Commercial Real Estate

Commercial Loan Modification – Frequent Objections

by Ted Karsch | April 1, 2010

The congressional oversight panel for commercial real estate has recently estimated that as many as 50% of all commercial properties in the United States will be underwater over next 12 months. This leaves half of all commercial real estate owners owing more on their commercial properties than the property is worth. The dire situation is [...]

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Commercial Real Estate

Hotel Owners in Financial Distress

by Ted Karsch | March 24, 2010

The fallout from the great recession can be seen on almost every Main Street in America in the form of empty storefronts to abandoned and foreclosed homes. One area of the real estate market that has been the hardest hit by the real estate collapse has also received the least amount of attention in the [...]

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Commercial Real Estate

When Your Commercial Loan Comes Due

by Ted Karsch | March 10, 2010

Commercial real estate analysts have predicted that approximately 1.5 trillion dollars of commercial loans will be maturing between now and 2013. Most of these loans were initiated during the peak times of real estate valuation, between 2005 and 2007. Since 2007, however, commercial real estate owners have watched as their investments have dropped in value [...]

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Commercial Real Estate

How Long Before Commercial Real Estate Recovers? Depends

by Charles Feldman | February 24, 2010

May as well kiss commercial real estate goodbye, at least till sometime next year. Yeah, fat chance! The latest report from the National Association of Realtors is darker than a nighttime boy scout camp out without a roaring fire. On its website, NAR’s chief economist says, “Because of the lingering impact from the deep recession [...]

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Commentary

Congressional Oversight Panel on Commercial Real Estate

by Ted Karsch | February 17, 2010

The Congressional Oversight Panel released their 189 page, February report entitled “Commercial Real Estate Losses and the Risk to Financial Stability” on February 10th. Typical of government reports of its kind, the authors are long on explanations, coupled with impressive analysis, but short on solutions. At least the report does make one thing clear, they [...]

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Commercial Real Estate

Alternative Financing Options for Commercial Real Estate

by Ted Karsch | January 13, 2010

Despite the fact that banks are not lending like they used to on construction projects and commercial real estate there still exist many alternative financing options for the commercial real estate investor who is willing to do some leg work and research. The following are a list of alternative funding sources that are being used [...]

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Commercial Real Estate

Commercial Loan Modifications: Know Your Options.

by Ted Karsch | January 6, 2010

Knowing how to pick a commercial loan modification company can be a difficult task. There are many factors to consider and the most important is to first decide whether you are good candidate for a commercial loan mod. Many commercial real estate owners have seen their property values decline between 30% and 50%, depending on [...]

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Commercial Real Estate

Alternative Financing for Commercial Real Estate

by Ted Karsch | December 16, 2009

As the underwriting guidelines have changed drastically over the past few years, many commercial property owners and investors have been frustrated by attempts to obtain traditional financing for the purchase of commercial real estate. Generally, even buyers of cash-flow positive real estate are finding it extremely difficult to obtain financing. As prices of commercial real [...]

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Commercial Real Estate

IRS Eases Restrictions on Commercial Loan Modifications

by Ted Karsch | November 5, 2009

The IRS has issued a new rule IRS Revenue Procedure 2009-45 IRS Revenue Procedure 2009-45 that eases the restrictions on modifications of commercial mortgages that have been packaged into commercial mortgage backed securities. This action allows borrowers to open discussions with the loan servicer prior to any default in an attempt to work out the [...]

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Commercial Real Estate

Apartment Vacancy Rate Hits Its Highest Point In Nearly 25 Years

by Christina Inman | November 2, 2009

In what is an interesting phenomenon, apartment vacancies have hit their highest point since 1986 in cities across the country. According to Reis Inc., a New York real-estate research firm that tracks vacancies and rents in the top 79 U.S. markets, the vacancy rate reached 7.8% this summer, which is normally a strong period for [...]

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Commentary

Deja-Vu… All Over Again! This time in the Commercial Real Estate Market

by Peter Giardini | October 21, 2009

I was surprised by some of the comments regarding Dr. Doom AKA Nouriel Roubini and his predictions that we are not yet out of the economic woods, and we are most likely going to experience continued turmoil in our economy in general and real estate specifically.

To the point – it seems that everyone is now paying attention to the coming challenges with the commercial mortgage market. And who can blame anyone for thinking that the commercial market is on the edge, and will likely go right over the side in the coming 2 – 3 years.

Using Old Valuations Can Lead to Disaster!

Making this situation worse is the fact that most lenders are valuing the underlying properties collateralizing their mortgages at their original values (just like what is happening with residential properties), further forestalling the pending crisis in bank defaults. If banks revalued their portfolios to the real (current) values of their underlying collateral… it is possible the entire system would collapse. I found an interesting dialogon public radio amongst various experts regarding the pending (actually it has already started) commercial collapse that demonstrates that some people may have their head in the sand.

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Commercial Real Estate

Attorneys for Commercial Loan Modification. What You Need to Know.

by Ted Karsch | October 14, 2009

Commercial real estate owners who are considering hiring an attorney to handle their commercial loan modification should investigate the background and experience of the person they hiring so that they know in advance what to expect.

In my experience as a commercial loan modification specialist I have found that many attorneys who advertise themselves as commercial loan modification attorneys actually have very little experience performing successful loan workouts. Unfortunately, as many people know, there is an over supply of attorneys in the United States. This forces many lawyers to follow the latest and hottest trends in order to get new business and survive. You may see the same people who used to do accident and injury work now advertising their services as loss mitigation specialists because it has become such a needed service. For this reason the commercial real estate owner should definitely do their homework and research the actual experience of the person they are hiring.

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Commercial Real Estate

Developing Real Estate: How to Price Land for Profit

by Craig Grella | October 2, 2009

Pricing land for development can be a daunting task for the untrained investor. As a niche subset of both residential and commercial real estate, using comparables for land can be as dangerous to a developer as it is mysterious, sometimes causing the failure of what was certain to be a fantastic development.

However, for the savvy investor, there is one universally accepted land valuation method used by development professionals, corporations, and appraisers alike; the Land Residual Method. By using this method you will be able to determine the current and future value of any piece of land, whether its use be residential or commercial. You will also be able to price land, such that any development you propose will have built in profit. With some practice, you will be able to employ the land residual method in just a few moments, summing up the value of almost any property just on sight.

The land residual method has a fancy sounding name, but to use it all you need is an understanding of some simple math. The land residual method is a calculation that takes the highest and best use of a particular piece of property and subtracts out the total cost of development to arrive at the residual value: the land value. Once you have the numbers it’s that easy. “How do you get the numbers?” You ask. It takes some research, but even a novice investor can figure it out relatively quickly.

For the sake of this article I’ll be speaking to residential single family development or single family lot land. Rest assured, commercial development uses the same principles, though the calculations are a little more in depth.

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Commercial Real Estate

If Your Building is 100% Occupied, Your Rents Are Too Low!!!

by Kyle Koller | September 28, 2009

Income properties are, to many, the ideal investment. Not only does one receive rental income on a monthly basis, but he also gets to enjoy capital appreciation—or at the very least, a solid hedge against inflation. With favorable tax treatment throughout and available 1031 tax deferred exchanges, one would be silly to not at least consider real estate investment.

And so he does. Hypothetical investor Bob purchases his first income property: an 8-unit multi-family in sunny San Diego, California. He loves the fact that it’s in a great location, has a favorable unit mix, and there has only been one vacancy in the last two years—and that vacancy didn’t last very long. As far as Bob is concerned, he has made the perfect investment. How could he do any better?

Raise the rents!

Typically, investment properties in low-vacancy, heavily renter-occupied housing areas that incur vacancies about as often as the Chicago Cubs win World Series have one problem: their rents are too low. If the rents weren’t below market, they would incur significantly more turnover.

That’s the key word: turnover

Turnover is a good thing; vacancies, themselves, are not. What’s the difference? A vacancy occurs when a unit has been turned (i.e. “rent ready”) and it does not have a tenant, or a prospective tenant. Turnover occurs when someone moves out of a unit and another moves in.

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Commercial Real Estate

What’s the difference between you and Sam Zell?

by Craig Grella | September 25, 2009

It’s no secret that the real estate market is at its worst since the great depression. It doesn’t help that most of the media seems to set their sights on publishing only articles that highlight the latest crash or the biggest loan scandal. Defaults are rising, foreclosures are at an all time high and Realtors are leaving their jobs to pursue careers in acting.

It’s not really as bad as it seems though. At least, not in the long run. Boom and bust cycles are nothing new, and thankfully there has always been a boom that followed a bust. In part due to the investors who sweep with the time tested strategy of “buy low…sell high.” The time has come to prepare for the next boom cycle, and those who can invest now will find great wealth in the near future.

You may be saying, “Thanks for the tip, Craig. Tell us something we don’t know. Problem is, we don’t have any money to invest. How do we do it.” Great question. Let’s start by discussing how not to do it.

How Not to Get Money to Invest

A simple search on BiggerPockets for the term “bulk reo” yields over 400 forum posts and articles about buying or flipping bulk reo portfolios. Go out further by searching “bulk reo” on Google and you’ll find just under a half million results. Take a moment and read a few of them and you’ll notice many newbie investors stating their plan is to go out and search for the mother lode of REO portfolios, buy them at four cents on the dollar and then wholesale them at twenty five cents on the dollar. They all plead for other people to invest with them stating if they could just pool some money they could go out and take over Citibank’s entire portfolio. Mostly, those posts go unanswered or just get ignored, the would-be investor tucks his tail and moves onto the next brilliant money making scheme. That’s a great example of how not to do it.

I don’t mean to pick entirely on newbie investors because there are many seasoned investors out there using the same strategy. We all understand the math of “buy low and sell high” but it begs the question:

How is it that Sam Zell, even during bankruptcy, can raise $600 million to buy property in this market when you can’t raise a dime? The answer: he’s got a plan and you don’t.

That is… until now!

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