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Would you say this statement is true?

You love awful surprises that cost you a lot of money during your commercial real estate venture.

No? Who would?

That’s why doing your due diligence is vital before purchasing a commercial property. When the dust settles, you want to have a profitable investment on your hands — not a liability that eats up all of your time and money.

The best way to avoid this is to do your due diligence before signing anything or handing over any money.

What Is Due Diligence in Real Estate?

It might seem like experienced commercial real estate buyers just pick a property out of thin air and enjoy a successful venture. They have “the magic touch” when it comes to choosing commercial properties.

Nope.

What they have developed over their years of experience are investigational skills and a keen attention to detail.

Before you purchase a piece of property, you want to know about all the potential downsides — and you can’t trust the seller to tell you. The seller may try to paint the property with a rosier light than reality and may outright hide undesirable information.

To limit the possibility of this happening to you, it’s crucial to do your own investigation. Preferably before signing the purchase contract.

Types of Due Diligence in Real Estate

There is a myriad of matters you have to investigate to perform proper due diligence on a commercial property. They all fall loosely into three categories. Let’s break it down.

Financial Due Diligence

Before you start sinking too much money and time into a property, you want to know the investment potential. How much profit can you feasibly earn from the venture?

Start by finding out how much money the property is currently earning. Be aware that many sellers will present a “pro forma” financial with the listing. This statement usually does not represent the actual financials of the property but rather the “gross potential income.” In other words, the amount of income the property can earn if 100% of the units are rented 100% of the time.

Obviously, this is not always sustainable in the real world.

A more accurate picture is to look at the actual financials for the property going back at least 3 years. You should request the tax returns for the current property owner, current and past years’ rent rolls, and lease information for each of the tenants.

And don’t forget about the expense side of things. Request past property taxes, utility bills, insurance policies, and risk assessment information gathered by the insurance company to get an accurate picture.

Physical Due Diligence

If the financials are looking promising, it’s time to dig into the physical structure of the building(s). This part is a little costly as you’ll have to pay experts to inspect every inch of the property.

However, this money is well spent. If the building(s) have major structural issues, pest infestations, or other problems, you could end up in a world of financial hurt after the sale.

Keep in mind that while some unscrupulous sellers might try to hide these problems, others may not even be aware of them.

Also, be aware that even most brand-new buildings will have something wrong with them. The point of the physical inspection is not to find a perfect building, but rather to be aware of any issues and make an informed decision about whether you want to take them on.

Legal Due Diligence

Finally, you’ve got to do your legal due diligence. The title insurance company will help you with this and ultimately issue a title insurance policy to cover you if something is missed.

Keep in mind that there are common exclusions that title policies will not cover. These can include easements, rights-of-way, restrictions, and covenants. Always be aware of what your policy does and does not cover and if any of the aforementioned items apply to your property.

Generally, before the title can be insured, all property taxes must be up to date and any liens on the property must be released. Finally, the deed must be approved, executed, delivered, and filed on record.

Never Skip Due Diligence

Now that you understand a little more about what due diligence is, you probably also understand why it is so important. You don’t want to get an amazing deal on a “pristine” property only to have the roof cave in a few weeks later. Or you don’t want to be stuck paying a previous owner’s back taxes or being responsible for their debts in the form of liens on the property.

And, most importantly, you want to purchase a property that has the realistic potential to offer a return on your investment.

Why Due Diligence is a Critical Step Before Purchasing a Commercial Property

There’s a clever subset of real estate investors who aren’t landlords at all. Here’s how you can make a profit from real estate without owning a single rental property.

Did you know that you can make money from real estate without ever owning a home? Not only is it possible, but many people are doing it right now.  

There’s a subset of real estate investors who avoid the hassle of the three Ts: tenants, taxes, and trash. That pesky trio can make being a landlord a daunting task for property owners trying to eke out meager margins. Plus, the mental load and debt burden can make some think that real estate just isn’t worth it.  

Think again. Here are just a handful of ways to profit from real estate without owning a single rental property.

1. Sublet your rental. 

Subletting happens when a tenant rents out their space to another person who isn’t on the original lease with the landlord. This could be a temporary arrangement while the lessee is away on business or vacation. But it could also be a long-term arrangement where there’s just one lessee who takes responsibility for renting out vacant rooms in an apartment or house. 

If this is allowed in your lease (not all leases allow it), it is highly likely that there’s no limitation on how much you could charge. In cities without rent control, a lessee could demand whatever the market allows. This could mean that the subletter ends up footing the bill for the majority of the rent, allowing the leaseholder to profit from the savings on their own housing costs. 

2. Get into real estate investment trusts. 

Real estate investment trusts, or REITs, function a bit like mutual funds. A company owns a portfolio of properties: commercial, residential, land, and more. They seek investors to pay the development costs and to float operational expenses for the properties they own. And when those properties become profitable, the investors get dividends. 

There are some private REITs, but hundreds trade publicly on the stock market. This form of investing is perfect for someone who wants to be totally hands-off and enjoys hedging their bets across many different types of properties around the country. If you still can’t decide, consider Real Estate Mutual Funds and Exchange Traded Funds (ETFs), which can pool together a few different REITs so you don’t have to pick just one. 

3. Crowdfund your investment. 

Crowdfunding isn’t just for donations and charities anymore. These days, you can invest in major real estate deals by using a very similar funding structure on sites like Fundrise, Realty Mogul, and Peer Street. Each has different minimum investments and vetting requirements, but most people get stuck trying to figure out what exactly is the difference between crowdfunding and a REIT.

Sure Dividend offers a comprehensive explanation, but the main difference is that when you invest in a REIT, you’re investing in a company that owns real estate. In crowdfunding, you and a pool of other like-minded people invest directly in the properties of your choice. Essentially, you cherry-pick the ones you like and ditch the ones you don’t. Either way, you’re not involved in the day-to-day management-and you still get your dividend check in the mail. 

4. Lend a lump sum. 

Hard money loans are a great way for someone with extra cash to make a hefty profit without owning a single piece of property. Essentially, you can lend to a borrower who doesn’t want a traditional mortgage loan. For example, a person who plans to buy a property in cash to flip a house isn’t always able to access a bank loan quickly. So, they search for someone willing to lend a lump sum of cash and pay a premium for it. 

If the loan falls through, instead of repossessing the investors’ car or garnishing their wages, the loan is secured by that investment property. If things go downhill, well, that property is yours. But since seizing the property isn’t your end game, there are many ways to identify a seasoned investor with a great track record of delivering on their projects and getting their investors serious returns. Many loans have high interest rates and fast repayment periods that both parties find mutually beneficial. It is common to see 10-15% returns in just a year or two. And if you find the right borrower, this relationship could be long and lucrative. 

5. Become a wholesaler. 

Wholesaling is simply being the middleman in a real estate transaction. In such situations, a person who is behind on their mortgage or tax payments might be willing to sell their house below market value to avoid foreclosure. People in this situation are often experiencing many other challenges, so the idea of selling their house to unravel their finances might not be top of mind. Also, their home might need repairs that they can’t afford and wouldn’t pass inspection otherwise, making it hard for them to list their place on the traditional market. 

If you can help that person find a buyer who likes the house and is willing to take it in its current condition, there could be money in it for you. Matching the right seller with the right buyer can easily generate $10,000-$20,000 for every deal closed. The drawback is that it can take time to figure out how to find deals. For that, there are mentors and courses to overcome the steep learning curve. The upside is that most wholesalers work virtually from their own home, which means they never even set foot in the properties that are bankrolling their financial future. 
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In this article, we’ll look at the different types of commercial real estate loans. We’ll describe each loan type, who uses them, typical terms and rates, and then look at the commercial lenders that provide them.

Types of Commercial Real Estate Loans

For the following professionals, understanding the commercial loan process is vitally important:

• An investor seeking a new loan for an existing property.
• A developer seeking a loan for an upcoming project.
• A mortgage broker trying to find the right loan for a client.
• A commercial lender of any kind.

In general, commercial real estate loan types can be broken out into three broad categories—loans for investment, loans for development, and loans for businesses.

To cut through some of the complexities of the lending process, and to aid in your property debt research, we’ll look at six different loan types, including new loans and refinance loans.

Conventional Commercial Mortgage Loans

What is a Conventional Commercial loan?

Conventional commercial loans are similar to what you’d get when purchasing a single-family home, but often with shorter terms.

A large portion of commercial real estate investors still purchase property using traditional, fixed-rate mortgages.

Conventional Commercial Loan Terms

Lenders typically require a 25% down payment (minimum) in exchange for a fixed-rate mortgage ranging from 5 to 30 years.

While home loans can last 20-30 years in a lot of cases, commercial mortgages will more often fall in the 5-10 year-term range.

Lenders will order an appraisal to confirm the value of the property, and will want to see a copy of the financials to determine whether the existing rents can support the debt service.

Who uses Conventional Commercial Loans?

Traditional, fixed-rate mortgages are more frequently used by investors looking to buy an existing, occupied asset with positive cash flow.

Investors have to have good credit (700+), but in return, are able to access low-cost capital relative to the other loan products available to investors.

Conventional Commercial Loan Lenders

Most of the big American banks offer conventional commercial mortgages.

From JPMorgan Chase, to Wells Fargo, Capital One, Bank of America and so on, you can usually turn your local big bank for a conventional home or commercial loan.

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➤ “Lender from TD Bank Turns Days of Work to Minutes”

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Lenders might also include other large entities like insurance companies or property investment firms—MetLife and Prudential serving as prominent examples there.

For a list of commercial lenders of all types, you can visit Scotsman Guide’s lengthy lender directory.

Commercial Bridge Loans

What is a Commercial Bridge Loan?

A commercial bridge loan is a source of short-term capital that is often used for debt service until an owner improves, refinances, leases, sells or otherwise completes a property transaction.

For instance, a commercial bridge loan may be used by an investor that has a balloon payment coming due.

The bridge loan may be used to fund the balloon payment before refinancing into a more traditional commercial loan.

Commercial Bridge Loan Terms

The short-term nature of these loans means that they come with a higher interest rate than a permanent commercial mortgage loan.

Generally, commercial bridge loans are intended to provide 6-12 months’ worth of financing before repayment is due.

The interest rate tends to be 50 to 200 basis points higher than a traditional, fixed-rate mortgage – though the interest rate will fluctuate depending on the nature of the deal.

An example of when you might use a commercial bridge loan:

Let’s say you’re under agreement on a 200-unit apartment building that is running at a 30% vacancy rate.

You have an option on the property for $10 million, but your team believes that $2 million worth of upgrades could increase the property’s value to $18 million.

Those renovations will take six to eight months to finish, after which time you should be able to raise rents.

In this situation, you might use a commercial bridge loan worth $12 million to fund the acquisition and improvements. After you complete the renovations, you’d refinance the property into a traditional fixed-rate mortgage.

A 75% loan-to-value mortgage on a property valued at $18 million would be $13.5 million.

At this point, you’d easily be able to pay off the commercial bridge loan, and increased rents would cover the debt service on the new $13.5 million mortgage.

Commercial Bridge Loan Lenders

Lenders for commercial bridge loans are a bit harder to come by compared to conventional loans, and will usually be offered by companies with more robust capital solutions.

Nationwide examples include Century Capital Partners, Avatar Financial Group, Silver Arch Capital Partners, and Money360.

Commercial Hard Money Loans

What is a Commercial Hard Money Loan?

Hard money loans are an alternative form of capital, provided outside of traditional lending channels, either by individuals or companies.

Hard money loans are secured by using commercial real estate as collateral. They’re a source of short-term capital, referred to by Investopedia as a loan of “last resort.”

These loans are used by individuals who need to move quickly in order to purchase, refinance or renovate a property. Hard money loans tend to have lower underwriting standards, but in exchange, have quick turnaround times.

Hard money lenders have a bigger focus on the value and equity of a property rather than the creditworthiness of the borrower.

Unlike traditional or bridge loans, hard money loans are not subject to the same regulations that apply to financial institutions.

As such, the proceeds can be used for a wider variety of purposes without significant scrutiny.

Commercial Hard Money Loan Terms

Hard money loans tend to be used in high-risk situations, or in situations where traditional financing is not an option. Therefore, they tend to be one of the higher-cost forms of capital with interest rates typically ranging between 10% and 20%.

While not appropriate for every situation, hard money loans can be a good source of short-term capital when real estate investors need to move quickly or with a great deal of flexibility.

To put it in perspective, it may take a bank 30 to 60 days to approve and fund a traditional commercial real estate loan whereas a hard money lender may be able to release funds within a week.

Commercial Hard Money Loan Lenders

Commercial hard money lenders include many of the same lenders offering commercial bridge loans across the country.

Examples of nationwide hard money lenders include LendTerra, Prescient Capital, Ajax Funding, and Pender Capital. See some more examples here.

SBA 7(a) Loans

What is an SBA 7(a) Loan?

There are two types of SBA loans that are generally of interest to commercial real estate investors: SBA 7(a) loans and SBA 504 loans. These loan types are those that are backed by the Small Business Administration (SBA).

Both are beneficial new and existing businesses looking to purchase or refinance owner-occupied commercial real estate (more on that later).

SBA 7(a) loans are the most common type of SBA loan. They’re used to help business purchase or refinance owner-occupied commercial properties up to $5 million.

SBA 7(a) loans are often used for working capital, but can also be used to purchase commercial real estate.

SBA 7(a) Loan Terms

Generally, in order to qualify for an SBA 7(a) loan, the owner must put down at least 10% of the purchase price.

He or she must have a credit score of at least 680 and have been in business for at least three years. Loans are often amortized over a 10-25 year period at interest rates ranging from 5% to 8.75%.

The property must be at least 51% owner-occupied, which means a real estate investor can use this for his own business as well as a property in which he has other tenants as well, as long as his space accounts for more than half of the total square footage.

SBA 7(a) Loan Lenders

Many American big banks are also providers of both SBA 7(a) and SBA 504 loans. Wells Fargo, TD Bank, US Bank, JPMorgan Chase, and so on again serve as examples here.

SBA 504 Loans

What is an SBA 504 Loan?

SBA 504 Loans are similar to the SBA loans described above, except the SBA does not have a maximum loan amount.

These loans can be used for up to 90% of the purchase price of commercial real estate, regardless of the size of the deal.

SBA 504 Loan Terms

Loan terms are typically 20 years when used to purchase commercial real estate (10 years for equipment purchases), and have interest rates between 3.5% and 5%. As was the case above, the owner must occupy at least 51% of the property to qualify for an SBA 504 loan.

SBA 504 Loan Lenders

SBA lenders are the same whether a borrower is apart of the 7(a) program or the 504 program. See SBA lenders above.

Commercial Mezzanine Loans

What is a Mezzanine Loan?

Mezzanine financing is often used to fill the “middle” of a capital stack. It can be structured in a number of ways, with both debt and equity.

For instance, it can take the form of junior debt – such as a second mortgage on the property. It can also be structured as preferred equity, convertible debt or participating debt.

Let’s look at each of those in more detail:

Junior debt is typically used as a second source of capital, repaid only after a senior loan is repaid in full. Junior debt can be used for both acquisitions and development projects.

Preferred equity is an equity investment in the property-owning entity with a fixed, preferential return that is paid ahead of distributions to the “common” equity interests in the deal. Preferred equity is often used in joint-venture situations, where investors get a more secured position relative to the equity but a higher yield for being subordinate to the senior loan on the property.

Convertible debt, as its name implies, is a form of debt that can be converted into common equity at specific terms.

Participating debt is a form of capital whereby the investor(s) will receive interest payments and will share in part of the revenue generated by a commercial property above a specified level – including both rental income and sales proceeds. Participating debt is often used to finance commercial properties (usually, office and retail) that have well-known, financially stable tenants with long-term leases.

In all cases, mezzanine financing is subordinate to senior debt, such as a traditional mortgage on the property.

Typically, mezzanine financing is not secured by the property but rather the equity the owner holds in the property.

In terms of the capital stack, mezzanine debt tends to be a riskier position than the senior mortgage debt secured by the property, and therefore, the cost of mezzanine capital tends to be higher than a traditional commercial real estate loan.

Commercial Mezzanine Loan Lenders

You can turn to the Commercial Mortgage Alert’s lengthy list of lenders that actively provide mezzanine financing on commercial properties.

Examples include Apollo Global, Barings Real Estate, and Goldman Sachs.

As you can see, there are a number of commercial real estate loan products available to real estate investors.

It’s important to find a lender that is adept with various programs to ensure you find the most appropriate (and lowest cost!) of capital.

Overview of Commercial Real Estate Loan Types, Terms, and Lenders

With more buyers competing for fewer homes, finding ways for agents to stay relevant is more important than ever. And the best way to do that is to bring in inventory that the client didn’t even know existed. Method is as follows.https://googleads.g.doubleclick.net/pagead/ads?client=ca-pub-0379882813451621&output=html&h=280&slotname=6921188883&adk=1237398969&adf=3661326517&pi=t.ma~as.6921188883&w=804&fwrn=4&fwrnh=100&lmt=1623566000&rafmt=1&psa=0&format=804×280&url=https%3A%2F%2Fwww.jioforme.com%2Fbecome-an-off-market-pro-10-tips-for-finding-hidden-inventory%2F508006%2F&flash=0&fwr=0&fwrattr=true&rpe=1&resp_fmts=3&wgl=1&dt=1623565999721&bpp=3&bdt=774&idt=463&shv=r20210607&cbv=%2Fr20190131&ptt=9&saldr=aa&abxe=1&cookie=ID%3Dd5be4d45705b6ef1-22c265a21cba00fa%3AT%3D1623566000%3ART%3D1623566000%3AS%3DALNI_MZQIeOQ3R8GC5gXLrgpvIcZKw-whQ&prev_fmts=0x0%2C834x280%2C804x280&nras=1&correlator=553423891000&frm=20&pv=1&ga_vid=1380277305.1623566000&ga_sid=1623566000&ga_hid=1693291225&ga_fc=0&u_tz=-300&u_his=2&u_java=0&u_h=1112&u_w=834&u_ah=1112&u_aw=834&u_cd=32&u_nplug=0&u_nmime=0&adx=15&ady=1653&biw=834&bih=1009&scr_x=0&scr_y=0&eid=42530672%2C31060972&oid=3&pvsid=633221091408979&pem=425&ref=https%3A%2F%2Fwww.google.com&eae=0&fc=1920&brdim=0%2C0%2C0%2C0%2C834%2C0%2C834%2C1112%2C834%2C1009&vis=1&rsz=%7C%7CoeEbr%7C&abl=CS&pfx=0&fu=128&bc=31&ifi=4&uci=a!4&btvi=2&fsb=1&xpc=PMAFpJmGRS&p=https%3A//www.jioforme.com&dtd=497

According to 2019 data, there are about 140 million homes in the United States. Census BureauAnd in the regular market, more than 6 million homes are listed and sold annually (by 2020). Most homes for sale In 14 years, the total will reach 6.5 million).

In today’s market, the number of homes for sale is Significantly reduced..For example in February Less than 550,000 homes on the market.. It was half of what was on the market in winter.

Meanwhile, demand from buyers has skyrocketed. Given that more than 99% of U.S. homes aren’t on the market, it was never a fish-rich sea, but the current state of U.S. home inventories is that the wreckage of overpriced buyers dries up. It’s like the bottom of the sea. Desperately around.

For all accepted offers, Number of other highly qualified buyers I don’t have the opportunity to spend their money to find their next home. We’re all starting to be very aware of these stats as it’s become part of the mainstream media story, but it’s certainly a crisis and something that needs to be resolved.https://googleads.g.doubleclick.net/pagead/ads?client=ca-pub-0379882813451621&output=html&h=280&slotname=6921188883&adk=1237398969&adf=3930612886&pi=t.ma~as.6921188883&w=804&fwrn=4&fwrnh=100&lmt=1623566000&rafmt=1&psa=0&format=804×280&url=https%3A%2F%2Fwww.jioforme.com%2Fbecome-an-off-market-pro-10-tips-for-finding-hidden-inventory%2F508006%2F&flash=0&fwr=0&fwrattr=true&rpe=1&resp_fmts=3&wgl=1&dt=1623565999721&bpp=3&bdt=773&idt=466&shv=r20210607&cbv=%2Fr20190131&ptt=9&saldr=aa&abxe=1&cookie=ID%3Dd5be4d45705b6ef1-22c265a21cba00fa%3AT%3D1623566000%3ART%3D1623566000%3AS%3DALNI_MZQIeOQ3R8GC5gXLrgpvIcZKw-whQ&prev_fmts=0x0%2C834x280%2C804x280%2C804x280&nras=1&correlator=553423891000&frm=20&pv=1&ga_vid=1380277305.1623566000&ga_sid=1623566000&ga_hid=1693291225&ga_fc=0&u_tz=-300&u_his=2&u_java=0&u_h=1112&u_w=834&u_ah=1112&u_aw=834&u_cd=32&u_nplug=0&u_nmime=0&adx=15&ady=2325&biw=834&bih=1009&scr_x=0&scr_y=0&eid=42530672%2C31060972&oid=3&pvsid=633221091408979&pem=425&ref=https%3A%2F%2Fwww.google.com&eae=0&fc=1920&brdim=0%2C0%2C0%2C0%2C834%2C0%2C834%2C1112%2C834%2C1009&vis=1&rsz=%7C%7CoeEbr%7C&abl=CS&pfx=0&fu=128&bc=31&ifi=5&uci=a!5&btvi=3&fsb=1&xpc=kzfBQmFRCk&p=https%3A//www.jioforme.com&dtd=504https://googleads.g.doubleclick.net/pagead/ads?client=ca-pub-0379882813451621&output=html&h=280&slotname=6921188883&adk=1237398969&adf=3550788753&pi=t.ma~as.6921188883&w=804&fwrn=4&fwrnh=100&lmt=1623566000&rafmt=1&psa=0&format=804×280&url=https%3A%2F%2Fwww.jioforme.com%2Fbecome-an-off-market-pro-10-tips-for-finding-hidden-inventory%2F508006%2F&flash=0&fwr=0&fwrattr=true&rpe=1&resp_fmts=3&wgl=1&dt=1623565999724&bpp=3&bdt=776&idt=515&shv=r20210607&cbv=%2Fr20190131&ptt=9&saldr=aa&abxe=1&cookie=ID%3Dd5be4d45705b6ef1-22c265a21cba00fa%3AT%3D1623566000%3ART%3D1623566000%3AS%3DALNI_MZQIeOQ3R8GC5gXLrgpvIcZKw-whQ&prev_fmts=0x0%2C834x280%2C804x280%2C804x280%2C804x280&nras=1&correlator=553423891000&frm=20&pv=1&ga_vid=1380277305.1623566000&ga_sid=1623566000&ga_hid=1693291225&ga_fc=0&u_tz=-300&u_his=2&u_java=0&u_h=1112&u_w=834&u_ah=1112&u_aw=834&u_cd=32&u_nplug=0&u_nmime=0&adx=15&ady=2611&biw=834&bih=1009&scr_x=0&scr_y=0&eid=42530672%2C31060972&oid=3&pvsid=633221091408979&pem=425&ref=https%3A%2F%2Fwww.google.com&eae=0&fc=1920&brdim=0%2C0%2C0%2C0%2C834%2C0%2C834%2C1112%2C834%2C1009&vis=1&rsz=%7C%7CoeEbr%7C&abl=CS&pfx=0&fu=128&bc=31&ifi=6&uci=a!6&btvi=4&fsb=1&xpc=M9KHP7zYaF&p=https%3A//www.jioforme.com&dtd=523

The challenge is Increase inventory When the seller seems hesitant to list the homes for sale. Why do sellers hesitate to sell? Are they waiting to see how hot this hot market is? Do they play a stock valuation game where they see home quotes go up every month and figure out when to trigger? Or maybe it’s another obvious concept: “Where do you go if you sell?”https://googleads.g.doubleclick.net/pagead/ads?client=ca-pub-0379882813451621&output=html&h=280&slotname=6921188883&adk=1237398969&adf=600928601&pi=t.ma~as.6921188883&w=804&fwrn=4&fwrnh=100&lmt=1623566000&rafmt=1&psa=0&format=804×280&url=https%3A%2F%2Fwww.jioforme.com%2Fbecome-an-off-market-pro-10-tips-for-finding-hidden-inventory%2F508006%2F&flash=0&fwr=0&fwrattr=true&rpe=1&resp_fmts=3&wgl=1&dt=1623565999727&bpp=4&bdt=779&idt=526&shv=r20210607&cbv=%2Fr20190131&ptt=9&saldr=aa&abxe=1&cookie=ID%3Dd5be4d45705b6ef1-22c265a21cba00fa%3AT%3D1623566000%3ART%3D1623566000%3AS%3DALNI_MZQIeOQ3R8GC5gXLrgpvIcZKw-whQ&prev_fmts=0x0%2C834x280%2C804x280%2C804x280%2C804x280%2C804x280&nras=1&correlator=553423891000&frm=20&pv=1&ga_vid=1380277305.1623566000&ga_sid=1623566000&ga_hid=1693291225&ga_fc=0&u_tz=-300&u_his=2&u_java=0&u_h=1112&u_w=834&u_ah=1112&u_aw=834&u_cd=32&u_nplug=0&u_nmime=0&adx=15&ady=3026&biw=834&bih=1009&scr_x=0&scr_y=0&eid=42530672%2C31060972&oid=3&pvsid=633221091408979&pem=425&ref=https%3A%2F%2Fwww.google.com&eae=0&fc=1920&brdim=0%2C0%2C0%2C0%2C834%2C0%2C834%2C1112%2C834%2C1009&vis=1&rsz=%7C%7CoeEbr%7C&abl=CS&pfx=0&fu=128&bc=31&ifi=7&uci=a!7&btvi=5&fsb=1&xpc=hUyX4qdbc8&p=https%3A//www.jioforme.com&dtd=532

All of these options are probably true to some extent, but it also seems that a high percentage of homeowners built a figurative moat around their lives last year. They are looking for a way to stay protected, yet willing to abandon the drawbridge to sell their home for the right reason and the right price.https://googleads.g.doubleclick.net/pagead/ads?client=ca-pub-0379882813451621&output=html&h=280&slotname=6921188883&adk=1237398969&adf=3863072062&pi=t.ma~as.6921188883&w=804&fwrn=4&fwrnh=100&lmt=1623566000&rafmt=1&psa=0&format=804×280&url=https%3A%2F%2Fwww.jioforme.com%2Fbecome-an-off-market-pro-10-tips-for-finding-hidden-inventory%2F508006%2F&flash=0&fwr=0&fwrattr=true&rpe=1&resp_fmts=3&wgl=1&dt=1623565999731&bpp=3&bdt=784&idt=534&shv=r20210607&cbv=%2Fr20190131&ptt=9&saldr=aa&abxe=1&cookie=ID%3Dd5be4d45705b6ef1-22c265a21cba00fa%3AT%3D1623566000%3ART%3D1623566000%3AS%3DALNI_MZQIeOQ3R8GC5gXLrgpvIcZKw-whQ&prev_fmts=0x0%2C834x280%2C804x280%2C804x280%2C804x280%2C804x280%2C804x280&nras=1&correlator=553423891000&frm=20&pv=1&ga_vid=1380277305.1623566000&ga_sid=1623566000&ga_hid=1693291225&ga_fc=0&u_tz=-300&u_his=2&u_java=0&u_h=1112&u_w=834&u_ah=1112&u_aw=834&u_cd=32&u_nplug=0&u_nmime=0&adx=15&ady=3415&biw=834&bih=1009&scr_x=0&scr_y=0&eid=42530672%2C31060972&oid=3&pvsid=633221091408979&pem=425&ref=https%3A%2F%2Fwww.google.com&eae=0&fc=1920&brdim=0%2C0%2C0%2C0%2C834%2C0%2C834%2C1112%2C834%2C1009&vis=1&rsz=%7C%7CoeEbr%7C&abl=CS&pfx=0&fu=128&bc=31&ifi=8&uci=a!8&btvi=6&fsb=1&xpc=1aBYDqNfbQ&p=https%3A//www.jioforme.com&dtd=542

For the past 12 months, homeowners have come up with ideas for living and working at home and have become more aware of where they live than ever before. This has led some homeowners to sneak up on some old needs and some new wants not being met by their current homes, and ideas on how to farewell to find new homes. I noticed.This homeowner may also have been studying for the last 12 months Real estate as entertainment while they are lying in bed And they became their own experts.

The question has always been how to get the homeowner’s attention and measure their interest in selling. Consider your level of interest, especially if the actual buyer is usually willing to pay a premium to the home to bet. Get them on the market and get what they really want.

Although there are tedious demands for upgrades by homeowners, the requirement to list homes and the physical and emotional effort it puts on all parties remains reluctant to homeowners. Homeowners want the right deals to fall out of the sky. It’s something you can sell personally and perhaps for more money without having to spend time preparing your home.

From the agent’s perspective, it’s more important than ever to be relevant to the buyer’s client’s eyes. And the most powerful way to do this is to bring in inventory that you didn’t know existed when you skimmed the market.

This element of emotion, and in fact better education, is rewarded to agents who have made their clients stand out from other buyers and educated with the loyalty of their buyers.

Agents are well aware that they don’t go anywhere as soon as they get involved in a transaction, but what’s more clear is what the agent’s role will be in the new market.

Smart Agents are now the “Indiana Jones” of the industry, digging into the past Invisible inventory opportunities Just below the surface of what most of the market chooses.

Here are 10 ways to become an off-market professional and find the perfect home to sell and make your clients love you.

1. Stay connected to the market

I’m always talking about real estate. Listen to the tips of anyone planning a move or upgrade and create a mental note. Even better, create a CRM note.

2. Prepare the buyer for a strike

Timing is more important than ever.Make sure the buyer is pre-qualified

3. Do not knock on the door

I don’t want to touch people yet, so it tastes bad.

4. Do not write a love letter

Don’t write unless you may be fascinating or your client may want you Love letter.. This puts homeowners in a very difficult position with fair housing law. Do not include the client’s photo.

5. Become a detective

Find out as much information as possible about a particular home, including previous sales data and information about current homeowners. Use tax records and previous lists.

6. Engage everyone with ideas for unforeseen circumstances

Make it mutually beneficial for everyone.Let homeowners focus on what they can get they Let them know that you really want and the buyer is patiently happy.

7. Better yet, make it mutually beneficial

If the homeowner does not have an agent to use, the rate of double closing is high. Under the right conditions, many homeowners will be happy to use the same agent to facilitate their transactions. Be aware of dual agency limits.

8. Look to the past

Expired list FSBO is a seller hidden behind the scenes.

9. Educate homeowners

Let them know why it is advantageous to sell from the market — it is private and you can make more money for them.

10. Leverage technology

Apps like DropOffer and services like Vulcan7 provide agents with great tools to take advantage of expired lists and huge slices of homes that will sell in off-market areas.

There are still many sellers, but what is changing is the way they want to sell. They want to sell under their terms. If the buyer performs some or all of the above points and gives the client side short-sighted patience, you can find a home that meets your client’s needs in this new and wild market.

https://www.jioforme.com/become-an-off-market-pro-10-tips-for-finding-hidden-inventory/508006/

Part IIIn Part I, we provided tips on how to project the appreciation of a commercial real estate property; however, it is just a byproduct of good underwriting/investment fundamentals and exogenous variables. While price appreciation cannot be completely guaranteed, depreciation of real estate is more of a tactic or strategy. This week, we will look at strategic decisions real estate investors should make throughout the lifespan of an investment. One of the most common strategies to managing a real estate investment portfolio is the exercise of depreciation. Reasons to Consider a Depreciation StrategyBefore we deep-dive into the nuances of calculating the depreciation of a CRE property, you should understand why it is so important. Depreciation offers multiple benefits, but the primary reason for executing this strategy is for tax deductions. Here’s some other tax saving strategies. To get more granular, depreciation deductions reduce your taxable income while your cash flow remains the same. Many even consider depreciation to be just as important as the cash income and potential increase in market value that a property generates. The deductions can even lead to a favorable change in the investor’s tax bracket.Key Items Investors Need to KnowNow that you understand the benefits, what else is important to know when it comes to calculating the depreciation of your property? To start, keep in mind that the larger the investment, the greater the amount of depreciation. Also, the “useful life” of the property does not include the land, just the building and improvements. The Internal Revenue Service (IRS) created the standard depreciation period for CRE to be “fully depreciated” after 39 years. Straight-line Depreciation MethodSo, how do you calculate it? The straight-line depreciation method describes the formula that determines how much a specific asset “loses value” in one year, and then depreciates the asset by that amount each year thereafter. This approach assumes a constant rate (or straight-line) of depreciation. Here is an example to illustrate the process:Value of building (excluding land): $2 millionDeductible annual depreciation: $2 million / 39 years = $51,282.05Taxable income: $250,000/year — $51,282.05 (depreciation) = $198,717.95 As mentioned, these calculations can even cause you to fall under a different tax bracket if you take the time to make these deductions. In fact, in the example above, the investor would go from the 35% tax bracket down to 32%.Cost SegregationAnother useful tool for this topic is cost segregation, or accelerated depreciation. This is essentially a strategic tax planning tool that allows you to increase cash flow by accelerating depreciation deductions and deferring both federal and state income taxes. The ultimate goal is to determine all property-related costs that could be depreciated over five, seven, and 15 years. For example, certain electrical outlets for kitchen appliances or computers could be depreciated over five years.Depreciation Recapture If the property is sold for a gain, this tax provision can be exercised by the IRS to collect on the asset that the owner had previously used depreciation deductions to offset their taxable income. The depreciation recapture is calculated by taking the adjusted cost basis of the asset compared to the sale price of the asset. The gain realized upon selling the property must be reported on IRS Form 4797 as ordinary income for tax purposes. Depreciation recaptures on real estate property gains are capped at a maximum of 25% (2019). When it comes to CRE, depreciation deductions are strategic moves that should be held at a high level of importance when it comes to reducing your taxable income. Keep these items in mind and it will pay off.

Our research team releases regular monthly housing trends reports. These reports break down inventory metrics like the number of active listings and the pace of the market. In light of the ongoing COVID-19 pandemic, we want to give readers more timely weekly updates.  Generally, you can look forward to a Weekly Housing Trends View near the end of each week along with a weekly video update from our economists. Here’s what the housing market looked like over the last week.

We’re now at a period where the year ago comparisons we’re making are against the early days of the pandemic when the real estate market, like many of the sectors of the economy, largely hit pause. When comparing today’s frenzied market to last year’s frozen market, the differences are going to be large. While home prices never declined, they were flat this time last year, which is one of the reasons we’re seeing home prices register such large gains compared to that time. A similar story plays out for new listings. In sum, the housing market remains competitive and while the new listings trend is an optimistic sign for hopeful buyers, they still face a challenging market. Fortunately, we are seeing more usual seasonal trends in the housing market this year, and that means we’ll likely see a big pick-up in the number of options for buyers as we move toward summer. For sellers, getting in early optimizes odds of a quick sale at a good price before there’s too much competition, but that means acting to list now–the best time to sell a home is next week.

Weekly Housing Trends Key Findings

Key Findings:

• Median listing prices grew at 18.7 percent over last year, marking 35 consecutive weeks of double-digit price growth. In the second half of 2020, buyers could handle higher prices without batting an eye thanks to falling mortgage rates which meant falling monthly payments even as prices rose, but this may soon change. The monthly payment for the median priced home increased $100 in the last month thanks to soaring home prices and now climbing mortgage rates. On top of this, although they remain historically low, mortgage rates are expected to increase further later in the year. Thus, affordability will be a growing challenge for home buyers in the months ahead, as prices and rates both climb.
• New listings–a measure of sellers putting homes up for sale–notched a 36 percent gain compared to this time last year following last week’s 7 percent drop. As we compare to the early days of the pandemic when the spring home buying season was disrupted, we expect to see some big numbers ahead for gains in new listings. This is not only expected, it’s needed. The housing market is still relatively under supplied, and buyers can’t buy what’s not for sale. Relative to what we saw in 2017 to 2019, March 2021 was still roughly 117,000 new listings lower, adding to the pre-existing early-year gap of more than 200,000 fresh listings that would typically have come to market in January or February. As the weather warms, the key weeks for selling activity are still ahead of us, and we expect to see more new listings growth. 
• Total active inventory showed a smaller decline for the first time since November 2020, but it remains 53 percent below this time last year. The total number of homes actively available for sale continues to be less than half of what we saw last year, and we’re measuring from somewhat lower early-pandemic levels. However, a bounce back in new sellers as we move into the heart of home selling season is a welcome sign for buyers and one of several contributors to a smaller decline in homes actively for sale this week. 
• Time on market was 18 days faster than last year.  Thanks to competitive market dynamics, home buyers have to move quickly to submit offers early enough for consideration by potential sellers. These fast moving conditions can be challenging, especially for first-time home buyers.  Roughly half of potential first-time home buyers reported falling in love with a home but not successfully purchasing it.  Among these buyers, roughly 4 in 5 of them cited getting outbid or unaffordability as the reason they didn’t buy the home they loved.

Data Summary

Recent Weeks:

All Changes year-over-year	First 2 Weeks March 2020	Week ending Mar 27 2021	Week ending Apr 3 2021	Week ending Apr 10 2021
Median Listing Prices	+4.5%	+17.2%	+17.2%	+18.7%
New Listings	+5%	+6%	-7%	+36%
Total Listings	-16%	-53%	-54%	-53%
Time on Market	4 days faster	9 days faster	12 days faster	18 days faster

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You can download weekly housing market data from our data page.

Subscribe to our mailing list to receive monthly updates and notifications on the latest data and research.

Weekly Housing Trends View — Data Week April 10, 2021

Our research team releases regular monthly housing trends reports. These reports break down inventory metrics like the number of active listings and the pace of the market. In light of the ongoing COVID-19 pandemic, we want to give readers more timely weekly updates.  Generally, you can look forward to a Weekly Housing Trends View near the end of each week along with a weekly video update from our economists. Here’s what the housing market looked like over the last week.

After increasing last week for the first time in 2021, new listings were down again, highlighting the up and down progress on the road to a more normal housing market. We’re still far from reaching “normal” thanks to continued strong buyer interest far outstripping the availability of homes for sale. While this creates challenges for buyers who have to act fast and be prepared to offer a lot, these conditions put sellers in a strong position.

Weekly Housing Trends Key Findings

Key Findings:

• Median listing prices grew at 17.2 percent over last year, marking 34 consecutive weeks of double-digit price growth. Monthly payments increased $100 in the last month thanks to soaring home prices and now climbing mortgage rates. The monthly payment for an 80% loan for the typical listing hit $1,260 in March, matching the previous peaks that we saw in both fall 2018 and spring 2019. Although they remain historically low, mortgage rates are rising and are expected to increase further later in the year, thus affordability will be a growing challenge for home buyers in the months ahead, especially first-time buyers who don’t have home equity to tap into.  
• New listings–a measure of sellers putting homes up for sale–had a 7 percent drop compared to this time last year, slipping after last week’s 6 percent gain. In a sign of the pandemic’s continued impact, seller trends are up and down this spring. Relative to what we saw in 2017 to 2019, March 2021 was still roughly 117,000 new listings lower, adding to the pre-existing early-year gap of more than 200,000 fresh listings that would typically have come to market in January or February. As the weather warms, the key weeks for selling activity are still ahead of us, and we expect to see more new listings growth, but we are watching rising COVID case numbers as a possible risk to that projection. 
• Total active inventory continues to decline, dropping 54 percent. Because homes are selling faster and seller motivation continues to lag behind that of buyers, the total number actively available for sale at any point in time continues to drop leading to limited availability of homes and competitive conditions for home shoppers. 
• Time on market was 12 days faster than last year.  As buyers seek to stand out in a competitive environment and find a home so that they can lock-in still relatively low mortgage rates, many are submitting offers quickly. These fast moving conditions are likely a contributing factor to the time first-time home buyers take just planning to enter the housing market–over 40% of first-time homebuyers said they spent a year planning to buy a home.

Data Summary

Recent Weeks:

All Changes year-over-year	First 2 Weeks March 2020	Week ending Mar 20 2021	Week ending Mar 27 2021	Week ending Apr 3 2021
Median Listing Prices	+4.5%	+15.6%	+17.2%	+17.2%
New Listings	+5%	-14%	+6%	-7%
Total Listings	-16%	-52%	-53%	-54%
Time on Market	4 days faster	8 days faster	9 days faster	12 days faster

You can download weekly housing market data from our data page.

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Subscribe to our mailing list to receive monthly updates and notifications on the latest data and research.

Weekly Housing Trends View — Data Week April 3, 2021

Our research team releases regular monthly housing trends reports. These reports break down inventory metrics like the number of active listings and the pace of the market. In light of the ongoing COVID-19 pandemic, we want to give readers more timely weekly updates.  Generally, you can look forward to a Weekly Housing Trends View near the end of each week along with a weekly video update from our economists. Here’s what the housing market looked like over the last week.

The housing market continues to be competitive for buyers resulting in higher home prices and quick-selling homes. One bright spot for buyers is new listings increased for the first time this year, and more is likely ahead in upcoming weeks as we move into the heart of home selling season. More listings should give buyers more options, but this good news is somewhat tempered by higher mortgage rates, which will increase the monthly cost of those homes even if price gains slow.

Weekly Housing Trends Key Findings

Key Findings:

• Median listing prices grew at 17.2 percent over last year, marking 33 consecutive weeks of double-digit price growth. Monthly payments increased $100 in the last month thanks to soaring home prices and now climbing mortgage rates. The monthly payment for an 80% loan for the typical listing hit $1,260 in March, matching the previous peaks that we saw in both fall 2018 and spring 2019. Although they remain historically low, mortgage rates are rising and are expected to increase further later in the year, thus affordability will test buyer demand in the months ahead and likely help slow the pace of price growth.  
• New listings–a measure of sellers putting homes up for sale–notched a 6.3 percent gain compared to this time last year. In the early weeks of the pandemic, sellers–as measured by the new listings trend–were the first to respond to evolving conditions. Thus, while the year over year improvement is welcome, we’re comparing against a low year-ago base. Relative to what we saw in 2017 to 2019, March 2021 was still roughly 117,000 new listings lower, adding to the pre-existing early-year gap of more than 200,000 fresh listings that would typically have come to market in January or February. As the weather warms, the key weeks for selling activity are still ahead of us, and we expect to see more new listings growth, but we are watching rising COVID case numbers as a possible risk to that projection. 
• Total active inventory continues to decline, dropping 53 percent. Because homes are selling quickly and seller activity continues to lag, the total number actively available for sale at any point in time continues to decline leading to scarce options and competitive conditions for home shoppers. 
• Time on market was 8 days faster than last year.  Whether they are aiming to capitalize on low mortgage rates before they disappear or gain a competitive edge by submitting the first offer, today’s buyers are acting fast and homes are selling faster as a result. These fast moving conditions are likely a contributing factor to the time first-time home buyers take just planning to enter the housing market–over 40% of first-time homebuyers said they spent a year planning to buy a home.

Data Summary

Recent Weeks:

All Changes year-over-year	First 2 Weeks March 2020	Week ending Mar 13, 2021	Week ending Mar 20, 2021	Week ending Mar 27, 2021
Median Listing Prices	+4.5%	+14.2%	+15.6%	+17.2%
New Listings	+5%	-24%	-14%	+6%
Total Listings	-16%	-51%	-52%	-53%
Time on Market	4 days faster	7 days faster	8 days faster	9 days faster

You can download weekly housing market data from our data page.

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Weekly Housing Trends View — Data Week March 27, 2021

Our research team releases regular monthly housing trends reports. These reports break down inventory metrics like the number of active listings and the pace of the market. In light of the ongoing COVID-19 pandemic, we want to give readers more timely weekly updates.  Generally, you can look forward to a Weekly Housing Trends View near the end of each week along with a weekly video update from our economists. Here’s what the housing market looked like over the last week.

Buyers are flooding the housing market early in the year, as they have in the last few years, eager to find a home of their own. With plenty of buyers and not as many sellers, homes are selling fast at prices much higher than this time last year. Seller activity typically picks up as we approach May, and the data suggest this may be ahead, welcome news for homebuyers.

Weekly Housing Trends Key Findings

Key Findings:

• Median listing prices grew at 14.2 percent over last year, notching 31 consecutive weeks of double-digit price growth. The market continues to see home prices soar for two reasons. First, because there are many buyers and few sellers. The way free markets balance scarce supply with high demand is with rising prices. Second, low mortgage rates meant that although the sticker price of homes is much higher, the monthly costs had not risen much, although that is changing as rates rise. The monthly principal and interest payment on the typical listing in January and February 2020 was $1,070 and $1,095, respectively. In 2021, monthly payments were $50 and $100 more, totaling $1,120 and $1,200, respectively. Additionally, although they remain low, mortgage rates have begun to increase and are expected to rise further later in the year, thus affordability will test buyer demand in the months ahead and likely help slow the pace of price growth.  
• New listings–a measure of sellers putting homes up for sale–continue to fall behind the year ago pace, registering 24 percent lower this week. Although they remain below the year ago pace, we saw some week to week growth in the number of sellers that’s typical of this time of year, and we expect more ahead. While competitive conditions have drawn buyers out early in recent years, excepting 2020, the first weeks of May have historically been when we see the biggest numbers of sellers put their homes up for sale. Thanks to the post-holiday COVID surge and severe winter weather, we’re starting the year behind–missing more than 200,000 fresh listings that would typically have come to market in January or February. Put another way, the key weeks for selling activity are still ahead of us and we’ll need to see more new listings growth to see healthy sales activity this spring. 
• Total active inventory continues to decline, dropping 51 percent. Because homes are selling quickly, the total number actively available for sale at any point in time continues to decline. 
• Time on market was 7 days faster than last year.  While COVID adjustments have increased the time it takes to do many things, putting an offer on a home is not one of them. Buyers in today’s market must be prepared to submit an offer fast in order for sellers to consider it.

Data Summary

Recent Weeks:

All Changes year-over-year	First 2 Weeks March 2020	Week ending Feb 27	Week ending Mar 6	Week ending Mar 13
Median Listing Prices	+4.5%	+14.0%	+14.3%	+14.2%
New Listings	+5%	-27%	-27%	-24%
Total Listings	-16%	-50%	-51%	-51%
Time on Market	4 days faster	6 days faster	6 days faster	7 days faster

You can download weekly housing market data from our data page.

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Bitcoin has recently been in the news between its record-setting gains, corporate purchases by companies such as Tesla, and several investment firms discussing its merits. What is Bitcoin, and should you, as an investment real estate owner, sell and buy Bitcoin?

This should no way be construed as investment advice. Bitcoin is a speculative and volatile investment, while selling investment real estate will result in substantial tax ramifications.

What is Bitcoin?

There are mysteries of the founder of Bitcoin, who is said to be Satoshi Nakamoto. No one knows the person or where they may be located. Many believe it is actually a pseudonym of a different person, group of people, or government entity.

Bitcoin is a cryptocurrency, or an electronic version of value, that uses the blockchain to verify and store ownership and transactions. Bitcoin has several merits, such as anonymity and ease of exchange, but can be easily stolen if not stored property and is extremely volatile in price.

In 2011, Bitcoin was around $1.00 per coin. Today it fluctuates in the $50,000 range. If you purchased $1,000 of Bitcoin in 2011, it would have a value of $50,000,000 today.

Selling your investment real estate.

Let’s use the example of a strip center purchased in 2011 for $650,000. This investment could be sold today for $2,000,000. In this example, we are looking at a snapshot in time. In reality, the owner’s income and tax benefits over the last decade will not be addressed in this example.

Knowing all the details is important, so the owner has a loan with a current balance of $500,000. They are in the 15 percent federal and 9.3 percent state tax brackets. The net adjusted basis after capital improvements and accumulated depreciation is $875,000.

Selling would result in total taxes (federal, state, and depreciation recapture) of $245,500, leaving after-tax equity of $1,129,500. This is the cash the owner will pocket after taxes, loan payoff, and sale expenses.

It is all in the timing.

This article intends to compare a proven and solid investment such as commercial real estate to a speculative investment such as Bitcoin. I need to mention there are merits to cryptocurrency as an investment and its use, but Bitcoin may not be the one for you. Other cryptocurrencies have a better use case and may prove to be a better investment.

Purchasing Bitcoin in 2011 had much uncertainty involved. Today, many corporations and institutional investors may make it appear like the go-to investment, but your research is important.

In my example, they essentially doubled their investment in ten years, which is not too bad. Plus, they had income and tax benefits along the way. A 1031 like-kind exchange may have been a better option for the investor as they could essentially have had $1,375,000 to use to acquire another property. Using leverage, this could be an acquisition in the range of $5,500,000.

Commercial real estate is my investment of choice. Still, it is good to have a diversified portfolio, and the right cryptocurrency could prove extremely profitable.

Burt M. Polson is the CEO of ACRESinfo.com, a commercial real estate brokerage company, and CEO of StoneMarkerInvestments.com, a private equity real estate fund. Call him at (707) 254-8000 or email burt@acresinfo.com and burt@stonemarkerinvestments.com.

Should you sell your investment real estate and buy Bitcoin?