Top 10 Reasons why People Fail

Securing Private Funds for Commercial Real Estate Deals

As you may well know by now, private money funding is one of several options you have for funding a commercial real estate deal. The real trick is to know where to find such funding, and then to know how to lock it in so you can properly use it. I’ve used my share of private money over the years and what I've found is that private lending success comes from two key things: how you present yourself and how you present the deal. 

Presenting yourself to a private lender needs to revolve around your professionalism and your commitment to the types of deals you do. For this reason, a simple summary proposal is a nice touch, when you first begin visiting with a particular lender. In such a proposal, you can provide snippets of your business philosophy, history, experience, etc. You can also show examples of how you would handle a particular deal, giving a lending prospect a quick idea of what it is like to do business with you. 

There are several ways to put together a summary proposal and there are a similar number of things you could call it. The bottom line is that if your business is worth telling people about, it’s also worth putting in writing, and a person looking to learn more about you is less likely to want to read a full-blown business plan that is less relevant to their immediate interests. 

Once you have gathered some interest from private lenders (not to understate the importance of this step), the next step is to actually present a deal to them when one comes your way. How you do this will be very important, given that your credibility with a seller will be somewhat dependent on your ability to not only attract funding, but also have it when you need it most. 

When putting a project summary together, remember the key components that are important to you when you evaluate a commercial deal for your own business. First, there is the price tag, which should be competitive, relative to market value. Second, there are the market conditions, which should show some stability and also signs of good future growth. Last, there is of course the property’s cash flow, which should be acceptable to all parties involved. Once the basic elements of a deal are in place, then you can really dive in and start negotiating the terms of use for a private lender’s funds. 

Don’t ever forget that using private money is serious business, so make sure you have a good team in place to support your efforts, and be sure to treat a private lender’s funds as carefully as you would your own. These two things can really simplify the use of private money and open key doors of opportunity for your commercial real estate business.

The Sweetest Aspect of Commercial Real Estate Investing

Without a doubt, one of the greatest aspects of commercial real estate is the tremendous value of the properties that are out there and available for purchase. The natural question arises, ‘What determines value?’, and that is perhaps why you’re reading this.

The first determinant of value has to do with how you find your property deals. I have found that the greatest path to value comes from uncovering the diamonds in the proverbial rough. This means building your business upon a foundation of networking, rather than just searching through open networks like the MLS. While there are deals to be found here, they are often not the best ones.

The real gems come from referrals. Referrals come from other investors, bird dogs, and team members who “know someone who knows someone that might have a property they might want to sell”. I think you see what I am getting at here and the better you are at setting up these kinds of professional networks, the more referral deals you’ll have come your way. Sure, not all will be true deals but it will mean more potential deals coming across your desk, allowing you to better play the numbers game.

The second aspect of value has to do with the cost per unit of commercial real estate. In this regard, commercial properties that are good deals are almost always going to have better cost per unit value than single homes. For example, a single family home that rents for $800 a month in Market X has a market value of $100,000 and an approximate cost per unit of $900, not even really accounting for property maintenance or management.

Now, let’s consider a 4-unit apartment in the same area that commands the same monthly rent. In most markets, the price would be less than the value of four individual homes, in this case less than $400,000. That inherently improves the value of the property, on a cost per unit basis. Add to this that the fixed monthly expenses (e.g. taxes, insurance, maintenance, etc. are for one building instead of four, and you should quickly see how value builds with commercial properties.

Taking the model one step further, would a 100-unit complex be worth 100 times the value of a single home, rents being equal? Not likely, and the cost per unit would likely be far less than for a single home. This is just the tendency in most any real estate market in the country, and when you consider the tremendous boost in value that this gives you, the underlying value of commercial real estate becomes much more clear.

The Importance of Location in Real Estate

In some areas real estate is in demand, in other areas this is not the case. The key to selling real estate is buying that real estate in a desirable location or one that will become desirable soon. If the location of a property is not desirable, selling it becomes virtually impossible! It is not only important to make sure that the property is in a good location, but it is vital to ensure that it is in the most desirable location for the type of property that it is. 

For example, if you are looking to buy a home for resale, you are not going to want to look at a house next to bar where music is playing all night long and drunks and roaming the streets. If it is commercial real estate that you are interested in, and you are looking to buy a business that thrives on retail, you are not going to look for a building that is placed in the middle of nowhere with little traffic flow. As an owner looking to put a property up for resale, you want to make sure that you can get the most profit out of the property. A good way to do this is to ensure that the area is as advantageous as possible to the buyer. 

If you are selling commercially, a potential buyer will spend more money on your property if they know they can make money from the location that it is in. A family looking to buy a home from you will spend more if they can feel safe and secure in the environment surrounding them. 

When looking to invest in a home to sell to potential buyers, location is key. Most people are not going to enthusiastic about buying a home that is not in a desirable neighborhood. When investing in the home it is important to envision a whole pool of different buyers, imagining the key components varying individuals would look for when purchasing a home. 

Here are a few things that are very important to individuals when they are looking to buy a home: 

Security: People want to feel secure in their homes. Purchasing a home in a neighborhood with security problems and a high crime rate are going to make that home very difficult to sell. People rely on having good surroundings, which include having neighbors that they can trust around them. 

Cities with a stable economy: Buying a house in an area with a stable economy can ensure that you will have better luck when it comes time to re-sell the property. Large cities have plenty of job opportunities and potential for growth, which makes it a good economy to sell in. 

Suitable to raising a family: A house that is close to a shopping center or a city, gives it a great amount of appeal. A couple with children does not want to have to drive 30 minutes out of their way to get groceries, or school supplies. Also, being close to a good school district is also something to look for when investing in a property for resale. A home with a poor school system instantly looses its appeal to a whole group of potential homebuyers who may be looking to settle down and raise a family. 

Similarly, when looking to invest in a commercial property it is important to consider the location of the property, as it can make or break the success of the business. When buying a commercial property it is important to ask yourself these questions: 

What kinds of competition can be found in the nearby area, and what kinds of products are they selling? It is imperative to know if the product that you plan to sell can compete with the products that are already being sold in that area. Is the street that the business is on easily accessible? Can people get in and out? Is their suitable parking for the clientele? 

What is the daily traffic flow in the area? Is the area well known, or in the middle of nowhere? It is important to know if many people visit the area. If people cannot easily locate the business than it is not going to get customers, and we all know that a business needs customers to service. 

When buying a property, people know what they are looking for. They want to get the most possible out of the place that they are buying, for the smallest amount of money. They are picky, and because of this buyers have to be very specific about the properties they chose to invest in. A home or business can look nice, but if it is not in the right location, it is NOT going to sell. Never forget the age-old saying Location, Location, Location is key to becoming successful in real estate always!

How To Safely Invest in US Real Estate

Many people new to investment Real Estate worry about safety. I am living proof that investing in Real Estate anywhere in the United States can be safe (and fun). I live on the East Coast yet I control more than $260 million in Investment Real Estate all over the United States. You can live anywhere and safely invest in US Real Estate, especially in your own backyard! You will need a computer, an internet connection and a telephone and you can safely search for, locate, and acquire Real Estate from the comfort of your own home. 

It’s true, that with good due diligence, US Real Estate investing can be a very safe and high yielding investment vehicle. As a matter of fact, when proper due diligence is completed, US Real Estate investing has little risk, and at the same time can pay you nice returns. 

Due diligence is key to your safety in Investment Real Estate. With strong due diligence you will know your investment is sound before you take the plunge. Financial security is nothing to mess around with; safe investing is paramount. Your financial independence is much too important to take big risks, and too important to settle for low returns. US Real Estate investing gives you the opportunity to safely accelerate your financial success without taking big risks. 

Once you conduct your due diligence and take the time to know about the risk factors, and our simple strategies to avoid them, you can begin to successfully invest in real estate throughout the United States.