Fielding Investments provides information to help these investors maintain their properties in the coming year
There are many things that investors must keep in mind when they are purchasing a piece of commercial real estate, but their learning should not end when they find the property that they want. These investors must know how to properly manage their purchased properties to make sure that they can maintain a profitable investment. Here, Fielding Investments provides information to help these investors maintain their properties in the coming year. These tips are especially useful to first time investors.
Keep tabs on utility usage: Some states are starting to require buildings of certain size to report their energy usage. Properties in California, for example, may be held to a new state law that requires such reporting. To comply with these laws, it is important that owners get this information from their clients when the tenants pay their own utility bills directly to the power company. Having established open relationships between tenant and landlord will help this be accomplished.
Keep track of dates: There are many things that a commercial real estate owner must do each year, as well as deadlines that they must keep careful track of says Brian Fielding. He advises that these investors take the time early in the year to lay out these dates, from the expiration of lease agreements to payment due dates, and do it in such a way that they can easily keep track of them all. Doing this will help the owner keep tabs on these dates and avoid missing deadlines.
Keep agreements up to date: When a property owner has tenants, they need to have up to date agreements in writing with all of these tenants. Brian Fielding shares that it is smart for owner operators to even have an agreement for themselves as a tenant so that they may keep policies consistent with all of their tenants.These should all be updated regularly reminds the expert.
Property investment advisor shares information about understanding the types of leases that investors will find when they search for properties to invest in.
As investors look to compare the various investment opportunities that can be found on sites such as Loopnet, they should be aware that oftentimes, these offerings are not entirely forthright in terms of the statement about investor obligations pursuant to the offered lease.. Some brokers opine that a lease is NET to the landlord without emphasizing that the term Net can be NNN, NN or N.
NNN suggests “pure net” leases that place the burden for any sort of problem onto the tenant while NN, also sometimes referred to as “double-net,” leaves the burden of some site and structural responsibilities upon the investor. A savvy investor not only fully understands the limitations of each offering shares property investment advisor Brian Fielding, but factors in the cost to have those landlord obligations addressed by professionals at the tenant location, which often is not at all proximate to the investor’s home/office.
The greatest problem with N and NN leases is that it is often difficult to project operating costs for a great number of different tenant operations. Not only does the nature of the tenant business create varying demands of the site, but an investor who does not work or live near to the property will have to retain persons to provide the oversight that insures that assets are not being wasted through abuse.
There are a variety of so called net leases: double-net or triple-net being the most common offerings made to non-operating investors. The double-net lease suggests that the tenant is responsible for paying all of the utilities, taxes, insurance, and maintenance costs associated with the property, but the owner assumes responsibility for any and all expenses that have to do with structural elements of the land and building shares property investment advisor Brian Fielding. The much preferred triple-net lease generally ascribes full responsibility for all elements onto the Tenant. It is for that reason that most NNN tenant offerings tend to be long term leases [often 15 years or longer] to regionally and nationally recognized tenants who have the wherewithal to handle a broad spectrum of issues that arise in the ownership and management of commercial properties.
Brokers advise that there are certain investors who are seeking the equivalent of a creditworthy bond. Those parties are often coming out of a previous investment through IRS 1031 tax deferment and tend to care less about long term revenue growth. Best known among those offerings are Walgreen’s and CVS who have excellent credit but often do not have any escalation clauses in their lease and provide for unilateral options to renew at the discretion of the Tenant. Other, sometimes less creditworthy tenants offer more traditional lease forms where there are escalation provisions within the term and on all renewal options.
Most serious investors in commercial real estate consider the Net Present Value of the stream of income they will receive, ascribe a risk factor to the creditworthiness of the Tenant and then “guestimate” the likely value of the property and building at the end of the lease term. It is the investor who contemplates the numerous factors involved more carefully that tends to be most successful in his reaching his return on investment goals.
“If the Investor is willing to consider anything short of a NNN lease, he should be very careful to properly estimate all costs he is likely to incur dealing with those items not fully covered by the lease, and then re-compute the real cap rate he is likely to enjoy,” shares Brian Fielding. “Underestimating the challenges and costs to find a reliable and knowledgeable person to address some of the complex and costly issues involved in handling structural, roof and site issues can be devastating.”
For more information about the benefits of net leases and hot-topics of discussion in the commercial real estate industry, visit http://brianfielding.com.
Property Investment Veteran Brian Fielding knows that many people who decide to go into real estate investment do so in some form of partnership. The legal definition of a partnership is “a legal relationship existing between two or more persons who are contractually associated with each other as joint principals in a business or investment venture.” Of course, partnerships exist in many forms, most commonly today in the form of a limited liability company, also known as an LLC.
Investors often enter into partnerships to share in exposure and opportunity, but also to complete the credentials necessary to affect a purchase. Few people have all of the knowledge, the capital and the various resources to complete the purchase of a commercial asset. The sharing of responsibility and risk in any one property will often allow the savvy investor to diversify and acquire a balanced portfolio of quality commercial properties.
“You should always seriously consider whom you plan to go into business with,” shares property investment veteran Brian Fielding. “There is something to the old line that the fastest way to make an enemy is to loan them money or enter into a partnership.”
This is why it is important to choose one’s partner wisely. Investors will want to find someone who is detail and goal-oriented, is honest, and does not micro-manage or steamroll the other person’s opinions. The most effective partnerships tend to have persons with different skills and assets – it is the effective sharing process that is the mark of the most successful ventures.
Whenever investors get into a partnership, it is always important to have formal documentation and ensure that the partnership complies with local laws. Retaining a knowledgeable attorney is a “must,” but check references because some otherwise excellent lawyers are not dealmakers.
There are few things that will tear a partnership apart or kill a deal more than hardheaded attorneys who are so enamored with their knowledge that they forget a deal can be made only through cooperative negotiation. A good attorney will happily explain the rationale for every provision and will build an agreement that protects the parties in every “worst-case scenario” shares property investment veteran Brian Fielding.
Remember that a legal agreement is there to protect the parties when things go wrong. Partners in a successful venture rarely note the various provisions in the partnership agreement unless there is a dispute. Make certain that the attorney has included a dispute resolution provision that allows for timely and inexpensive decision-making. Property investment veteran Brian Fielding suggests including a provision for mediation by a qualified professional over time-consuming and expensive litigation.
Brian Fielding reveals that trend predictions for the 2015 commercial real estate market are already showing some promising results. Businesses continue to recover from the recession, and are actually starting to grow and expand as the economy recovers and spending increases. Many small businesses are reaching a point where they need to move on from being a home or online business and want a concrete space to fit their growing staff. Additionally, businesses that have one of two locations see the possibility of a number of new spaces. Brian Fielding knows that this is resulting in a demand for commercial spaces and in turn investors will see a drop in vacancies and a higher return on their investment.
These trends for the New Year are certainly making now an appealing time to invest, but Brian Fielding knows that some are held back by the large amount of upfront capital needed to make a commercial real estate purchase. However, banks trends too are becoming more favorable for those who want to purchase commercial properties. Banks are experiencing a decrease in loss rates, as well as a number of realized commercial real estate loans, making these types of loans a wiser choice for banks and allowing individuals a better chance of obtaining these types of loans. Additionally, as banks compete for these clients, Brian Fielding shares that the conditions of these loans will be more favorable.
After years of the recession, the real estate market is truly bouncing back, and now is the opportune time to make a commercial real estate purchase. Commercial real estate is in high demand, and as the economy continues to recover, and more businesses continue to grow and seek new spaces for their companies, real estate investors will see a number of new opportunities to acquire quality clients and see an excellent return in their investment. With the promising trends and expert information on the market from Brian Fielding, feel confident in your commercial real estate investment in 2015.
Costs & Benefit Analysis makes successful investors says Brian Fielding
Brian Fielding of Fielding Investments is a 40-year veteran in the industry who knows that there are many factors that are involved in a great commercial real estate deal. From doing one’s homework for the property and the area that it is in to several other factors. Here are some of the best pieces of advice that Brian Fielding can offer to those who are considering investing in commercial real estate.
Make sure your investments will make a profit.
While there are many variables to commercial real estate investment, the end goal is always to make a profit shares Brian Fielding. It may be tempting to acquire a lot of properties at one time. Without making the proper calculations, however, more and more properties can put a large drain on investor’s finances. Buying too much too quickly can cause you to have some oversight on the more meticulous and detail-oriented items that can really cost you money in the long run shares Brian Fielding. Slow and steady definitely wins the race in the commercial real estate industry.
Understand how much you need to spend.
On top of your initial investment, you also need to be prepared for other expenses shares Brian Fielding. Commercial real estate investments are usually for a longer period of time than other property investments, meaning that you will need to think about setting money aside for repairs. Brian Fielding of Fielding Investmentsshares that roofs need to be replaced every 15-25 years and HVAC systems more than likely need to be replaced every 10-15 years as well. Other structural improvements such as pavement repairs, preventative maintenance and so much more will need to be addressed as well, so being prepared for these expenses will definitely be the investor’s advantage.
I was approached by one of our local businessmen about his company’s desire to consider a sale/leaseback of their office and warehouse facilities. The company has been around for a very long time and the owners enjoy a great reputation in our community. Is this an opportunity that you would recommend commercial investors to consider or is this too risky a venture?
Antonio F., Salem, Mass.
A wonderful question and I thank you for sharing it with me and our readers.
While money is generally plentiful in our current economy, the bad taste of the banking industry fiasco has left many lenders eager to loan monies only to those that don’t need it. I say that with my tongue planted firmly in cheek, but there is an element of truth to that statement that concerns the Fed and may be a causative factor in the nation’s economic recovery to be slower than it ought to be. It is for that reason that I encourage companies to consider sale/leasebacks – a way to obtain the monies that those entities need to grow and prosper without subjecting itself and its principals to often burdensome personal guarantees and numerous restrictions on how those monies may be spent.
Throughout the country we can find everything from Mom and Pop stores to Fortune 500 companies deciding that they are not in the real estate business and do not want their capital tied up in real estate assets. The credit is often excellent, the facilities are usually properly sized and designed for their operations and the question should not be whether an investor should strongly consider these offerings, but rather how does one get into a position to become among the first to be aware of them.
What your question brings to mind is how important it is for the investor to be “in the loop”, to get to know the leading businesspersons in his chosen community, and to understand the local business environment. We recommend that our readers become involved in the various civic organizations and religious groups within your community. Get to know your local politicians and industry leaders and demonstrate your eagerness to be a contributor to your community and to show your financial prowess and fair dealings. Antonio, you have clearly managed to position yourself into that type of respected position … the fact that a successful businessman feels comfortable enough to inquire of you demonstrates that you have earned a certain level of respect.
We have found the nicest investment property right in our hometown, but our attorney is concerned about the fact that there used to be a drycleaner in this store. It has been over 30 years since it operated at “our” location, shouldn’t that be long enough ago to not be concerned?
Your attorney is giving you sage advice. It was commonplace for drycleaning operations to dispose of excess cleaning fluid by simply pouring it into the driveways or streets outside the store. The resultant “Perc” is considered an environmental hazard, it degrades by “natural attenuation” very slowly and not only is the “Perc” a hazard that can pollute drinking water, it also may emanate vapors that can seep through the flooring into the store.
We strongly suggest that you find a licensed environmental professional to assess the site [this will often include a Phase 1 report to identify if there is a likelihood of a spill [extremely likely if one had a drycleaning operation], and suggest certain areas on [and maybe around] the property for soil sampling. Further, many states have regulatory language that deems such sites as areas of concern and subject to various sorts of conveyance terms – something you can find doing some online research, but given the potential ramification, we recommend retaining specialized counsel to advise you.
Sorry to be the bearer of bad news, but of course it is better to be forewarned than to scramble to correct.
Real estate advisor Brian Fielding, provided commentary today on the acquisition of Dollar Tree’s acquisition of Family Dollar. He explained that both companies have been building assets that have been prominent in the net lease market. The merger will not only make Family Dollar’s real estate assets larger than the other major competitor, Dollar General, but one could reasonably expect that the consolidation could result in the closing of less profitable stores. Family Dollar had already announced its intention to close nearly 5% of its existing locations and while Dollar Tree has stated that it will continue to operate FD under its existing name, it is difficult to imagine that DG and FD stores in close proximity will not be consolidated under one of the brand names.
This merger and the previously announced store closings serve as a reminder to the net lease investor that the success of each store individually should be considered when seeking to acquire any asset. For while the corporation will likely stand behind the obligations of the remaining term on existing leases, the investor will not only face the prospect of having a “dark” store, but will likely have many challenges in convincing a replacement tenant that the site is a good one for other businesses.
Brian Fielding suggests that persons new to the real estate investing business follow the progress of Dollar Tree and Family Dollar and the company’s decision to close certain stores and open new ones. The business cycle that follows may be indicative of a trend that will be followed in other retail industries.