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Navigating the 2023 Real Estate Market: Buy Now or Wait It Out?

Navigating the 2023 Real Estate Market: Buy Now or Wait It Out?

In this video, Joseph Gozlan from the Eureka Business Group discusses the current state of the real estate market in 2023. With inflation soaring, high-interest rates, and declining property prices due to reduced availability of money, many are unsure whether to buy real estate or wait. Gozlan compares these conditions to the last recession in 2007-09, highlighting the similarities. Joseph notes that while property prices may continue to decrease, the dwindling availability of funding due to banks’ reluctance to lend is a significant issue. He predicts a “race to the bottom,” whereby property prices will be at their lowest, but securing funding will be extremely challenging, much like in 2009-2010. Joseph advises his viewers to focus on the long-term game, drawing on the analogy “You marry the property, you date the interest rate.” He emphasizes that, in the long run, the value of the property is what matters the most, as interest rates can be renegotiated during refinancing. Finally, Joseph Gozlan highlights emerging opportunities in the industrial and retail sectors, where high-quality properties with national-level tenants are trading these days at 6.5% to 8% cap, creating potential for great deals and an opportunity for those interested in building legacy wealth. He encourages his audience not to wait too long to invest, emphasizing the importance of seizing good opportunities when they can still secure a decent loan. Despite the uncertainties, Joseph believes that we are currently in the “opportunity zone,” indicating a promising time for real estate investment.

If you’re looking for commercial real estate in Texas (Buy, Sell, Lease) feel free to call us: at 903.600.0616 or contact us through our website

Tags: #RealEstateInvesting, #CommercialRealEstate, #RealEstate2023, #MarketAnalysis, #Inflation, #InterestRates, #PropertyPrices, #InvestmentStrategy, #LegacyWealth, #IndustrialRealEstate, #RetailRealEstate, #EurekaBusinessGroup, #JosephGozlan

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May 2023 DFW Industrial & Flex Active Listings Insights

May 2023 DFW Industrial & Flex Active Listings Insights

Author: Joseph Gozlan, Eureka Business Group | Published: 05/09/2023

As in every month, we share on our DFW Industrial & Flex Digest some interesting insights drawn from the DFW Active Industrial & Flex Listing.

The data source we use is Costar and conversations we have with local owners & brokers. For the sake of data simplicity and the interest of our clients, we focused our research on the Class A/B Industrial & Flex properties at the sizes between 5KSF and 60KSF.

As of the first week of May 2023, there are currently about 140 Such properties actively offered for sale in the DFW market place. Of these 140 properties, there is a relatively even distribution between the small, medium and larger properties (within the above mentioned range). 

Asking Prices: One of the things we found very interesting was the massive differences in the price per SF regardless of property size. Each size group had cheap properties in the sub $40/SF range and very expensive properties asking over $750/SF.

Locations wise, Dallas is leading the list with about 20% of the total number of available properties. No less than 44 cities have at least one industrial property available for sale within the city limits which shows how important the asset class had become in recent years. No more hiding the industrial/flex spaces in the cities around the airport in areas w/o public transportation and accessibility. Affluent suburbs such as Plano, Allen, Prosper and Celina all have available industrial or flex properties to sell and leading the northern suburbs is Frisco with 9(!) industrial properties offered for sale.

Days On Market: Surprisingly enough, the Average DOM (Days on Market) was lower in the larger category (over 20KSF) standing at 145  days compared to 195 and 243 for the small and medium sizes. 

For more insights on the average asking price, Construction materials, property vintage, etc.
Click here to download the full May 2023 DFW Industrial & Flex Active Listings Insights PDF

 

#industrialrealestate #commercialrealestate #legacywealth

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2022 Commercial Real Estate Acquisition Trends: Multifamily Continues to Lead, Industrial Surges, Office and Hotels Struggle

2022 Commercial Real Estate Acquisition Trends: Multifamily Continues to Lead, Industrial Surges, Office and Hotels Struggle

2022 Commercial Real Estate Acquisition Trends: Multifamily Continues to Lead, Industrial Surges, Office and Hotels Struggle

Author: Joseph Gozlan, Eureka Business Group | Published: 04/21/2023

Juniper Square has recently released a comprehensive report analyzing the commercial real estate acquisition volumes by asset class in 2022. The report offers valuable insights into the current state of the market, and how it is evolving. As a commercial real estate investor, understanding these trends can help inform your investment strategies and help you make informed decisions.

 

The report reveals that the multifamily asset class continues to dominate the market, accounting for 45% of all commercial properties acquired in 2022. This comes as no surprise, given the favorable agency debt, strong rent growth, and a plethora  of multifamily “gurus” that flooded the real estate circles in the last few years…

Multifamily has consistently held the top position in the past decade, with its share of the market fluctuating no more than 5% of the overall share of commercial real estate transacted.

 

On the other end of the spectrum, the office and hotel asset classes have experienced a significant decline, with their combined share dropping from 34% in 2013 to just 22% in 2022. The pandemic has had a significant impact on both asset classes. The demand for office space plummeted, with remote working becoming the norm for many businesses. As a result, office buildings have seen a decline in occupancy rates, and investors have become more cautious about investing in this asset class. Similarly, the pandemic has significantly impacted the demand for hotels, with travel restrictions and reduced business travel leading to decreased occupancy rates and revenue.

 

However, one asset class that has emerged as the real winner in 2022 is industrial properties. The report reveals that the industrial asset class has experienced a 450% growth rate since 2013, rising from just 4% to 18% of the commercial real estate acquisitions volume in 2022. The growth in e-commerce has played a significant role in driving demand for industrial properties. As e-commerce businesses continue to thrive and expand, they require larger spaces beyond the confines of the founder’s living room or garage. This has resulted in increased demand for industrial buildings, with businesses seeking spaces ranging from 2,000SF flex suites all the way up to millions of square feet distribution centers.

 

The report highlights the importance of keeping abreast of the latest market trends and using data to inform investment decisions. As a commercial real estate investor, it is crucial to identify emerging trends, evaluate their potential impact on the market, and adjust your investment strategies accordingly.

 

In conclusion, while multifamily remains the dominant asset class, industrial properties are emerging as a significant growth opportunity for investors. It is essential to keep abreast of the latest market trends, evaluate the potential impact on your investments, and make informed decisions based on the data available.

What do YOU see in this chart? Do you agree with the above insights or do you think differently?

Feel free to vote, comment, like as you see fit!

 

2022 Commercial Real Estate Acquisition Trends: Multifamily Continues to Lead, Industrial Surges, Office and Hotels Struggle
Chart 1.0 by Juniper Square. 2022 Commercial Real Estate Acquisitions | Eureka Business Group Commercial Real Estate Brokers
2022 Commercial Real Estate Acquisition Trends: Multifamily Continues to Lead, Industrial Surges, Office and Hotels Struggle
Joseph Gozlan Commercial Real Estate Expert

Joseph Gozlan,
Commercial Real Estate Advisor

Click to learn more about Joseph
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Rental Market Tracker: U.S. Rents Post First Annual Decline in Three Years

Rental Market Tracker: U.S. Rents Post First Annual Decline in Three Years

Author: Joseph Gozlan, Eureka Business Group | Published: 04/18/2023

I came across this article by Redfin: https://www.redfin.com/news/redfin-rental-report-march-2023/?utm_source=newsletter.credaily.com&utm_medium=newsletter&utm_campaign=rent-prices-drop-yoy-for-the-first-time-since-2020 and felt that this needs to be said…

In a world where sensational headlines dominate the news cycle, it’s easy to get caught up in the hype. But when it comes to investing in the multifamily real estate market, it’s important to take a step back and read through the noise.

The past few years have been turbulent for the multifamily market, with rising rents and a shortage of affordable housing driving demand for rental properties. However, the tail end of COVID-19 pandemic and the rampant inflationary conditions have introduced a new set of challenges, with some markets experiencing sharp declines in rent growth while others continue to grow steadily.

 

Despite these challenges, multifamily remains a strong asset class and is often one of the first to recover from recessions. But as investors consider their options for 2023, it’s important to take a closer look at the factors impacting the market and make informed decisions based on a comprehensive understanding of the landscape.

 

The State of the Market

 

According to recent data, rents are still overall very high in most markets, despite some areas experiencing a decline in growth. For example, Austin, TX has seen a significant 11% drop in rent growth, while other markets remain relatively flat or experience minimal growth in the 1%-2% range.

 

It’s important to note that rent growth is only one side of the equation when it comes to assessing the health of the multifamily market. Investors must also consider the impact of rising expenses on the net operating income (NOI) of their properties.

 

Challenges and Opportunities

 

One of the biggest challenges facing multifamily investors in 2023 is the increasing cost of labor and materials. The COVID-19 pandemic has led to a shortage of workers in many industries, including construction, which has driven up wages and made it more difficult to complete projects on time and on budget.

 

Additionally, the cost of materials has also risen sharply, with shortages of lumber, steel, and other essential building supplies leading to supply chain disruptions and price spikes. These factors have contributed to a significant increase in expenses for multifamily properties, which can erode the NOI and make it more difficult to achieve desired returns.

However, despite these challenges, there are also opportunities for savvy investors who are willing to think creatively and adapt to changing market conditions. For example, some investors may be able to take advantage of the current climate to acquire distressed properties at a discount and add value through strategic renovations and improvements.

Others may be able to leverage technology to streamline operations and reduce costs, such as by implementing smart home features that allow for remote monitoring and energy management. By staying up-to-date on emerging trends and taking a proactive approach to asset management, investors can position themselves for long-term success in the multifamily market.

 

Making Informed Decisions

As with any investment, it’s important to approach the multifamily market with a clear understanding of the risks and rewards involved. While multifamily can be a lucrative asset class, it’s not without its challenges, and investors must be prepared to navigate the ups and downs of the market.

 

If you’re considering investing in multifamily in 2023, it’s important to do your due diligence and research the local market conditions, including factors such as job growth, population trends, and the supply-demand balance for rental properties. You should also work closely with a trusted advisor who can help you evaluate potential properties and assess their potential for long-term growth and profitability.

 

Ultimately, the key to success in the multifamily market is to take a measured approach and avoid getting caught up in the hype of sensational headlines. While it’s tempting to react to short-term fluctuations in rent growth or other market indicators, it’s important to keep your eye on the long-term trends and make informed decisions based on a comprehensive understanding of the market dynamics.

 

This requires a willingness to read through the noise and stay focused on the fundamentals of real estate investing, such as cash flow, NOI, and long-term growth potential. By taking a disciplined approach and working with experienced advisors and partners, investors can position themselves for success in the multifamily market in 2023 and beyond.

 

In conclusion, the multifamily market is facing a range of challenges and opportunities in 2023, from rising expenses to changing market conditions and emerging technologies. However, with the right approach and a willingness to adapt to changing circumstances, investors can position themselves for long-term success in this dynamic and ever-changing asset class. Whether you’re looking to buy, sell, or hold multifamily properties in the coming year, feel free to reach out to us so we can help you achieve your goals!

Rental Market Tracker: U.S. Rents Post First Annual Decline in Three Years
Chart 1.0 by Juniper Square. Rental Market Tracker: U.S. Rents Post First Annual Decline in Three Years | Eureka Business Group Commercial Real Estate Brokers
Rental Market Tracker: U.S. Rents Post First Annual Decline in Three Years
Joseph Gozlan Commercial Real Estate Expert

Joseph Gozlan,
Commercial Real Estate Advisor

Click to learn more about Joseph
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Fixed Vs. Floating Rate Loans

Fixed Vs. Floating Rate Loans

Author: Joseph Gozlan, Eureka Business Group | Published: 04/17/2023

Commercial real estate is a dynamic and ever-changing industry that requires constant attention to emerging trends and market shifts. One such trend in recent years is the short-cycle property purchase phenomenon that has become prevalent in the multifamily sector. This trend has created a challenging environment for owners of these properties, and it is important for industry professionals to stay informed about the potential risks and challenges associated with short-cycle purchases.

Historically, multifamily properties were purchased with agency debt from Fannie Mae, Freddie Mac, or Ginnie Mae. These long-term loans carried heavy exit penalties using deficiencies or yield maintenance, which meant that a sale within one or two years would result in a massive penalty, rendering the deal unprofitable. As a result, owners of multifamily properties would rather hold onto the property for the duration of the loan term than sell at no profit.

However, in the last few years, the short-cycle purchase phenomenon has emerged, especially in the multifamily sector. These properties were bought and sold on very short cycles, as short as six months in some cases. This trend created an unnatural and uncharacteristic behavior in commercial real estate driving owners to seek alternative financing options. Bridge loans became increasingly popular as they allowed owners to purchase properties with the intention of reselling within a year or two and also allowed buyer to acquire poorly managed properties that didn’t meet the agency debt requirements (usually 90% occupied for the last 90 days).

According to a recent report by CBRE, bridge loans accounted for approximately 18% of all multifamily financing in the first quarter of 2022. This is a significant increase from the previous year, where bridge loans accounted for only 12% of all multifamily financing. That is a 50% increase!

While bridge loans offered a way to finance these short-cycle purchases, they also created a risky environment where owners were essentially playing a game of musical chairs, hoping to sell the property before the music stopped. Unfortunately, the music did stop with the recent rate hikes and the banking crisis, leaving many multifamily owners with bridge loans that are now due.

According to a recent report by Trepp, there are approximately $17 billion in multifamily loans that are set to mature in 2022. This represents a significant increase from previous years and creates a potential risk for owners who may struggle to refinance their debt.

Owners of multifamily properties with bridge loans that are due this year are facing real challenges in finding replacement debt. 

There are three main scenarios that these owners face: 

  1. Do a “call for cash” from the investors to bring cash to the table to satisfy the bank’s DSCR requirement.

  2. Seek preferred equity or mezzanine debt to stack over a low LTV loan.

  3. Default on the loan and/or try to negotiate a loan modification. 

  4. Sell and hope they can save some of their investors’ equity.

None of these options are ideal, and we are likely to see some distressed properties go on sale before the end of the year.

According to a recent report by Real Capital Analytics, the distress rate in the multifamily sector has increased from 0.3% in the first quarter of 2021 to 0.9% in the first quarter of 2022. While this is still a relatively low rate of distress, it represents a significant increase (300%) and underscores the potential risks associated with short-cycle purchases and bridge loans.

In conclusion, the recent trend of short-cycle property purchase & sale in the multifamily sector has created an environment that is challenging for owners of these properties. While bridge loans offered a way to finance these purchases, the current market conditions have left many owners in a precarious situation. As professionals in the commercial real estate industry, it is important for us to stay informed about market trends and developments to ensure that we stay alert and help our client prepare for any challenges that may arise.


Fixed Vs. Floating Rate Loans Eureka Business Group Commercial Real Estate Brokers
Chart 1.0 by Juniper Square. Fixed Vs. Floating Rate Loans Eureka Business Group Commercial Real Estate Brokers
Fixed Vs. Floating Rate Loans Eureka Business Group Commercial Real Estate Brokers
Joseph Gozlan Commercial Real Estate Expert

Joseph Gozlan,
Commercial Real Estate Advisor

Click to learn more about Joseph
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6 Things Multifamily Owners Should Pay Special Attention In This Market

6 Things Multifamily Owners Should Pay Special Attention In This Market

Author: Joseph Gozlan, Eureka Business Group | Published: 04/13/2023

Everyone has been talking about the $230M multifamily portfolio that was foreclosed on by Arbor (a Fannie Mae DUS lender) in the past week.

The main talking points were pointed at syndication, education groups and such. Not many were talking about what can multifamily owners do today to avoid being in the same unfortunate position. So I thought I’d share some hard learned lessons from our own experience as owners, operators, syndicators and brokers of multifamily and other commercial real estate.

#1 The income-expense graph inversion

Every multifamily investor can tell you that NOI (Net Operating Income) is composed of Income less Operational Expenses. In the past 10+ years we’ve been living in a world where the rent growth graph has been growing at a rate of 5%, 10% and in some cases even 20% year over year while the expenses graph was growing at a normal inflation rate of 2%-3% per year. That means there was a positive difference between the two graphs which pushed NOIs higher year over year and created the multifamily merry-go-round where properties were bought and sold withing months(!) and everyone kept making money.

And then COVID happened…

All of the sudden, supply chains were stuck, causing material shortages. People found ways to work from home, which caused a huge labor shortage in the blue-collar jobs sector. The government was printing money like there’s no tomorrow, and everyone was spending money like there’s no tomorrow which pumped the economy with a lot of hot air until the end of 2022 when the balloon just popped. Now we have inflation rates ranging between 6% and 8% officially and much more unofficially. Chick-Fil-A is paying $19/hr and Walmart distribution centers are paying $24-$26/hr.

Why does it matter? Because the graph is now inverted! Expenses are growing at a much faster pace than rents, which in most of the country are going flat or worse.

What does it mean? It means that that a stabilized property is now on a down trend for the NOI!

So, the first thing multifamily owners should pay attention to is: The income-expense graph inversion

 

#2 Checks & Balances

Many Multifamily owners use 3rd party property management companies to run the day day-to-day operations of the properties. Unfortunately, many of these management companies have very little is any checks and balances systems to make sure everything is running as it should be. We’ve seen fees not being charged, fraud, embezzlement, unreported deposits, move-outs without final account statements, move-ins without deposits and many other issues that the lack of audit processes let through and hurt the property’s bottom line. Multifamily owners, specifically ones that don’t self-manage, should reach out to their 3rd party management teams and ask what checks and balances systems and processes they have in place to ensure that what they think is being done is actually done and done correctly. If you find the management team is lacking the required systems and processes, then you need to work with them to make sure these gaps are covered ASAP. Management teams that refuse to do so in a timely manner, should not be trusted with the care of your property…

 

#3 The Language In The Loan Documents

Not all loan documents are born equal, and every lender will have their own version. In fact, same lender, different loans can have significant differences because lenders (especially Fannie/Freddy DUS lenders) use a pool of agency approved attorneys and they have different format and different approach to the loan documents. The strength of the borrower’s attorney is also a factor in this.

All multifamily owners, regardless of the status of their property, should revisit the loan documents and refamiliarize themselves with the terms and conditions in it. What the lenders can ask/demand/force and take a note of these things. Multifamily owners should probably make a list of these things that would be considered technical defaults and work with their management team to review and make sure the properties are in compliance so the lenders won’t have any ammunition against you!

 

#4 The Cashflow Analysis

As mentioned above, many Multifamily owners choose to use a 3rd party property management company to run the day-to-day operations of the properties. As such, some owners choose to receive monthly reports and just glimpse over them, paying only attention to the bottom line. In today’s market, especially considering the income-expense graph inversion mentioned in the beginning of this article, paying attention to the cash-flow of the property is critical! Multifamily owners should prepare and/or review a cashflow analysis report that shows every dollar that came in and every dollar that was spent. Please note, this is not(!) the P&L report provided by the property management team (which in many cases is on an accrual basis). Every dollar that made it to the bank vs. every dollar that left the bank. Poor cashflow is the #1 cause for properties to get in trouble with the lenders. Poor cashflow also causes deferred maintenance and ironically, in a circular notion, deferring maintenance will allow incompetent managers to mask poor cashflow until a very late stage!

 

#5 Physical vs Economical Occupancy

There’s a fine line between “keeping it full” and high occupancy. Many Multifamily owners have a benchmark of occupancy for the management team which in some cases leads to “let’s not evict” and “give them another chance” mentality because the management company doesn’t want to show a drop in occupancy. Compensating a 3rd party property management company based on occupancy could incentivize the wrong behavior. Multifamily owner should regularly review the delinquency report and pay attention to how high the balances are compared to the monthly rent (e.g., if the unit rent is $800 and the outstanding balance is $2500 then that tenant didn’t pay rent for 3 consecutive months!). Most multifamily management software would also indicate next to every unit/tenant how many times they were late on payment in the past 12 months. Tracking this information on a regular basis will help Multifamily owners identify bad trends and allow them to take action sooner rather than later!

#6 Labor Costs

One of the large expenses, if not the largest one, is payroll. On-site managers, office team, maintenance techs, grounds, etc. are all hard to hire and retain in the post COVID world and the average salaries have increased by tens of percentages. Monitoring your labor costs closely can help identify inefficiencies, time theft (that’s a real thing!), abuse of overtime and over staffed teams. These items can prove to be massive money pits and put a real financial strain on the property!

 

As owners of multifamily ourselves, brokers, asset managers and special servicers for lenders we predict that many multifamily owners will find themselves in a corner that will be hard to get out of if they don’t pay closer attention to the details until we see an improvement in the market conditions and the income to expense graphs find their way to normalcy.

If you are a multifamily owner and need help with assessing the situation on a property or a portfolio, we can help with that. We can be as high level as reviewing reports and pointing out potential risks or we can be as thorough as spending time with your on-site team and reviewing the operations and financials of the property. Call me today (my number is on my profile) to discuss your needs and see if our service can bring value!

4 plex for sale dallas
Joseph Gozlan Commercial Real Estate Expert

Joseph Gozlan,
Commercial Real Estate Advisor

Click to learn more about Joseph
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The Top Trends in Commercial Real Estate for Investors

Maximizing Your Returns with Commercial Real Estate Investments

Author: Joseph Gozlan, Eureka Business Group | Published: 02/23/2023

Commercial real estate (CRE) has always been an attractive asset class for investors seeking to diversify their portfolios and generate steady returns. However, the COVID-19 pandemic has disrupted the CRE market, forcing investors to reassess their strategies and adapt to changing market conditions. In this blog post, we will discuss the top trends in commercial real estate for investors in 2023 and beyond.

  1. Hybrid Workspaces

The pandemic has accelerated the trend towards remote work and flexible office spaces. As a result, investors are looking for hybrid workspaces that offer the best of both worlds. These spaces provide the flexibility and cost savings of remote work while maintaining the benefits of a physical office, such as collaboration, networking, and access to amenities.

Investors can capitalize on this trend by investing in properties that offer flexible leasing arrangements, shared spaces, and a variety of amenities to meet the changing needs of tenants. Properties with modern technology infrastructure and high-speed internet connectivity will also be in high demand.

  1. Focus on Sustainability

Sustainability has become a critical consideration for investors, as more companies prioritize their environmental impact and strive to achieve sustainability goals. As a result, green buildings that incorporate sustainable features such as energy-efficient lighting, solar panels, and water-saving fixtures are becoming increasingly popular.

Investors can take advantage of this trend by investing in properties that are energy-efficient, sustainable, and environmentally friendly. These properties can command higher rents and have lower operating costs, making them attractive to both tenants and investors.

  1. E-commerce and Last-Mile Delivery

The pandemic has accelerated the growth of e-commerce and last-mile delivery, which has increased demand for industrial real estate. Industrial properties such as warehouses, distribution centers, and logistics facilities are in high demand, and investors are taking note.

Investors can capitalize on this trend by investing in industrial properties that are located in strategic locations, such as near transportation hubs and major urban centers. Properties with modern technology infrastructure, efficient layout, and flexible leasing arrangements will also be in high demand.

  1. Multifamily Housing

Multifamily housing has always been a popular asset class for investors, and this trend is set to continue. The pandemic has increased demand for affordable housing, and multifamily properties offer an attractive investment opportunity for investors seeking steady income streams.

Investors can take advantage of this trend by investing in properties that offer a range of amenities, such as fitness centers, swimming pools, and communal spaces. Properties located in desirable neighborhoods with access to public transportation and other amenities will also be in high demand.

  1. Health and Wellness

The pandemic has heightened awareness of health and wellness, and this trend is expected to continue in the CRE market. Properties that offer health and wellness amenities such as fitness centers, outdoor spaces, and healthy food options will be in high demand.

Investors can capitalize on this trend by investing in properties that incorporate health and wellness features and amenities. Properties located in desirable neighborhoods with access to parks, bike paths, and other outdoor spaces will also be in high demand.

  1. Technology and Innovation

Technology and innovation continue to disrupt the CRE market, and investors who embrace these trends are likely to be successful. Properties with modern technology infrastructure, such as smart building systems and high-speed internet connectivity, will be in high demand.

Investors can take advantage of this trend by investing in properties that offer cutting-edge technology features and amenities. Properties that are designed to accommodate emerging technologies such as 5G networks and autonomous vehicles will also be in high demand.

  1. Opportunity Zones

Opportunity Zones are a new investment vehicle that was introduced in the 2017 Tax Cuts and Jobs Act. These zones offer tax benefits to investors who invest in economically distressed areas, with the goal of spurring economic development and job creation.

Investors can capitalize on this trend by investing in properties

The Top Trends in Commercial Real Estate for Investors
Joseph Gozlan Commercial Real Estate Expert

Joseph Gozlan,
Commercial Real Estate Advisor

Click to learn more about Joseph
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Maximizing Your Returns with Commercial Real Estate Investments

Maximizing Your Returns with Commercial Real Estate Investments

Author: Joseph Gozlan, Eureka Business Group | Published: 02/20/2023

 

Commercial real estate (CRE) can be a lucrative investment opportunity, providing a reliable stream of income and the potential for significant long-term capital gains. However, maximizing returns with commercial real estate investments requires careful planning, research, and execution. In this blog post, we will discuss the critical factors to consider when investing in commercial real estate and provide tips for maximizing your returns.

  1. Location, Location, Location

Location is one of the most important factors to consider when investing in commercial real estate. A property’s location can significantly impact its value and potential for success. When evaluating a property, consider the neighborhood’s demographics, traffic patterns, accessibility, and local amenities.

For example, if you’re investing in an office building, you’ll want to make sure it’s in a location that’s easily accessible by public transportation, highways, and major roads. If you’re investing in a retail space, you’ll want to make sure the area has high foot traffic and is surrounded by other businesses that complement your tenant’s offerings.

  1. Property Type

The type of property you invest in will have a significant impact on your returns. The most common types of commercial real estate are office buildings, retail spaces, industrial buildings, and warehouses. Each type of property has its unique characteristics and requires different management approaches.

For example, an office building may require more hands-on management to maintain tenant satisfaction and lease renewals, while a warehouse may require more significant investments in maintenance and equipment to keep it in good condition.

  1. Tenant Quality

The quality of your tenants can make or break your commercial real estate investment. It’s crucial to evaluate potential tenants’ creditworthiness and financial stability before signing a lease. Ideally, you’ll want tenants with long-term leases, established businesses, and a track record of success.

For example, a retail space with a long-term lease to a well-established business with a loyal customer base is more likely to provide a steady stream of income than a retail space leased to a start-up business that has yet to establish itself.

  1. Financing Options

Financing is an essential aspect of commercial real estate investing. There are several financing options available, including traditional mortgages, commercial loans, and private financing. Each financing option has its advantages and disadvantages, and it’s essential to evaluate them carefully before making a decision.

For example, traditional mortgages may offer lower interest rates and longer repayment terms, while commercial loans may have more stringent requirements and higher interest rates.

  1. Risk Management

Like any investment, commercial real estate comes with its risks. It’s crucial to have a plan in place to manage those risks and minimize potential losses. One way to do this is by diversifying your portfolio across different types of properties and tenants. You may also want to consider purchasing insurance to protect your investment from potential hazards, such as fire or natural disasters.

  1. Exit Strategy

Before investing in commercial real estate, it’s important to have a clear exit strategy in place. An exit strategy is a plan for selling or divesting your investment. Having a clear exit strategy can help you avoid getting stuck with a property that no longer meets your investment goals.

Some common exit strategies include selling the property after a certain period, refinancing the property to free up capital, or converting the property to another use, such as residential real estate.

Maximizing Returns with Commercial Real Estate Investments

Now that we’ve covered the critical factors to consider when investing in commercial real estate let’s look at some tips for maximizing your returns.

  1. Identify Undervalued Properties

One way to maximize your returns with commercial real estate investments is to identify undervalued properties. Undervalued properties are those that are priced below their market value due to a variety of reasons, such as poor management or lack of investment.

By identifying undervalued properties, you

Joseph Gozlan Commercial Real Estate Expert

Joseph Gozlan,
Commercial Real Estate Advisor

Click to learn more about Joseph
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The Benefits of Investing in Commercial Real Estate

The Benefits of Investing in Commercial Real Estate

Author: Joseph Gozlan, Eureka Business Group | Published: 02/15/2023

 

When it comes to investing, there are many different options available, each with its own set of benefits and drawbacks. One area that is often overlooked by investors is commercial real estate. While investing in commercial real estate may seem intimidating, it can actually offer a number of benefits that are difficult to find in other types of investments. In this blog post, we’ll explore some of the benefits of investing in commercial real estate and why you might want to consider it as part of your investment portfolio.

Steady Income

One of the most significant benefits of investing in commercial real estate is the steady income it can provide. Commercial real estate properties are often leased out to businesses, and these leases typically last for several years. This means that investors can count on a regular stream of income from rent payments, making it an excellent option for those who are looking for a stable and reliable source of income.

In addition, many commercial real estate leases include clauses that tie rent increases to inflation, which means that the income stream from the property can increase over time. This can help investors to keep pace with inflation and maintain the value of their investment.

Long-Term Appreciation

Another advantage of investing in commercial real estate is the potential for long-term appreciation. Over time, commercial real estate properties tend to increase in value as the surrounding area develops and property values rise. This means that investors can benefit from both the regular income from rent payments and the long-term appreciation of the property itself.

In addition, commercial real estate can be a good hedge against inflation. As the cost of living rises, so do property values, which means that the value of the property can increase even if the investor does not make any improvements to the property.

Diversification

Another benefit of investing in commercial real estate is that it can provide diversification for your investment portfolio. While many investors focus on stocks and bonds, investing in commercial real estate can provide a way to spread your investment risk across multiple asset classes.

This is particularly true when it comes to commercial real estate investment trusts (REITs). REITs are companies that own and operate commercial real estate properties, and they offer investors the opportunity to invest in real estate without having to purchase a physical property themselves. By investing in a REIT, investors can benefit from the regular income and long-term appreciation of commercial real estate without having to take on the risk and responsibility of managing a property themselves.

Tax Benefits

Investing in commercial real estate can also provide a number of tax benefits for investors. One of the most significant tax benefits of commercial real estate is depreciation. Commercial real estate is subject to a tax deduction for depreciation, which means that investors can deduct a portion of the cost of the property from their taxable income each year. This can help to reduce the amount of taxes that investors owe and can increase the overall return on investment.

In addition, commercial real estate investors can also benefit from 1031 exchanges. A 1031 exchange allows investors to defer capital gains taxes on the sale of a property if the proceeds are reinvested in another like-kind property. This can be a valuable tool for investors who are looking to sell a property and reinvest the proceeds in a more lucrative investment opportunity.

Inflation Hedge

As we mentioned earlier, investing in commercial real estate can be a good hedge against inflation. This is because as the cost of living rises, so do property values. As property values increase, so does the income that the property generates, which means that investors can benefit from both the regular income and the appreciation of the property.

In addition, commercial real estate is a tangible asset that provides investors with a sense of security. Unlike stocks and bonds, which can be volatile and subject to rapid price swings, commercial real estate provides a tangible asset that can be seen and touched. This can help.

Joseph Gozlan Commercial Real Estate Expert

Joseph Gozlan,
Commercial Real Estate Advisor

Click to learn more about Joseph
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The Art of Finding the Perfect Commercial Property

The Art of Finding the Perfect Commercial Property

Author: Joseph Gozlan, Eureka Business Group | Published: 02/13/2023


Finding the perfect commercial property can be a challenging task. It requires careful planning, research, and attention to detail. However, with the right approach, you can find the property that meets all of your business needs and exceeds your expectations. In this blog post, we’ll explore the art of finding the perfect commercial property and the steps you should take to ensure success.

Step 1: Define Your Business Needs

Before you begin your search for a commercial property, it’s important to determine what your business needs are. This includes things like the size of the property, the location, the type of property, and the amount of parking available. It’s also important to consider any future growth plans you may have for your business, as this will impact your property needs over time.

Step 2: Research the Market

Once you have a clear understanding of your business needs, it’s time to research the market. This involves looking at various properties in the area, as well as gathering information about the local economy, demographics, and real estate market. The goal of this step is to get a good understanding of what is available in the market, what the prices are like, and what the trends are.

Step 3: Create a Budget

Before you start making offers on properties, it’s important to have a clear understanding of your budget. This includes the amount you’re willing to spend on the property, as well as any additional costs, such as renovation expenses, property taxes, and utilities. Having a budget in place will help you stay focused on your goals and avoid overspending.

Step 4: Work with a Real Estate Agent

Working with a real estate agent can be incredibly helpful in finding the perfect commercial property. They have a deep understanding of the local market and can help you navigate the complex real estate process. They can also help you negotiate the best deal possible, as well as guide you through any legal or financial considerations.

Step 5: Tour Properties

Once you have identified several properties that meet your criteria, it’s time to tour them. This will give you a chance to see the property in person, get a feel for the space, and assess the condition of the property. It’s also a good opportunity to ask questions and get more information about the property from the owner or real estate agent.

Step 6: Negotiate the Deal

Once you have found the perfect commercial property, it’s time to negotiate the deal. This involves working with the owner or real estate agent to agree on the terms of the sale, including the purchase price, closing date, and any contingencies. It’s important to have a clear understanding of what you’re agreeing to and to be prepared to compromise in order to reach a mutually beneficial agreement.

Step 7: Close the Deal

Once the deal has been negotiated, it’s time to close the transaction. This typically involves transferring ownership of the property, paying any necessary fees, and finalizing any necessary legal or financial documents. The closing process can be complex, so it’s important to work with a real estate agent or attorney to ensure that everything goes smoothly.

Conclusion

Finding the perfect commercial property requires careful planning, research, and attention to detail. By following these steps, you can ensure that you find the property that meets all of your business needs and exceeds your expectations. Whether you’re just starting out or expanding your business, taking the time to find the perfect commercial property will be worth the effort in the long run.

Joseph Gozlan Commercial Real Estate Expert

Joseph Gozlan,
Commercial Real Estate Advisor

Click to learn more about Joseph
Read More