This month’s newsletter has just been released! Check out the latest tips for tenants and users of commercial real estate space.
In this issue
- How To Turn Cash Flow From Negative To Positive
- Pre-Leasing For Construction Loans
- Investing In Land For Long-Term
- Contact Your Property Manager Before Your Investment
- Keeping Key Employees Happy
In investment properties, when cash expenses are more than cash receipts, there is negative cash flow. Most investors avoid properties where this is the situation, unless there are strong underlying economic factors that indicate the cash flow can become positive.
One six-tenant office building was leased out several years ago. After a few years operating expenses rose sharply and exceeded the gross rental income. However, the leases on all the units will soon expire and there are no renewal provisions. That means that there will be new leases negotiated. Leases that provide for higher rentals will replace the old below-market leases. The building’s negative cash flow will soon become positive…..(more)
Whether it’s a new office building, industrial warehouse, retail shopping center, or high-rise residential apartment building, investors and lenders increasingly demand to see a substantial portion pre-leased before they are willing to put up construction money. Purely speculative construction projects are rare in today’s real estate market.
People are reluctant to invest in buildings that do not have good strong prospects for leasing. The old days when developers and investors would go in and spec a building really are rare. Now developers and investors expect to have a tenant going in and taking away some of the risk. The trend away from speculative building without pre-leasing is having a profound impact……(more)
Land is always a good investment for the long term. In past years when investors made real estate investments, one consideration was the tax shelter of certain investments. Now, with fewer shelters, real estate investments must make sense as a dollars and cents return on capital, and must stand alone as a good business move. Land has never been a tax advantaged investment and should be worth considering as a way to increase wealth. The trend has always been up. In most cases, the land investor spends money each year with virtually no income from the investment. He has expenses of property taxes, clean-up and maintenance costs, expenditures for travel to check on the property. The opportunity for income from the land is minimal. When an investor puts money into land it is for the potential payoff when the land is sold. It is a very worthwhile investment when the land’s price skyrockets and the “cheap” land becomes highly treasured property……(more)
If you are about to acquire an income property, consider contacting the management company in advance. The ability to estimate income and expenses and a keen knowledge of the market makes the manager a valuable asset during the preacquisition process. The property manager has the background necessary to provide significant assistance in determining both the location, desirability and economic feasibility of a property. The usual way that a property management company comes upon the scene is when the owner of a building makes a contact. Often the owner has just acquired the property through a purchase or exchange, then looks for a manager……(more)
Key executives were the ones who always had the “office with a view”. Now, however, on modern buildings built in the past few years the atrium is one of the most popular (and expensive) amenities. It is popular because virtually every office can have a window view, either toward the conventional view, the outdoors, or toward the spaciousness and openness provided by the atrium. It is an example of “keeping key employees happy”. Trends in the newer buildings being built and refurbished today are to make the tenants happy and content. Part of this is doing everything to make the tenant’s employees content and happy also. Skilled employees are not tied to employers as they were in the past……..(more)
