Important Things To Know About Commercial Real Estate Loans

[ad_1]

Commercial real estate loans are considerably different when compared to residential loans. They actually are much more complicated as they carry terms and conditions that are very different when compared to that of residential loans. This is one of the reasons that most of the investors fear to venture in the commercial real estate market.

Smaller investors of residential real estate are typically limited to somewhere around four to ten properties that are valued in between hundreds and thousands of dollars before the lenders conclude that it’s the sufficient risk level and no further loans will be made. The loan requirements for commercial properties can significantly vary between the private lenders and banks. Also, the loans that are held in the portfolio of a single lender may vary based on the risks perceived by the lenders.

Commercial Bank Loans

Normally, the banks want you and you and your partners to come up with a minimum of about 20 – 25% of the property value as the down payment. For instance, if the property value is about RS 4 Cr, you’ll have to contribute about RS 80 Lakh- 1 Cr as the down payment. Also, the recent researches have shown us that, most of the businesses have failed because of the lack of adequate capital to meet the needs.

For that reason, banks often require the business maintain a significant cash reserve that can be drawn on if cash flow is not adequate to make the loan payments. This financial requirement is in addition to the hefty down payment. One strategy that some commercial investors use is borrowing as much money as they can (even at a higher interest rate) to provide ample capital to build out the business and thereby increase cash flow.

Private Commercial Loans

Private lenders or the non-bank lenders typically offer less rigorous requirements for commercial loans. There are a few lenders who require lower down payment (range of 10-15%). These lenders often agree to carry to the loan amount up to 20 or 30 years until it’s paid completely (in most of the cases). However, they charge the slightly higher interest rate when compared to banks (1% or 2% higher than bank rates).

But when you do all the maths, the higher interest rate might not look very expensive as it appears the first time. Calculate the cost of higher interest over the period of loan and compare it with the cost you pay to open a new loan (2 or 3 times as the balloon payments come due).

The emergence of private or non-banking lenders is challenging the banks on their traditional terms of loans. While the banks are continuing to tighten the requirements to sanction the loan, these private lenders are moving towards a larger share as it is making it easier to qualify. So, if you are looking for a smaller commercial loan (less than 15 Cr) or a medium loan amount (less than 35 Cr), consider taking your time so that you can find the lenders who can offer you the acceptable time and term constraints.

[ad_2]

Source by Pamlea Role

Six Economic Principles of Real Estate Valuation

[ad_1]

Real estate valuation is the process of estimating a single price one would realistically pay to own a particular property. The method for residential property valuation that is most familiar to brokers and agents, of course, is the comparative market analysis (or, CMA). This property valuation process involves an estimate of value based upon the sale prices for other similar properties (or comparables) within the local market area, and/or other similar markets.

When preparing a CMA, a minimum of three recently sold comparable properties and three comparable properties currently for sale, are typically chosen to infer the price of the subject property. Differences between the comparable properties and the subject property are evaluated to add or reduce value in the analysis, and to estimate a fair market value of the subject property by using a comparison approach.

Valuation of commercial properties (i.e. office buildings, apartment buildings, single family communities, and plots of land) is largely influenced by various principles of economics. These principles are not usually factored into the typical CMA report for residential properties. The objective of this article is to shed some light on these principles in because they can be applied to any property valuation effort. They are the basis of our focus in this discussion as we look at and summarize six applied economic principles that can help give you an idea of the impact they can have on the value of a property.

1) Anticipation

This is the expectation of future benefits. In other words, real estate investors measure the value of real estate investment based on the anticipated future income stream generated by the property. They are more likely to value a property on the income it generates rather than the perceived market value inferred by a comparative analysis, or the construction and land costs required to replace the property. The expected, or anticipated, income generation capabilities of the asset is the primary focus.

This approach is not a surprise to those that have some understanding of commercial real estate investing; However, it is not common knowledge to the average property owner or buyer. The focus on purchasing anticipated cash flows can help expand the understanding of value in residential properties as well. For example, instead of thinking “how much is the property worth now”, also think, “how much return would I purchased the property and rented it later”. In a competitive environment, this approach and knowledge can make all the difference.

2) Conformity

This is defined as the need for reasonable similarity and compatibility in a given location. Compatible land uses, for instance, may generate higher values than those with limitations imposed upon the property due to location.

For example, an apartment complex located in a primarily residential area will most likely have more value than one located in a highly industrial area. Savvy commercial real estate investors are keen to this concept, while many residential home buyers may not pay close attention to adjacent or nearby land uses. Taking a broader view of surrounding uses can provide a deeper understanding of value, or perceived value, from an investment perspective.

3) Supply and Demand

This principal encompasses both the scarcity, and the demand for the subject property. Although investment real estate with similar physical and economic characteristics can sell for similar prices, real estate valuation can be greatly affected (higher or lower) within a market that lacks reasonable balance between supply and demand.

For example, land in a metropolitan area where undeveloped land is scarce, would demand greater value than land in a rural area with large parcels of vacant land. Likewise, an apartment complex selling at a time when there is more than enough supply to meet the rental demand, would have less value to a real estate investor than the same complex during a time when the supply of apartments in the area is lower and does not appropriately meet the demand.

4) Highest and Best Use

This is an important concept that relates to the highest possible use, and the best possible use of a property, as opposed to its current use. In other words, when it is legally possible, appropriately compatible, physically possible and financially viable to modify the use of a property, the value of the same property can be significantly increased.

For example, an office building can be enlarged to add more rentable office space or a retail on the first floor; or, an apartment complex can add more units or add mixed use features to the community enhancing its value.

Commercial real estate investors and developers use this principle to create value and to enhance cash flow. The principle can also be used in residential real estate when a buyer or owner of a residential property evaluates the highest and best use of the land per the municipal zoning and building codes, and considers adding or expanding the property’s features and characteristics to enhance its value.

5) Contribution

This, essentially, means that the value of an income property can be impacted when it is physically, legally, and economically feasible to contribute more space to the property at a cost equal to, or less than, the marginal revenue that it generates. In other words, when value added offsets the cost of making the contribution or investment. In contrast to the principle of Highest and Best Use, this principle compares revenues or value to the benefits that the investment or contribution may produce. The question to ask after you’ve identified the highest and best use of your property is, does the investment or contribution required to achieve the highest and best use for the property make financial sense, or is it justifiable. You can add features to a home such as a pool and a deck, and you can add units to a multifamily building; The contribution question is, “will you be able to sell the home for the added value that you perceive you are creating, or will the new apartment units rent?”

6) Substitution

This is an opportunity cost concept. In other words, a rational real estate investor will not pay mor for an investment property than what the next best substitute with similar levels of risk will yield in financial benefit. For the residential buyer, owner or investor this means, examine all other options well. Often, residential home buyers fall in love with the first or second home they see, and can easily forego better opportunities as a result. This principle suggests evaluating and comparing numerous opportunities in the market before making a decision.

The six principles mentioned in this article are intended as an overview, to give you an idea of how other economic factors can affect the valuation of properties. While these principles are demonstrated in commercial real estate valuation, they also affect residential properties and should be observed when analyzing the value of any real estate property.

[ad_2]

Source by Ricky Trinidad

Tips on Organizing a Car Garage

Some people use a garage for car storage only. But some also place a variety of items including appliances and household appliances. In fact, there are those who like to spend a lot of time in the garage doing something. Or use the garage as the main access to enter the house even though there is a front door.

What if the condition of your garage is classified as a mess? Lots of stuff and dirt scattered about, lots of oil, oil or gasoline spills on the garage floor. Although the car is clean, but if the garage is a mess and dirty, this will make the car infested with dirt or insects.

Now, it’s time to reorganize your garage. In addition to improving the appearance of the garage, rearranging is also useful so that the garage is more organized. This effort can be done in stages or at the same time upgrading as a whole.

A well organized garage will make it easier for you to store and search various items. Especially for car owners who like to do work or maintenance that is do it yourself.

Imagine if your garage has a clean floor, walls filled with shelves and storage cabinets neatly organized or there is a special area to do your hobby. Maybe, you will spend more time in the garage than in the family room. To achieve such conditions, there are several things that can be done.

Look at your garage and decide what you focus on. Which parts can be maximized, whether done by overhauling it all or gradually, always remember your focus. Look for inspiration on some architect’s websites to make it easier for you to make decisions. Both in terms of cost, design and arrangement of equipment.

Cleaning the floor is very important to eliminate dirt and dust and insect nests or find items that are scattered. If you find a pile of oil that is difficult to clean maybe you can start to think of replacing a floor that is easier to clean like in a professional repair shop.

Cleaning the surface of the floor is not enough; you need to re-polish the old garage floor to achieve a high level of neatness. Maybe you can do it using a certain epoxy floor polish. Epoxy will polish the floor and reduce friction with objects such as tires, oil, gasoline, etc.

You can choose to use stacking shelves or cabinets with many drawers as a storage area that is placed against the wall. But if the size of your garage space is not too large, you can install a rack that is attached to the roof.

After the floor is clean and the garage storage is finished, the next step is to place the items. This item placement needs to be done while thinking of safety. For example, there should be no items that can make a foot trip. It’s a good idea to place the items you use the most in the easiest to reach storage.

Well, everyone would want their garage to be safe and comfortable. This may seem trivial, but if you don’t do it right, it will have a bad impact on you, such as lots of bacteria, dirt sticking to your clean car, slipping, etc. If you want to get deeper information about a safe and clean garage, please access http://dpsk189.info/2019/10/clean-and-safe-garage/

Clean and Safe Garage

In addition to parking cars at home, the garage is also used as a workshop and storage equipment that often separates oil when we repair cars, if oil is left long then its presence will pollute the floor and even the wall in the garage. That’s why we need a few steps to fix and clean up the garage to make it look cleaner and better organized.

A good arrangement can beautify and provide comfort for anyone who sees it. That’s why cleaning and rearranging a garage becomes quite important. There are many ways to tidy up the garage and reorganize our garage; a good way to beautify the garage is to organize the existing items. You can sort items in several categories and put them in one place.

For example, for a variety of wrenches, screwdrivers and others in the category of tools. Then the flashlight, rope, cable and backup fuse into the utility category. The next consideration in sorting is how often we use certain tools. Frequently used equipment is placed in an easily visible box. In addition, we can also determine whether an item must be stored, given to someone else or thrown away, this is important so that the garage is not filled with useless equipment.

Next, we focus on the floor. Many people do not realize how important the cleanliness of a floor. You need to know that a dirty floor can endanger our lives, whether it can cause disease or make us slip because of the slippery floor. Slipping causes a broken bone if it happens suddenly.

Therefore, cleaning the garage floor until it reaches all sides is very important; this can eliminate dirt and dust and insect nests or get rid of scattered items. Even though the garage floor has been cleaned, sometimes there is still dirt that is difficult to clean such as oil or gasoline spills. If this happens to your workshop, it might be best to think about replacing the floor surface with a type that is easier to clean.

Air circulation in our garage room is also very important, especially if we like fiddling with cars in the garage. We can make air holes above the garage door or install exhaust on the wall. Another important thing that supports the neatness and beauty of the garage is the garage door, using a sturdy and strong garage door design is highly recommended. So you do not have trouble finding a door for the garage then you need to pay attention on some tips at http://dpsk189.info/2019/11/tips-for-choosing-a-solid-garage-door-design/