gross income from vacancy rates and identify your NOI.

Once you’ve identified assumed income achieved for each year, you should be able to see a steady growth. Ultimately, you should achieve an approximate 1 to 5 percent assumed growth rate per year.

Now that you have calculated the expected NOI through year 10, you are in the green to select a capitalization rate, or a cap rate, which is the ratio between NOI and the property’s asset value. You’ll want to make the selection for year 11, when you plan to sell the property.

Often, I’ll set the cap rate to about .5 percent higher than the rate in which I purchased the property — so if I purchased the property at a cap rate of 6, I’ll use a 6.5 rate in year 10 and cap the year 11 income to produce reversionary value.

IRR spreadsheet

Software programs like Excel do wonders in making IRR calculations a cinch. Often, IRR’s sit around 15 percent, however they can get higher if you’re refinancing a property or are involved in a development.

So, if you’re an investor looking to gauge the profitability of a future commercial real estate deal, I’d recommend taking a look at IRR.

MyNOI connects investors with the knowledge they need to make smart decisions and the right brokers to reach their goals. As a team we gather & write timely and salient articles for you to develop your expertise as a commercial real estate investor and broker.

3 Tips to Selling a Property in Tight Market Conditions

These days, real estate investors are increasingly looking to multi-family properties to generate high rates of return. With demand for apartments and similar units on the rise, learning to weather fast market conditions is an imperative to getting the best value for your property.

With years of experience as a commercial broker, I’ve developed these 3 tips for maximizing profit when selling a property in a tight market.

Tip #1: Be Prepared to Answer Questions

Prior to selling a property, or even listing it, you want to be informed, this means doing your homework.

Prepare records from the current year to date, referencing profit, loss, net income and capital expenses. Remove irregularities, such as infrequent need-based repairs, to form a standard income and expense list.

Records should prove that you’ve been able to maintain a steady growth of income — if that’s not the case, you’ll need to be prepared to clearly tell potential buyers why.

Once this step is complete and your offering memorandum and supplemental literature is prepared, it’s time to list the property.

Tip #2: Hold an Open House

Talk with tenants and get ready to host an open house after the listing has been out for one week. Let the listing grow interest and don’t take the first, or even the second offer.

I recommend scheduling just one open house during a two-hour time slot. Of course if it’s a larger property, space it out between two days, if necessary.

The value in hosting one open house is immeasurable, in my experience. A large crowd indicates to everyone in attendance that the property has sparked widespread interest and creates a sense of urgency amongst buyers. It’s also important to keep in mind that one open house, as opposed to many, reduces impact on existing tenants.

Keep in mind that this is the prime time to reference details you’ve prepared about the property prior to listing it on the market. If potential buyers have any remaining questions, be sure to get back to them within two to three days with an answer.

Tip #3: Call for Offers

Five days after the open house, call potential buyers for an offer. Details about the property are still fresh in their mind and they’ve had some time to think about the investment.

If you’re doing your job right, you should expect to generate between 5 and 15 offers. After that, you’ll just need to make a choice and move forward with the deal.

Troy Muljat is a Washington State certified commercial appraiser and broker with over 25 years of experience in the commercial real estate industry. He holds the Certified Commercial Investment Member (CCIM) and Certified Property Manager® (CPM) designations through the National Association of Realtors.He specializes in brokerage, leasing, property management, development, and commercial appraisal.Visit TroyMuljat.com for more information about Troy.

Mortgage Insurance Explained

MyNOI connects investors with the knowledge they need to make smart decisions and the right brokers to reach their goals. As a team we gather & write timely and salient articles for you to develop your expertise as a commercial real estate investor and broker.

What is Internal Rate of Return (IRR)?

In commercial real estate, it’s smart to think ahead and keep a close eye on the numbers.

As a commercial broker with more than two decades in the ring, I’ve continued to rely on a variety of metrics, including Internal Rate of Return, or IRR, to ensure my investments are sound.

IRR stands strong in its ability to identify the value of an investment over time. In essence, it quantifies the yield you’ll achieve after you invest in a property after an approximate ten year period — a metric used based on the average holding period of about seven to ten years.

The calculation accounts for the income generated by the property with expenses, or the Net Operating Income (NOI), and assumes you’ll sell the property based on future income on the tenth year.

calculating IRR

To calculate the IRR, you’ll need to identify expected cash flows for each year, accounting for outflows in the first year. To calculate cash flows, or the Effective Gross Income (EGI), you must subtract potential gross income from vacancy rates and identify your NOI.

Once you’ve identified assumed income achieved for each year, you should be able to see a steady growth. Ultimately, you should achieve an approximate 1 to 5 percent assumed growth rate per year.

Now that you have calculated the expected NOI through year 10, you are in the green to select a capitalization rate, or a cap rate, which is the ratio between NOI and the property’s asset value. You’ll want to make the selection for year 11, when you plan to sell the property.

Often, I’ll set the cap rate to about .5 percent higher than the rate in which I purchased the property — so if I purchased the property at a cap rate of 6, I’ll use a 6.5 rate in year 10 and cap the year 11 income to produce reversionary value.

IRR spreadsheet

Software programs like Excel do wonders in making IRR calculations a cinch. Often, IRR’s sit around 15 percent, however they can get higher if you’re refinancing a property or are involved in a development.

So, if you’re an investor looking to gauge the profitability of a future commercial real estate deal, I’d recommend taking a look at IRR.

Troy Muljat is a Washington State certified commercial appraiser and broker with over 25 years of experience in the commercial real estate industry. He holds the Certified Commercial Investment Member (CCIM) and Certified Property Manager® (CPM) designations through the National Association of Realtors.He specializes in brokerage, leasing, property management, development, and commercial appraisal.Visit TroyMuljat.com for more information about Troy.

Key Components to Include in a Letter of Intent

Before putting pen to paper on a fresh new lease, it’s often recommended to draft up a Letter of Intent. An LOI, as it’s called in the industry, helps prospective tenants edge forward to signing a lease that’s inclusive of their plans for the property in years to come.

These documents vary from deal-to-deal and can span the length of 10 to even 25 pages, depending on the scenario. With that in mind, I’ve put together a key list of components that can apply to any deal and skill level when preparing a LOI.

From the start, you’ll want to identify the tenant. Establish the interested party, whether you’re representing a company or an individual investor. Early on, you’ll want to note if you or your client is willing to personally guarantee the lease.

Next, pick a lease term and preferences for renewal. Generally, if a tenant agrees to sign a five-year lease, they’re offered a five-year option to renew.

Be sure to clarify the address and location. If there’s outlying space around the property, clarify its ownership in the letter in detail. Don’t be afraid to get technical.

You’ll want to identify both the lease and rent commencement. Landlords often are tasked with completing on-site projects or will start the rent dates later at the request of the tenant. Often, the lease and rental dates vary, so be sure to account for that in your letter of intent. Use the LOI to clarify the rental cost, method of payment and identify any potential provisions to rent as the lease ages. If the rent is projected to rise by a fixed percentage each year, put it in writing.

writing letter of intent

Tenants can also request to include an exclusivity clause in the letter of intent, meaning the landlord will be restricted from renting space to competing businesses in a surrounding plot of land. Keep in mind that malls and large retail spaces are especially challenging to pose an exclusivity clause and are often rejected by landlords.

It’s critical as an investor to consider expenses, especially prior to signing a lease. Consider suggesting a cap on triple net property expenses to, say, five percent to provide you with a safeguard down the road.

In the same vein, don’t forget to discuss a tenant improvement allowance, which guarantees repairs by the landlord prior to move-in. If you want plumbing, spell it out in a separate and detailed exhibition to accompany the letter.  

Now’s also the time to negotiate a security deposit. Publicly traded companies are often the largest opponents of the request and frequently use LOI to argue against them.

Money aside, a letter of intent allows you to detail aesthetics with the landlord, such as signage. Now’s the time to clarify what the landlord allows for the property. This can go a long way in marketing your business during the lifespan of the lease.

As an aside, remember to consult with an attorney during negotiations of this capacity. Try to establish timelines with the landlord and encourage an agreement to work together in faith to form a lease that’s mutually beneficial to all involved.

Troy Muljat is a Washington State certified commercial appraiser and broker with over 25 years of experience in the commercial real estate industry. He holds the Certified Commercial Investment Member (CCIM) and Certified Property Manager® (CPM) designations through the National Association of Realtors.He specializes in brokerage, leasing, property management, development, and commercial appraisal.Visit TroyMuljat.com for more information about Troy.

Getting Involved with Retail Investing

open retail property

Retail property is one of the most sought after investments around today. Out of the four asset classes on the market, investors are paying large sums for small, multi-tenant and single-tenant retail properties in locations across the globe.

With such hot demand, it’s hard to get your foot in the door. That’s why I’ve put my practice in writing to present one valuable piece of advice to aspiring investors looking to network and make deals in retail.

Become a member of the International Council of Shopping Centers (ICSC).

The global trade organization is comprised of an estimated 60,000 members, mostly representing developers, agents, lenders, investors, brokers and more. Membership tacks on a price tag of  $800 per company and $100 for additional members each year.

In my experience, ICSC is the only organization that’s successful in connecting investors to lucrative deals in some of the largest metro areas of the United States, as well as other hotspots in nations across the globe. The organization hosts a multitude of trade shows, which act as a valuable resource for investors hoping to gather information on the latest trends or biggest names in the industry.

The most prized event of the year is called RECon, which, in the United States, occurs in Las Vegas in May. Nearly 30,000 people from around the world show up to the days-long event to complete an estimated 60 to 70 percent of all recorded retail lease transactions nationwide per year.

ICSC convention in vegas

Vendors line the halls of the nearly two-million-square-foot facility to provide developers, brokers and investors resources and connections to deals already set up months in advance. Many participating retailers publish reports detailing lists of preferences and plans for brokers and developers looking to bring them deals.

It’s a great place to network. RECon is one of the few times where you’ll get to meet representative brokers from large retail conglomerates. Now, my rolodex is full of some of the most valuable names in the industry. In fact, I’ve put together entire centers with the contacts I’ve received from these events.

Really, you don’t need to look any further to break into the retail leasing market. Become a member — you won’t look back.

To learn more about the International Council of Shopping Centers (ICSC) visit, www.icsc.org.

Troy Muljat is a Washington State certified commercial appraiser and broker with over 25 years of experience in the commercial real estate industry. He holds the Certified Commercial Investment Member (CCIM) and Certified Property Manager® (CPM) designations through the National Association of Realtors.He specializes in brokerage, leasing, property management, development, and commercial appraisal.Visit TroyMuljat.com for more information about Troy.

Looking for the Latest Industry News? I’m Here to Help.

We all know that weathering fast market conditions requires stamina, experience and, most importantly, knowledge. As an investor, it’s crucial to stay informed, but it’s not always easy to find the best place to look. (Besides MyNOI’s own news aggregating page.)

Lucky for you, I’ve already sifted through the multitude of options online and have compiled a list of the top five news outlets reporting on issues impacting commercial real estate investors today.

co-star commercial real estate news

In all, CoStar Group Inc. leads the pack in providing investors market data and news impacting commercial real estate hubs across the nation. It’s a paid subscription service and is the largest publicly traded commercial real estate entity specializing in industry news and research.

The top news of the day often features a mix of high-stake commercial transactions, profiles on leaders in the industry and expert commentaries on market outlooks. The news team at CoStar is comprised of hundreds of researchers gathering the latest news on leasing deals, national trends, average expense rates and more.

A series of quarterly webinars are also published through the service and feature extensive analysis on the top four asset classes, including retail, office, industrial and multifamily.
globe st commercial real estate news

Next is GlobeSt.com, which contains a plethora of original content about the latest in commercial real estate on both a national and local scale. The online edition of their business highlights real estate trends and analysis.

If you’re looking for news on some of the largest corporate players in the real estate game, look here.

cre direct commercial real estate news

Since 1999, Commercial Real Estate Direct has acted as one of the most outstanding sources of news specific to the real estate capital markets industry.  

The daily news source is one of the top places to look for data, including its property sales database and others, detailing pricing surveys, a calendar of upcoming transactions and more.

wsj commercial real estate news

The Wall Street Journal is next on my top list of places to search for industry news. The seasoned team of real estate reporters produce work that is no less than exceptional.

The commercial real estate branch of the site focuses on the big picture, detailing market data, buyer trends and the latest stats on property stock. On a global scale, the outlet leads in highlighting some of the biggest transactions taking place on the market today.

ccim institute commercial real estate news

Finally, I have to give a shout out to the CCIM Institute (Certified Commercial Investment Member Institute). A subset of the National Association of Realtors, the organization’s monthly magazine tackles industry-wide issues and sets forth on predicting trends for the future.

It’s an incredibly valuable source for analysis on a wide spectrum of issues. The website also provides an ample amount of professional resources for aspiring and active investors.

Troy Muljat is a Washington State certified commercial appraiser and broker with over 25 years of experience in the commercial real estate industry. He holds the Certified Commercial Investment Member (CCIM) and Certified Property Manager® (CPM) designations through the National Association of Realtors.He specializes in brokerage, leasing, property management, development, and commercial appraisal.Visit TroyMuljat.com for more information about Troy.

The Absolute Net Lease — My Take on the Golden Egg of Real Estate

Investors prize after real estate deals that guarantee safety and high rates of return. These days it’s hard to know where to look. My advice to you: consider the absolute net lease, also known as the land lease.

Picture a prime piece of property on a high traffic corner, free of development — to put it simply, it’s an empty plot of land in a top spot in town. For a moment, pretend you’re the owner looking for a safe and lucrative investment.

What do you do? One solution is to build on the property and rent out the space to prospective tenants, but it’s a risk since you’d have to drop more money on the property. The other option is to pursue what I call the crème de la crème of real estate, an absolute net lease or — leasing the land.

Golden Egg absolute net lease

Find an accredited tenant that is willing to lease the space and build. This is a typical move in the retail industry and leads to decades-long contracts with reputable companies able to pay their rent. And if they default, your land will be worth more with the addition of a property paid for by the original leasing party.

Often, these accredited institutions, like McDonalds or Walmart as an example, will provide property owners with a letter of intent to lease the property. Most of the time, these institutions will sign a decades-long lease, spanning 20 or even 40 years.

mcdonalds absolute net lease

All costs associated with building on the property, including utilities, taxes, insurance and more are the burden of the leasing party. In essence, they assume the responsibilities of the property owner, but don’t legally own the land.

So if you’re a broker or have a client with land looking for a safe investment, get on the phone and start dialing retailers that are expanding in your market.

These properties are in high demand. Investors are willing to pay some of the highest premiums and lowest cap rates for these types of leases. In fact, I get calls on a similar property of my own about once every other week. It’s in hot demand and I don’t want to sell — It’s really the best problem to have in real estate.

Troy Muljat is a Washington State certified commercial appraiser and broker with over 25 years of experience in the commercial real estate industry. He holds the Certified Commercial Investment Member (CCIM) and Certified Property Manager® (CPM) designations through the National Association of Realtors.He specializes in brokerage, leasing, property management, development, and commercial appraisal.Visit TroyMuljat.com for more information about Troy.

The Dos and Don’ts of Property Management Software

Central to the business of brokerage, leasing and investing is property management. To maintain a smooth operation, it’s crucial to pick the right property management software.

As an owner of a property management company, in addition to my brokerage and development business, I can tell you the dos and don’ts of property management software options online today.

Do: TenantCloud

tenant cloud property management software

The software is free to use for up to 75 units and operates on the cloud. With just a few clicks, you can access details on the property, rental regulations and more. Not only that, but the software allows users to pay bills in minutes. TenantCloud makes it easy to record payment information into a concise report that can easily be stowed away for record keeping.

The small team at TenantCloud also offers a service to renters, looking for an efficient application process and easier route of communication to landlords.

Do: Buildium

buildium property management software

Dubbed the “property management software designed by property managers,” the software excels in usability. Buildium is also cloud based and is an optimal option for all types of computer users, making it easy to introduce the software to employees and others new to the portal.

In 2015, the software received recognition by Inc. 5000 for the fourth year in a row and has grown its user base to more than 12,000.

Don’t: Yardi Systems Inc.

yardi property management software

If you’re looking to save a buck, don’t look here. The price point begins at $10,000 to $15,000 just to implement the property management software and an added $15,000 to $25,000 to purchase it. I’ve reviewed the trials and while it comes in handy for residential and commercial management, the barrier to entry is just too steep.

The company has a staff of 5,000 with offices in 30 locations throughout North America, Europe, the Middle East, Asia and Australia and claims to have set the standard for real estate software solutions.

Do: AppFolio

appfolio property management software

I’ve been using this software for more than two years and, by far, it’s my favorite. The software is managed through the cloud and can be easily accessed on a mobile device. At any time, I can login and get a clear snapshot of the status of a property, including details on delinquencies, rent collection and more.

To say the least, it’s a time saver. It even helps out with the dreaded triple net reconciliations which need to be completed by the end of the year. Before purchasing the software, which costs $1 per unit, my staff and I spent months tallying up the costs. Now, with just the tap of a button, it’s done in a matter of seconds—forget the pen and paper.

I recommend testing out all of the software I’ve mentioned on the list. Talk to people, do your research, ask the right questions and see what works for you.

Troy Muljat is a Washington State certified commercial appraiser and broker with over 25 years of experience in the commercial real estate industry. He holds the Certified Commercial Investment Member (CCIM) and Certified Property Manager® (CPM) designations through the National Association of Realtors.He specializes in brokerage, leasing, property management, development, and commercial appraisal.Visit TroyMuljat.com for more information about Troy.

Top Websites to Search for Commercial Real Estate

Search “commercial real estate” online and right away you’re inundated with thousands of portals vying for your attention. I know finding the right site isn’t always easy, so I’ve compiled a list of the best websites to search for commercial real estate. 

Loopnet.com is one of the best websites to search for commercial real estate, particularly in sales. The site is owned by the information-driven CoStar Group Inc. and has become one of the most used and valued tools in my real estate toolbox, and for many others in the industry as well.

loopnet Websites to Search for Commercial Real Estate

LoopNet generates an approximate 5 million visitors per month and contains 800,000 to 1 million listings at one time. About 400 to 500 billion is available for sale and at least 6 billion square feet is on the site for lease. The numbers are staggering, and that’s why they’re a leader in reaching brokers and investors online.

LoopNet is free for brokers to search, however a monthly subscription is required for investors looking to gather more information on listings in locations within the United States and beyond.

The CoStar Group Inc. is also the driver behind its own site, costar.com. Specialists in compiling stats on the industry, the site is filled with a variety of data points for serious brokers and investors.

costar Websites to Search for Commercial Real Estate

The website shares some data with its subsidiary LoopNet, but provides more extensive research, including comp data, same sale data, and any data from the majority of commercial real estate on the market. CoStar also features information about lease terms, such as availability times and expiration dates. So if you’re looking to get serious about investing, I advise you to spend the $200 per month to access the site in-full.

Auction.com is another one of the great websites to search for commercial real estate. No surprise, Auction.com focuses on auctions for housing, commercial, multi-family and luxury real estate. You name the property type and they most likely have it covered on their site.

auction Websites to Search for Commercial Real Estate

Created by Ten-X LLC, which holds the tagline “where real estate is moving,” the site contains a calendar outlining a series of upcoming auctions. Often, especially in the last 10 years, property owners offer a minimum bid on items they want to sell through the site. Brokers pay a fee to participate, but all can gain access to the sites calendar which lists upcoming auctions throughout the nation.

If you’re looking to search for multi-family properties, I recommend Zillow.com. Based out of Seattle, Washington, the team at Zillow provides online users with a comprehensive search tool to look for not only residential, but commercial properties as well.

zillow Websites to Search for Commercial Real Estate

When a realtor lists a property through a multiple listing service (MLS), it will often get picked up by sites like Zillow or realtor.com. Specializing in multi-family assets, realtor.com is a great source for agents that participate in the commercial market but don’t want to pay for services like LoopNet.

realtor Websites to Search for Commercial Real Estate

Speaking of free, don’t forget craigslist.org. Craigslist offers users a look at a variety of mostly small and some commercial properties and investments. If you’re a broker and you’re looking for a for sale by owner or multi-family listing, keep Craigslist in your bag of tricks.

craigslist Websites to Search for Commercial Real Estate

If you’re looking to catch a glimpse at the latest foreclosures, I’d recommend realtytrac.com. The site features up-to-date listings and outlines the basics of foreclosure. Most properties listed on the site are single-family and sometimes multi-family. If you’re looking for retail or commercial office space, for example, I’d still recommend LoopNet and CoStar.

realtytrac Websites to Search for Commercial Real Estate

If you’re looking to localize your search I recommend looking at your local commercial multiple listing service in your area. Here in the northwest, we have commercialmls.com, which encompasses Washington state as well as parts of Oregon and Idaho.

commercialmls Websites to Search for Commercial Real Estate

Remember that online search tools are crucial for serious investors — knowing where to look will give you an edge.

Troy Muljat is a Washington State certified commercial appraiser and broker with over 25 years of experience in the commercial real estate industry. He holds the Certified Commercial Investment Member (CCIM) and Certified Property Manager® (CPM) designations through the National Association of Realtors.He specializes in brokerage, leasing, property management, development, and commercial appraisal.Visit TroyMuljat.com for more information about Troy.

Three Ways to Value an Investment Property

As a certified appraiser and broker, I know the best practices to value an investment property. My go-to list boils down to three approaches related to cost, income and sales. So if you’re not so sure how to value your commercial property, keep reading.

1. The cost approach

When you begin to value an investment property, start by identifying the cost to replace the property. This means accounting for all costs associated with construction and property value.

If you come across comparable properties that are priced above the cost to rebuild it completely, educate your clients — the same goes if properties are priced below the cost of reproduction.

If a property is listed 30 percent below its estimated value, for example, acknowledge the edge you have over new complexes on the market that require additional cost to build. Ultimately, they’ll have to charge a higher rent and you’ll have a competitive edge.

2. The income approach

piggy bank income value an investment property

Consider the Gross Scheduled Income (GSI), or the amount of rent collected for the entire property if it was completely occupied, even if some units are vacant.

You’ll need to consider external income generated through on-site laundry, parking or whatever else is accrued through tenant property expenses.

Next, subtract the stabilized vacancy rate from the equation. Depending on your market, you’ll want to stick to about 2 to 5 percent. I always consider vacancy because it’s so unpredictable. It’s rare that an apartment will become available the same day a tenant chooses to move out. Typically, it takes about 5 to 10 days to clean, fix damages and get a new tenant in an apartment.

Once you calculate the stabilized vacancy rate, you get the Effective Gross Income (EGI), which is then subtracted by expenses including taxes, insurance, utility costs, water, sewage, garbage — you name it.

From there, you’ll be able to calculate your Net Operating Income (NOI) which clarifies the amount you’ll profit each year before debt service, tax treatment and depreciation.

Finally, divide that figure into the cap rate, which is the annual return on a property paid for in cash. Simply take the cap rate and divide into the NOI to get the final valuation of your property.

3. The sales approach

Once you’ve identified expenses, you’ll want to break it down to a per-unit basis and compare properties. Compare properties on a per-square-foot basis or even a per-bed basis, depending on your market.

Reconcile the numbers and compare a handful of properties. You’ll then want to make adjustments to your property valuation based on what you find.

Weigh each of the above approaches and determine which works best for you and what gives you most confidence. It’s different for everyone, but it works.

 

Use these three ways to value an investment property!

Troy Muljat is a Washington State certified commercial appraiser and broker with over 25 years of experience in the commercial real estate industry. He holds the Certified Commercial Investment Member (CCIM) and Certified Property Manager® (CPM) designations through the National Association of Realtors.He specializes in brokerage, leasing, property management, development, and commercial appraisal.Visit TroyMuljat.com for more information about Troy.

Seven Traits to Look for in a Real Estate Broker

I’ve been involved in commercial real estate for more than 25 years. Since then, I’ve come to understand what works and what doesn’t when it comes to the relationship between a client and their broker. I put together a list of 7 key traits for brokers to strive for, developed from my many years of experience in the field.

1. Brush up on your communication skills.

Communication is key to any successful relationship. It may seem simple, but it’s crucial to maintaining trust with a client.

If you’re a commercial broker, you need to be in contact with your clients on a regular basis.

Update your clients on new investment opportunities; be clear about what you are going to do once you take on the property as a listing; and inform your clients about the marketplace.

If you’re leasing a property for your client, generate a weekly report detailing activity, even if there is none. Don’t be afraid to explain why an office building, for example, leased in a certain market and not the one you’re representing. These conversations build trust and hold you, the broker, accountable.

The door should always be open.

2. Maintain professionalism at all times.

Sure, this may seem pretty straightforward, but putting it in practice is a different story.

As a broker, you should constantly be willing to learn. Be ready to go the extra mile.

I, for example, am certified with the Certified Commercial Investment Member Institute (CCIM) — only one percent of brokers hold that designation. It makes me stand out and gives me the skills to provide a unique and improved service to my clients.

Commit yourself to excellence and hold yourself to a higher standard. Do something that adds value to the client experience.

3. Be knowledgeable and prepared to answer questions.

commerical real estate broker notes

Are you prepared to answer client questions? Do you understand the intricacies of the market? Are you capable of advising your client to achieve the best outcome?

These are all questions you should be replying to with a resounding “yes.”
Being knowledgeable is essential. My CCIM training, for example, taught me how to define a cap rate, calculate a ten-year cash flow analysis and internal rate of return. If you’re able to answer those questions, you have an edge.

More specifically to you, be prepared to tell clients how many properties you sold in the last year, your total dollar volume and other details related to your professional experience and accomplishments. If you specialize in a specific asset class, tell investors.

Understanding the industry and having a specialty is key.

4. Always be honest.

Being transparent with clients has been at the forefront of my business practice for years. Breaching ethical standards to turn a profit or make a deal should simply be off the table at all times.

Even if you make a mistake, be honest with your clients. It’s your responsibility to build a trusting relationship so apologize for your mistakes and make it right. Don’t make up a story.

Client’s appreciate a broker that strives to maintain a high level of integrity at all times.

5. Don’t forget to be tenacious.

Do you prefer to work from 8 a.m to 5 p.m. or do you like to get out and knock on doors? Going the extra mile makes all the difference.

Half of my sales come from properties that aren’t even listed — I’ve sold everything from a movie theatre all the way to a hotel on properties that weren’t listed.

As a broker, it’s your job to stir up deals. Inform the public about the market and make moves.

6. Entrepreneurship opens doors.

brokers

A mere 8 percent of brokers own a property outside of their own home. That means more than 90 percent of brokers don’t own an investment property. Run the numbers.

If you’re going to do business and encourage investment, you should know how to answer client questions from experience. That’s why I’ve invested in commercial real estate for years.

Not only has it generated tremendous opportunity for me, but it’s provided me with a unique insight that I can bring to clients. I know what it’s like to be a landlord. I’ve been in those situations and I can tell clients how I handled it on my own.

Being an entrepreneur demonstrates self-motivation and goes a long way in business.

7. Persevere when times are tough.

Transactions that take months to finalize are one of the most challenging aspects about being a broker, but you’ve got to stick with it.

Face it, commercial transactions take time. You have to communicate with your client throughout the process, even if it takes months. Remain up to date on the information and send your client progress reports. You’ll need to continue providing assurance to your client and others involved throughout the process, despite how long it takes.

To counter that, know when it’s time to cut your losses. It’s acceptable to identify that a transaction is not working. Inform your client and choose what’s best.

Learn to persevere and you’ll be successful in the long run.

Troy Muljat is a Washington State certified commercial appraiser and broker with over 25 years of experience in the commercial real estate industry. He holds the Certified Commercial Investment Member (CCIM) and Certified Property Manager® (CPM) designations through the National Association of Realtors.He specializes in brokerage, leasing, property management, development, and commercial appraisal.Visit TroyMuljat.com for more information about Troy.

Cap Rate 101 – What is a Cap Rate?

Not so sure how to answer the above question? Here’s what you need to know.

A capitalization rate, or a cap rate as it’s often referred, is the rate of return anticipated for one year if the property was paid for in cash — It’s the ratio between Net Operating Income (NOI) and the property value.

If you pay $1 million on a property in cash with a 10 percent cap rate, for example, you should expect to see $100,000 rate of return per year.

For investors or brokers, you’ll have to calculate your Net Operating Income (NOI) to identify the cap rate. To do that, you’ll need to account for the Gross Scheduled Income (GSI) of potential renters and subtract the vacancy rates and property expenses to calculate your gross income. The net profit you generate before debt, divided by the purchase price of the property, is your cap rate.

finding local cap rate

Now, it’s not often that investors are buying properties in cash. Frequently, they’re incurring debt and placing a certain percentage down on the property.

If you’re intending to leverage the property, you’ll want to subtract total yearly debt costs, or your annual debt service, from your calculated NOI to identify net cash flow. Most often, your cash-on-cash return should be slightly above the cap rate if your borrowed interest rates fall below it.

Let’s say you’re a property owner and you want calculate the cap rate of your own property. First, hop online and look at property comparables. Let’s say you come across a 20-unit apartment building with a NOI of $50,000 and it sells for $1 million. That’s a cap rate of 5 percent. It’s as simple as that.

Remember, cap rates are extracted from the market, so keeping close attention to what’s selling today is crucial in determining the perfect cap rate for your property.

Read more about finding local cap rates. Or use our free service to discover your market’s cap rates!

Troy Muljat is a Washington State certified commercial appraiser and broker with over 25 years of experience in the commercial real estate industry. He holds the Certified Commercial Investment Member (CCIM) and Certified Property Manager® (CPM) designations through the National Association of Realtors.He specializes in brokerage, leasing, property management, development, and commercial appraisal.Visit TroyMuljat.com for more information about Troy.

Three Keys to Selling a Property in Fast Market Conditions

These days, real estate investors are increasingly looking to multi-family properties to generate high rates of return. With demand for apartments and similar units on the rise, learning to weather fast market conditions is an imperative to getting the best value for your property.

With years of experience as a commercial broker, I’ve developed three key strategies for maximizing profit when selling a property in a tight market.

Step One: Be prepared to answer questions.

Prior to selling a property, or even listing it, you want to be informed.

Prepare records from the current year to date, referencing profit, loss, net income and capital expenses. Remove irregularities, such as infrequent need-based repairs, to form a standard income and expense list.

Records should prove that you’ve been able to maintain a steady growth of income — if that’s not the case, you’ll need to be prepared to clearly tell potential buyers why.

Once this step is complete and your offering memorandum and supplemental literature is prepared, it’s time to list the property.

Step Two: Hold an open house.

shake hands selling a property

Talk with tenants and get ready to host an open house after the listing has been out for one week. Let the listing grow interest and don’t take the first, or even the second offer.

I recommend scheduling just one open house during a two-hour time slot. Of course if it’s a larger property, space it out between two days, if necessary.

The value in hosting one open house is immeasurable, in my experience. A large crowd indicates to everyone in attendance that the property has sparked widespread interest and creates a sense of urgency amongst buyers. It’s also important to keep in mind that one open house, as opposed to many, reduces impact on existing tenants.

Keep in mind that this is the prime time to reference details you’ve prepared about the property prior to listing it on the market. If potential buyers have any remaining questions, be sure to get back to them within two to three days with an answer.

Step Three: Call for offers.

Five days after the open house, call potential buyers for an offer. Details about the property are still fresh in their mind and they’ve had some time to think about the investment.

If you’re doing your job right, you should expect to generate between 5 and 15 offers. After that, you’ll just need to make a choice and move forward with the deal.

Troy Muljat is a Washington State certified commercial appraiser and broker with over 25 years of experience in the commercial real estate industry. He holds the Certified Commercial Investment Member (CCIM) and Certified Property Manager® (CPM) designations through the National Association of Realtors.He specializes in brokerage, leasing, property management, development, and commercial appraisal.Visit TroyMuljat.com for more information about Troy.