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.

2. 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.

3. 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.

4. 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.

5. 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.

6. 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

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.

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.

Author: Joseph Gozlan, Eureka Business Group | Published: 01/30/2023

Is this the year multifamily operators stop charging back for utilities? Multifamily properties have unique challenges when it comes to utility billing. In the last 6-8 years, property operators have used a Ratio Utility Billing System (RUBS), where residents are billed for their individual usage of utilities such as electricity, gas, water, and waste management. However, recent trends show that more multifamily operators are opting to go back to the fixed utilities fee system.

A fixed utilities fee is a flat rate charged to residents for their use of utilities. This fee is based on the average consumption of utilities in the property and is charged to residents regardless of their actual usage normally based on the unit size and how many occupants are in the unit.

There are several reasons why multifamily property owners are making the switch from chargebacks to fixed utilities fees.

1. Simplicity and Convenience: One of the primary advantages of fixed utilities fees is the simplicity and convenience of billing. Unlike chargebacks, which require operators to keep track of the property usage and submit meter readings, fixed utilities fees are a straightforward, predictable cost. This eliminates the hassle of managing and billing for individual utility usage, freeing up operators to focus on other aspects of operations.

2. Increased Revenue: Another benefit of fixed utilities fees is increased revenue for the property owners. With a RUBS chargeback system, property owners are normally dependent on 3rd party vendors to accurately calculate the usage, which can result in lost revenue if usage is underreported. On the other hand, fixed utilities fees are based on average usage and are not subject to the same inaccuracies. This results in a more consistent and predictable stream of revenue for property owners.

3. Improved Cash Flow: Fixed utilities fees also improve cash flow for property owners. Unlike RUBS, which can result in uneven payments throughout the month, fixed utilities fees provide a consistent source of income that can be relied upon to meet operating expenses.

4. Reduced Maintenance Costs: Fixed utilities fees can also help reduce maintenance costs for property owners. In a RUBS system, residents may be reluctant to report higher than normal usage, which can result in maintenance issues going unnoticed. With fixed utilities fees, property owners have a better understanding of the overall consumption of utilities and can proactively address any issues before they become a larger problem.

5. Compliance: Implementing a RUBS system is complicated because of all the rules and regulations that may (and often do) differ between state, counties and municipalities leading to the fact most multifamily operators choose to hire 3rd party vendors to take on that responsibility. 

6. Enhanced Resident Satisfaction: Finally, fixed utilities fees can enhance resident satisfaction. In a chargeback system, residents may be frustrated by unexpected spikes in their utility bills, or feel that they are paying more than their fair share. Fixed utilities fees provide residents with a predictable cost, which can lead to a more positive living experience.

While fixed utilities fees have many benefits for property owners, there are also some drawbacks to consider. For example, residents who use less utilities than average may feel that they are paying more than their fair share. Additionally, if property owners do not accurately estimate the average consumption of utilities, fixed utilities fees may be too high or too low, which can result in lost revenue or increased costs.

Despite these potential drawbacks, the trend towards fixed utilities fees in the multifamily property industry continues to grow. Property owners who are considering making the switch from RUBS to fixed utilities fees should carefully weigh the benefits and drawbacks and consult with a professional to determine the best option for their specific property and residents.

In conclusion, multifamily property owners are increasingly opting for fixed utilities fees over RUBS and chargebacks for their convenience, increased revenue, improved cash flow, reduced maintenance costs, compliance and enhanced resident satisfaction. While fixed utilities fees may not be the best option for every property and every resident, they provide many benefits that make them an attractive option for many property owners.