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What are Commercial REITs?

Tag: Commercial Real Estate

What are Commercial REITs?

September 6, 2023

What is a REIT?

A REIT, or real estate investment trust, is an investment vehicle that is used as an alternative to purchasing a single piece of real estate. 

Purchasing a property takes large amounts of time, effort, and money. If buying real estate on your own feels out of reach, a REIT allows you to be a shareholder in a company that owns many pieces of real estate. This eliminates the need to search for and manage a property, and also greatly reduces the financial commitment. 

There are three major types of REITs, including equity, mortgage, and hybrid. Each offers unique benefits that are worth exploring if you are considering investing. 

How do Commercial REITs Work?

Commercial REITs are companies that own income producing commercial properties. These types of REITs typically own real estate such as apartment buildings, shopping centers, hotels, hospitals, and corporate offices. 

Most REITs focus on a specific type of property, however, some try to diversify their portfolio by owning several different subtypes of real estate. Diversification can help to reduce risk in the event that one sector of the real estate market performs poorly.

Overall, the company generates revenue by leasing its owned real estate to businesses in need. In turn, the REIT pays out a portion of its rental profits to the shareholders. 

Your Investment Strategy

Depending on your investment strategy and your financial situation, a REIT may or may not be the right option for you. Consulting a real estate expert is the best first step to determine how you’d like to set up your investment portfolio. 

Please contact Steve Longenecker at WeBrokerCORealEstate or 720-600-9513 regarding any commercial real estate needs in Longmont, CO, and our neighboring communities.

We give out $250 gift cards for referrals that become our real estate clients.

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Location, Location, Location: Does it Really Matter?

August 17, 2023

Everyone has heard the infamous real estate saying “location, location, location”. But how much does location really matter?

For many years, real estate professionals have touted location as the most essential aspect of any property. It seems to make sense that a home in a desirable neighborhood would be an ideal place to live. Additionally, buying a short-term rental in a resort town where people love to vacation is a savvy investment strategy. 

The question, therefore, is: What about commercial properties? Does location matter as much in commercial real estate?

Does Location Matter in Commercial Real Estate?

The short answer is yes. Location matters greatly in commercial real estate. The longer answer is that it heavily depends on the type of property.

For example, location is vital when considering potential property options for opening a restaurant, as the building and sign need to be visible to passersby. If your restaurant isn’t in a highly-visible location, you will miss out on many potential customers. 

On the other hand, you must consider location differently if you are considering purchasing commercial real estate to open a storage facility. Your building may not need to be exposed to quite as much foot and vehicle traffic, but you will need a location that provides easy access for your target demographic with storage needs. 

Additionally, to make a commercial real estate investment profitable, you may need to consider different locations based on price. Depending on the business and your goals, a prime location with a hefty price tag may make sense, or a smaller price tag with a better cash flow may be the best option. 

Working with a highly-qualified commercial real estate broker is the best way to find the property and location that is right for you. Please contact Steve Longenecker at WeBrokerCORealEstate or 720-600-9513 regarding any commercial real estate needs in Longmont, CO, and our neighboring communities.

We give out $250 gift cards for referrals that become our real estate clients.

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The Evolution of Commercial Retail Space

August 3, 2023

Will E-Commerce Be the Downfall of Commercial Retail Space?

Many people wonder if e-commerce giants like Amazon will be the downfall of commercial retail space. The short answer is no; commercial retail space simply must evolve with the new normal. As technology and societal patterns change, retail and real estate will follow suit. 

Buy Online and Pickup In Store

Is a buy-online-pickup-in-store (BOPIS) option the answer? It certainly is one that large retailers are paying attention to. Stores like Target and Walmart have found significant success in offering a BOPIS option. 

Not only does it give consumers the ease of purchasing an item online, but it also provides instant satisfaction in that they can have the product the same day. While Amazon offers some same-day delivery, it is only available for some of their inventory. Therefore, when shoppers can find what they are looking for in a local store and pick it up later that day, they will likely forgo the Amazon order. 

Change Its Purpose

If you own commercial retail estate space, you may need to consider changing its purpose. With such a substantial increase in online shopping, there is a greater demand for storage space to house inventory. Online shoppers want more color, material, and size options meaning retailers must have more products on hand. Physical store locations may succeed in serving as storage locations for increased inventory. 

Additionally, without the ability to see products in person or try on clothing items in-store, e-commerce can lead to more frequent returns. While consumers do love the ability to have packages shipped straight to their door, they don’t enjoy the hassle of repacking and bringing unwanted items to a UPS store to be returned. Brick-and-mortar retail spaces can serve as drop-off locations and even offer drive-through options for customers in a hurry. 

Finally, larger retail spaces and shopping malls could transform altogether into community gathering centers or even multi-family housing. 

Overall, commercial retail space isn’t going anywhere quite yet; it’s simply continuing to shift with our needs and desires. 

Please contact Steve Longenecker at WeBrokerCORealEstate or 720-600-9513 regarding any commercial real estate needs in Longmont, CO, and our neighboring communities.

We give out $250 gift cards for referrals that become our real estate clients.

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Tips for Subleasing Commercial Real Estate

July 18, 2023

What is Subleasing?

Subleasing is common in both commercial and residential real estate, and involves the current tenant leasing their rented space, or part of it, to a new tenant. 

The new tenant, therefore, is known as the subtenant, and the agreement between the two is known as a sublease. The subtenant pays their rent directly to the original tenant, who then pays the landlord. Subleasing has many advantages, and following the tips below will ensure the process is successful. 

Tips for Subleasing

Here are a few tips to consider prior to subleasing commercial real estate:

  • Work with a knowledgeable commercial real estate agent who has experience in subleasing agreements and can advise you accordingly.
  • Research the area and property extensively before signing. Make sure it will be an excellent fit for your business!
  • Consider having an attorney review the sublease in detail to ensure the agreement is fair. 
  • Don’t be afraid to negotiate the terms of the sublease to better benefit you. 
  • Interview the tenant to make sure they are someone you can trust.
  • Throughout the sublease, communicate frequently with the tenant/landlord about expectations. 

Depending on your situation, subleasing might be the best option for your business. Subleasing can broaden opportunities for office locations and is often more cost-effective. Knowing the ins and outs of being a subtenant and following the tips above will help ensure success in your next subleasing endeavor. 

Please contact Steve Longenecker at WeBrokerCORealEstate or 720-600-9513 regarding any commercial real estate needs in Longmont, CO, and our neighboring communities.

We give out $250 gift cards for referrals that become our real estate clients.

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Understanding Owner Financing in Commercial Real Estate

July 11, 2023

In commercial real estate, buyers often select a type of financing offered by a commercial lender. There are a variety of traditional loan options, each with their own pros and cons. If looking for an alternative, however, buyers can consider using owner financing, also known as seller financing, to purchase commercial real estate. 

How Does Owner Financing Work?

With a traditional loan, a lender agrees to give a buyer a specified amount of money (based on their income and assets) to secure ownership of a property. The borrower then pays the lender directly according to their loan terms.

Owner financing, on the other hand, allows a seller to finance a property for a prospective buyer. Rather than going through a third party, the buyer and seller agree on an interest rate and payment schedule, and the buyer pays the seller directly. 

Pros & Cons of Owner Financing

As a buyer, there are several pros and cons to consider when using owner financing. 

Pros

  • A buyer is not required to qualify for a specific loan product offered by a commercial lender.
  • The buyer and seller can directly negotiate the loan’s interest rate, payment, and length.
  • The lack of commercial lender fees reduces the total closing costs. 
  • Not using a third party for financing allows for a faster closing. 

Cons

  • Not all sellers will offer owner financing.
  • The loan terms can be written in the seller’s favor (higher interest rate, larger monthly payment, etc.) because they are taking on more risk by carrying the loan.
  • The seller can dig into the buyer’s finances, including income, debt, and credit. 

An experienced real estate professional will help you determine the best type of financing for your situation. Please contact Steve Longenecker at WeBrokerCORealEstate or 720-600-9513 regarding any commercial real estate needs in Longmont, CO, and our neighboring communities.

We give out $250 gift cards for referrals that become our real estate clients.

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6 Benefits of Hiring a Commercial Real Estate Broker

June 20, 2023

The world of real estate can feel like the Wild West. There are many different ways to navigate the buying, selling, and leasing process, and some try to do it all on their own.

In commercial real estate, it is common for businesses and individuals to go unrepresented when looking to purchase or lease. Some consumers simply don’t understand the advantages of partnering with a commercial real estate broker. 

Working With a Commercial Real Estate Broker

Let’s dive into a few reasons why working with a commercial real estate broker is the right decision. 

  • Time: Allow your commercial real estate agent to do the heavy lifting! They will search for properties, set up showings, and prepare contracts on your behalf to save you time. 
  • Money: Hiring a broker does not always mean money directly out of your pocket. Often commissions are paid based on the lease amount or purchase price and are normally paid by the seller or leasing landlord. 
  • Negotiations: Negotiating a real estate transaction is a skill. Your agent knows the tactics to secure the best terms possible and save you money. 
  • Legal: Commercial real estate contracts are complicated and have legal consequences. Having an experienced professional to explain the nuances is key. 
  • Data: Your real estate agent has access to many search engines and market stats you will need to make a well-informed decision. 
  • Knowledge: A broker’s general knowledge of the industry, your local market, and real estate contracts will ensure you stay on the right path. 

Hiring a Professional You Trust

Hiring a professional that you trust, who will work in your best interest throughout the transaction, will make the process seamless. Please contact Steve Longenecker at WeBrokerCORealEstate or 720-600-9513 regarding any commercial real estate needs in Longmont, CO, and our neighboring communities.

We give out $250 gift cards for referrals that become our real estate clients.

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Deferring Taxes Using a 1031 Exchange

June 6, 2023

When you sell a piece of real estate, you may need to pay capital gains tax on the proceeds. Capital gains tax payments can be hefty in commercial real estate, where price tags are often significant. 

To avoid paying taxes immediately following a sale, some investors choose to use a 1031 Exchange. 

What is a 1031 Exchange?

A 1031 Exchange is a tool used to defer taxes. It doesn’t eliminate tax payments; it simply allows investors to pay capital gains tax at a later date. When using a 1031 Exchange, an investor can sell a piece of real estate and use the proceeds to purchase another property of like kind without paying taxes on the gain. 

Deferring taxes in this way allows funds to be reinvested in a new asset and continue to grow without a tax penalty for many years. The new property must be of greater or equal value, and the purchase must happen within a specific period to qualify. 

Regarding commercial real estate, your business could sell its current office space and purchase a new office (of greater or equal value and within the specified period) without paying taxes on the proceeds from the sale. Ultimately, it means keeping more money in your pocket to continue investing.

What’s Your Strategy?

The first step is determining your investment strategy. Your commercial real estate agent can help guide you based on their experience and the type of real estate you hope to invest in. Depending on your goals, a 1031 Exchange may not be the best option, but it’s a highly beneficial tool to implement in the right situation. 

Please contact Steve Longenecker at WeBrokerCORealEstate or 720-600-9513 regarding any commercial real estate needs in Longmont, CO, and our neighboring communities.

We give out $250 gift cards for referrals that become our real estate clients.

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Types of Financing in Commercial Real Estate

May 24, 2023

As with purchasing residential property, there are various types of financing in commercial real estate. Each lending category has different terms and requirements that may or may not benefit specific buyers. 

Knowing your financial situation and goals is crucial in selecting the correct type of financing for your commercial property.

Types of Financing

The following are a few of the most common types of financing in commercial real estate.

Term Loan

A term loan is a lump sum repaid through periodic payments over a given loan term. This type of financing is what most people picture when they consider taking out a loan and is the most common type of lending in commercial real estate. 

Bridge Loan

Bridge loans are typically used as interim financing options until a long-term loan is secured. For example, if a business needed to move to a new property, they could use a bridge loan to purchase the new building (without selling the current property first) and then refinance into a term loan or SBA loan after the original building sells. 

SBA Loan

SBA (Small Business Administration) loans are government-backed loans given to businesses that meet specific requirements. Government-backed loan products mean less risk for lenders; therefore, you receive a lower interest rate on an SBA loan than other financing types. 

Hard Money Loan

Hard Money Loans have shorter terms and are used to finance properties that do not qualify for other types of lending. These loans typically have higher interest rates and fees due to their risky nature and are repaid on a shorter term. 

The Best Loan For You

Finding the best loan for you is one of the most essential steps in guaranteeing success in a commercial real estate investment. Your real estate broker will guide you toward the best organizations to talk to for your commercial lending needs.

Please contact Steve Longenecker at WeBrokerCORealEstate or 720-600-9513 regarding any commercial real estate needs in Longmont, CO, and our neighboring communities.

We give out $250 gift cards for referrals that become our real estate clients.

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What is Commercial Real Estate Development?

May 10, 2023

Commercial Real Estate Development

In commercial real estate, the term development is commonly thrown around. But what exactly is commercial real estate development? 

Overall, the objective of a developer is to increase a property’s value, which often includes changing its use. A developer may build new structures, remove abandoned buildings, or renovate the current facility into something new, all with the goal of adding value.

Once the project is complete, the developer can hold onto the property as an income-producing asset or sell it for a profit and reinvest elsewhere. 

Types of Development

Commercial real estate development projects all look different. Here are a few examples:

  • Purchasing an old warehouse and developing it into a restaurant or event venue
  • Buying a single-family home and converting it into multi-family housing 
  • Purchasing a plot of land and constructing an office building or condo complex
  • Tearing down an existing structure and using the land as an income-producing storage location for equipment, RVs, boats, etc.

A commercial developer must be well-versed in many aspects of real estate. They are tasked with selecting the site or building, obtaining financing for the project, understanding zoning, and overseeing engineering and construction. Most developers work with an experienced team to tackle the various aspects of a project. 

Find a Broker

One of the first steps in a development project is connecting with a commercial real estate broker. Your broker will guide you through different investment strategies and usher you through the next steps, such as obtaining financing, narrowing down your preferred location, and touring properties. 

Please contact Steve Longenecker at WeBrokerCORealEstate or 720-600-9513 regarding any commercial real estate needs in Longmont, CO, and our neighboring communities.

We give out $250 gift cards for referrals that become our real estate clients.

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How to Maximize Your Building’s Cap Rate

April 26, 2023

Maximizing Your Building’s Cap Rate

Maximizing your commercial real estate building’s capitalization rate, or cap rate, tends to bring the best return. 

A cap rate considers a building’s current market value and net operating income and produces a percentage that shows the investment potential. Additionally, a higher cap rate typically leads to higher risk, so each investor needs to determine their comfort level based on their situation. 

What Affects Cap Rates?

There are various ways that cap rates can be affected. The following are factors to pay attention to when evaluating the investment potential of a property:

  • Market Trends: Market trends substantially impact a building’s value. When there is strong demand, a building will be worth more. When there is a large influx of supply, a building’s value may drop. Any change in a property’s value will ultimately alter the cap rate for better or worse. 
  • Leases: Cap rates are dramatically affected by the amount of income the building produces. The types of leases in place and the rental rates are crucial in maximizing returns. 
  • Location: The location of any piece of real estate is essential. If you are looking to draw a specific tenant or demographic to increase rental income, you need to be in the correct location. 
  • Condition: The condition of the building can have a major impact on cap rates. A property that needs little to no updating will likely draw higher-paying tenants but will have a heftier price tag. 

Finding a building that doesn’t just excel in one of these categories is crucial. To maximize your property’s cap rate, you must ensure it has the best combination of the abovementioned factors. 

For example, just because a building may be in perfect condition, a bad location may result in a lower cap rate. Or, if the real estate market is strong, but the leases in place don’t have great terms, you may be leaving money on the table. 

Your commercial real estate agent will work with you to understand your investment goals and strategy, and help you find the right property to fit your needs. Please contact Steve Longenecker at WeBrokerCORealEstate or 720-600-9513 regarding any commercial real estate needs in Longmont, CO, and our neighboring communities.

We give out $250 gift cards for referrals that become our real estate clients.

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#longmontcommercialrealestate #commercialrealestatebroker #northerncoloradocommercialrealestate

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