Commercial Real Estate Finance
Winston Rowe
Commercial Real Estate Financing
Winston Rowe & Associates
No Upfront Fee Commercial Loans
Keeping It Simple & Short Series
Trademark and Copyright 2017
Disclaimer
The work (free book commercial real estate finance copyright 2017) is provided “as is.” Winston Rowe & Associates its licensors make no guarantees or warranties as to the accuracy, adequacy or completeness of or results to be obtained from using the work, including any information that can be accessed through the work via hyperlink or otherwise, and expressly disclaim any warranty, express or implied, including but not limited to implied warranties of merchantability or fitness for a particular purpose. The contents of this eBook are only a non-professional opinion by the writer and are protected free speech. Winston Rowe & Associates and its licensors do not warrant or guarantee that the functions contained in the work will meet your requirements or that its operation will be uninterrupted or error free. Neither Winston Rowe & Associates nor its licensors shall be liable to you or anyone else for any inaccuracy, error or omission, regardless of cause, in the work or for any damages resulting there from. Winston Rowe & Associates has no responsibility for the content of any information accessed through the work. Under no circumstances shall Winston Rowe & Associates and/or its licensors be liable for any indirect, incidental, special, punitive, consequential or similar damages that result from the use of or inability to use the work, even if any of them has been advised of the possibility of such damages. This limitation of liability shall apply to any claim or cause whatsoever whether such claim or cause arises in contract, tort or otherwise. Winston Rowe (&Associates) is the name (Trademark) of a company and not a real person living or dead, is only a pen name. Winston Rowe & Associates is not a lender, capital source, banker, securities dealer or financial advisory company. Winston Rowe & Associates does not make credit decisions in connection with loans. Always seek the advice of licensed and qualified professionals before making any investment, business or personal decisions. For more information go to winstonrowe.com
Introduction
This eBook is written to provide as the title implies, simple and short topics organized into self-contained chapters that you can read in any order.
Think of this eBook as a reference that you can pick up and read bits and pieces, whenever you have the time.
The Keep it Simple & Short free eBook series, is published by Winston Rowe & Associates, a no upfront fee commercial real estate due diligence firm.
We wrote this free eBook to help us get more customers and meet new business people like you.
Hence, if you have any questions, please reach out to us at winstonrowe.com which is also a great resource for all types of commercial real estate investors.
Table of Contents
Disclaimer
Introduction
Commercial Real Estate Basics
Commercial Real Estate Types Explained
The Due Diligence Investigation Overview
Property Income and Expense Data
Investigate Comparable Sales and Market Rents
Representations about the Leases
Area Demographics
Physical Inspection
Financial Analysis and Due Diligence
Purchase Offer Due Diligence
Types of Capital Sources for Financing
Supporting Document List
Questions In A Loan Application
The Loan Submission Process
Winston Rowe and Associates Authors Bio
Glossary of Commercial Loan Terms
Reach out to us at winstonrowe.com
Commercial Real Estate Basics
Winston Rowe & Associates at winstonrowe.com has custom forms, commercial property analysis and explanations of the financial calculations detailed in this eBook.
TableofContents
When people get started with their commercial real estate investing, most of them dream of creating a six-figure annual income stream so that they can get off the job tread mill.
Everyone’s seen the get rich quick real estate infomercials selling you a fool proof system you can use in your spare time, with no experience, no money and every deal is a winner.
Like all types of investing, commercial real estate is hard work which requires that you develop a proficiency with some basic business metrics that are determined through a due diligence investigation.
Perfect deals with absolutely no associated risk just do not exist, so don’t waste your time searching for them. In fact, the more challenges there are associated with a project, the more reward one typically can derive from one’s efforts.
Make a calculated decision to invest (or not) based on your ability to achieve the rate of return necessary given the amount of risk assumed.
Due diligence requires the investor to verify everything before proceeding to the closing table. In addition to the physical condition of the property, there are a multitude of intangibles that must be considered when you are evaluating a commercial property for acquisition.
Every document (especially the financials) related to an asset’s historical operation should be examined, and you must confirm that everything you have been told about the property is accurate.
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Commercial Real Estate Types Explained
Your first commercial real estate objective is to identify the property type.
Your choice of a commercial property will be based on data about its location, its income stream, and its physical attributes.
Once you identify the price range, location, and types of properties that are candidates to invest in, then you need to identify which, if any, of these commercial properties you actually want to invest in.
If you’re currently considering a commercial real estate transaction and have questions concerning the various property types.
Winston Rowe & Associates is always ready to answer questions at winstonrowe.com
Commercial real estate can be broken down into several different categories.
Office
Office buildings are usually loosely grouped into one of three categories: Class A, Class B, or Class C. Class A buildings are considered the best of the best in terms of construction and location. Class B properties might have high quality construction, but with a less desirable location. And Class C is basically everything else.
Central Business District (CBD) buildings located in the central business district are in the heart of a city. In larger cities and in some medium sized cities.
Suburban office buildings, are generally classified as office space generally includes midrise structures of 50,000 to 500,000 square feet located outside of a city center.
Cities will also often have suburban office parks which assemble several different midrise buildings into a campus-like setting.
Industrial
Industrial property is really a special use category that most large manufacturers would fall under.
These types of properties are heavily customized with machinery for the end user, and usually require substantial renovation to re-purpose for another tenant.
Light Assembly, are much simpler than the above heavy manufacturing properties, and usually can be easily reconfigured. Typical uses include storage, product assembly, and office space.
Flex space is industrial property that can be easily converted and normally includes a mix of both industrial and office space.
Warehouses are very large, normally in the range of 50,000 to 1,000,000 square feet. Often these properties are used for regional distribution of products and require easy access by trucks entering and exiti
ng highway systems.
Retail
Strip malls are smaller retail properties that may or may not contain anchor tenants. An anchor tenant is simply a larger retail tenant which usually serves to draw customers into the property.
Community retail centers are normally in the range of 100,000 to 500,000 square feet. Multiple anchors occupy community centers, such as grocery stores and drug stores.
Shopping Malls range from 500,000 to 2,000,000 square feet and generally have a handful of anchor tenants such as department stores or big box retailers.
Out parcel retail centers contain one or more out parcels, which are parcels of land set aside for individual tenants such as fast-food restaurants or banks.
Apartments
Suburban garden apartments started popping up in the 1960s and 1970s, as young people moved from urban centers to the suburbs.
Garden apartments are typically 3 to 4 stories with 25 to 400 units, no elevators, and surface parking.
Midrise Apartments are usually 5 to 10 stories, with between 30 to 100 units, and elevator service.
High rise apartments are found in larger markets, usually have 100+ units, and are professionally managed.
Hospitality
Full service hotels are usually located in central business districts or tourist areas, and include the big name
