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Cincyland.com email@example.com 721-LAND (5263) Here at CincyLand.com we promote and sell commercial property for sale in Cincinnati Ohio. Commercial Property Types...Which One Is The Best? What commercial property types should you buy? You should consider the pros & cons of each property type, as well as, have a good understanding of your investment objectives and your experience. These factors will help lead you to your ideal commercial property. Listed below are the most common commercial property types. Apartments/Multi-family Apartments or multi-family buildings are usually the first choice for new commercial investors. Apartment management and financing is very similar to residential, and so new investors feel more comfortable with them. The main disadvantage with apartments, is that they are management intensive. In order for an apartment to be considered commercial property, it must have 5 or more units. There are numerous sub-types of apartments: Low-Rise Garden Apartments Mid-Rise Apartments High-Rise Apartments Student Housing Military Housing Townhouse Style Co-op When you are looking at properties to purchase, pay close attention to the location and general market for that area. You will want to avoid properties that are located in economically depressed or seasonal areas. Also, the property should have acceptable aesthetic qualities to be competitive with market standards and have a minimum occupancy of at least 85%. What if the property you are evaluating has inferior physical characteristics or is in an economically depressed area? You may have a higher interest rate, higher reserves and tighter underwriting constraints. Mobile Home Parks Mobile homes can be a wonderful investment, especially if you own the land and sell off the mobile home. You're just renting dirt at that point! If you're not familiar with mobile home investing, you need to read "Deals On Wheels: How To Buy, Sell And Finance Used Mobile Homes For Big Profit And Cash Flow" by Lonnie Scruggs. This book is a gem! Lonnie explains how to buy and sell mobile homes on a note. His presentation is very basic and understandable. Now back to mobile home parks. Mobile Home parks are rated as 1 Star, 2 Star, 3 Star, 4 Star, and 5 Star. The Star ranking is based on the conditions and amenities of the park. A 3 Star park usually has a mix of single and double wide homes that are in good condition. The park is attractive and offers some amenities. A 4 Star mobile home park usually only has double wide homes that are skirted and in good condition. The homes will have concrete patios or raised porches. A 5 Star mobile home park can be characterized as having deluxe accommodations, with a wide range of amenities and services. The homes are usually set back from the curb with paved streets, sidewalks, street lights and signs. The park is located in a desirable neighborhood and accessible to retail and community services. The homes are late model doublewides and modular homes in excellent condition. The mobile home park should have at least 85% occupancy and be located in desirable areas. Also, be cautious if the park has too many homes for sale (more than 20% of total pads) or more than 20% of total pads are rented homes owned by the park. Retail Retail properties are properties that are occupied by one or more tenants and the property is utilized for retail purposes. A free standing retail, strip center with an anchor tenant is a well known commercial retail business such as a national chain store or regional department store strategically placed in a shopping center so as to generate the most amount of customers for all of the stores located in the shopping center. An Unanchored retail center is a center which is occupied by multiple tenants of which none are anchor tenants. Single tenant investment grade retail properties are properties that are net leased to one investment grade tenant (BBB- rating or higher). Office The different categories of offices include: Suburban Garden Office Suburban High Rise Office Medical Office Central Business District (CBD) Office Potential office buildings should have a minimum of 85% occupancy and is located on or near a main thoroughfare and easily accessible. Properties that have more than 20% of total revenue from owner occupied or owner affiliated tenants, will usually have a higher interest rate on any loans. Mixed-Use These properties will be a combination of any of the above property types. A real estate development of mixed use properties, should be complementary to each other. Healthcare These property types are nursing homes, congregate care and assisted living centers. Properties should be close to retail and community services. Be cautious of properties in economically depressed or seasonal areas. Also, be sure that the property complies with ADA requirements. Hotel Hotels are characterized as either Full Service or Limited Service. Full Service Hotels can be further divided into Luxury, Upscale, Mid-scale, and Extended Stay hotels. Limited Service Hotels can be further divided into Mid-scale, Economy, Budget and Extended Stay. When considering hotel properties, the property should have a stable operational history. A property with a history of four or less years should be scrutinized. The minimum acceptable occupancy is usually 60%. Lenders also prefer franchise affiliated hotels with franchise agreements extending beyond the term of the proposed loan. Industrial These property types will have usage for industrial purposes only. Such as Warehouse-single tenant Warehouse-multi tenant Manufacturing Research & Development Flex Space Light Industrial Heavy Industrial Self Storage Also is called Mini-Storage, it is used for personal storage for lease by consumers. Other Specialty These property types are unique and the financing them can be difficult. They include gas stations, oil change facilities, etc. Definitions of INDUSTRIAL PROPERTY on the Web: A plot of land used for a factory or other industrial use. www.dreamsintorealty.biz/index.cfm/fuseaction/terms.list/letter/I/contentid/BD03506D-9E28-4661- 95C36DCFB79ED020 Inventions, trademarks, industrial designs, and appellations of origin. Industrial property is afforded protection according to numerous international treaties and federal statutes. www.domainhandbook.com/gloss.html A property used for light or heavy manufacturing or warehouse space. Property type also includes office/warehouse. ciao.reiwise.com/help/commercial/process55.htm Encompasses most forms of intellectual property with the exception of copyrights --eg, patents, trademarks, and trade secrets (Sec. II). See intellectual property rights. www.itcdonline.com/introduction/glossary1_ghij.html This building classification includes facilities used for light manufacturing businesses, and auto- related businesses. Funeral homes and rooming houses can sometimes be included by lendors’ standards. www.threepennies.com/blog/ shall generally include but not be limited to, all Parcels of Developed Property with a building or structure that is used for assembling, disassembling, fabricating, finishing, manufacturing, packaging, repair or processing operations, as classified by the City's Planning Division. www.cityofdavis.org/cmo/citycode/detail.cfm Property used for industrial purposes, such as factories. www.godenverhomes.com/glossary/glossi.html commercial property real estate that includes incomeproducing property, such as office buildings, restaurants, shopping centers, hotels, industrial parks, warehouses, and factories. Commercial property usually must be zoned for business purposes. It is possible to invest in commercial property directly, or through Real Estate Investment Trust or real estate limited partnership . Investors receive income from rents and capital appreciation if the property is sold at a profit. Investing in commercial property also entails large risks, such as nonpayment of rent by tenants or a decline in property values because of overbuilding or low demand. Dictionary of Business Terms commercial property property intended for use by retail, wholesale, office, hotel, or service users, or for manufacturing or other industrial purposes. Examples are shopping centers, office buildings, hotels and motels, and resorts or restaurants. For many years, commercial property has been treated less favorably under the tax laws than residential rental property. See also industrial property Dictionary of Real Estate Terms commercial property property designed for use by retail, wholesale, office, hotel, or service users. Example: An investor is interested in purchasing commercial property for investment. A broker might show the investor shopping centers, office buildings, hotels and motels, resorts or restaurants. Related Terms: industrial property property used for industrial purposes. Types of industrial property include factory-office multiuse property; factory- warehouse multiuse property; heavy manufacturing buildings; industrial parks; light manufacturing buildings; and research and development parks. http://www.naiop.org/, - What Is NAIOP? The National Association of Industrial and Office Properties (NAIOP) is the nation's leading trade association for developers, owners, investors, asset managers and other professionals in industrial, office and mixed-use commercial real estate. Founded in 1967, NAIOP comprises 16,000+ members in 55 North American chapters. It provides networking opportunities, educational programs, research on trends and innovations and strong legislative representation. NAIOP's sister organization, the NAIOP Research Foundation, is one of the industry's leading think tanks dedicated to conducting research assessing the trends, economic viability and needs of the built environment. Property Listings Black's Guide – Provides comprehensive office and industrial space information on more than 88,000 properties and 4,000 service companies in 20 markets nationwide. Information includes maps, market and sub market overviews, regional and national statistics and industry related articles. Data appears in an easy to use, standardized format. Access is free. CityFeet.com – A portal for property listings for sale or lease, as well as a venue for posting available sites. Sign up for e-mail notification of space that meets your needs. (Note: there is a fee for listing properties, although searching for available space is free.) CoStar Group – Offers building specific information on 800,000 properties, enhanced by photographs, floorplans and 3-D images. Includes details such as comparable sales, buildings for sale, cap rates, income and expense data, lease expirations and loan terms. According to their web site, covers "virtually every building in every major city" and six million tenants, owners and brokers, using a 700-person research team. LoopNet – Offers a selection of online products and services designed to streamline commercial real estate transactions. With over 1.5 registered members, LoopNet provides its users more efficient and cost effective ways to list, search, market and finance commercial real estate properties. In addition to a commercial real estate listing service, LoopNet's services include; RecentSales, a commercial comparables database; Premium Membership; advanced marketing and searching tools; LoopLink, market-leading product that powers the web sites of more than 1,000 commercial real estate organizations; and LoopLender, an online financing service. PA SiteFinder – One-stop shopping for property information and other assistance for brownfields real estate transactions. PropertyManagerz.com – PropertyManagerz.com is a business-to-business vertical portal bringing information, interactive services, and e-commerce to the commercial real estate industry. PropertyManagerz.com serves building owners, property managers, building engineers, vendors, contractors, and tenants in commercial/industrial, multifamily, and retail industries. They help professionals stay up to date on information, locate and qualify vendors and contractors, maintain building-specific records, and interact with tenants and building owners. SpaceForLease.com – Nationwide listings for commercial properties, targeted to landlords, tenants and brokers. Property groupings are site-specific (for example, medical buildings, office warehouses and malls) and offer cross-database posting opportunities. One-time site registration is required. Sublease.Com – Provides a venue for commercial property searches and for listing available properties, targeted specifically to the sublease market. Features the sublease "Hot Sheet," a frequently updated list of available properties organized by state. (Note: There is a fee for listing properties.) WebRealEstate.com – With over 300 real estate companies listing more than 100 million square feet of property, we help decision makers determine the right commercial properties to lease, purchase or sell. We even take aerial and ground photos to help you get your property online quickly and inexpensively in a content-rich, banner-free environment. http://www.buildings.com/, - All about Buildings http://www.commercialpropertynews.com/, http://www.commercialpropertynews.com/cpn/propert y-types/index.jsp, http://www.wipo.int/ipstats/en/, - Industrial Property Statistics WIPO collects and publishes annual statistics on industrial property, by country and in accordance with the relevant international industrial property classification systems administered by WIPO. The statistics relate to patents, utility models, marks, industrial designs, plant varieties and microorganisms and are published in a unique collection of statistical tables which bring together data supplied by Industrial Property Offices in respect of filings under national, regional and international legislations. http://www.industrialproperty.biz/index.html, - Industrial Property Brokers Industrial Property Brokers is a brokerage firm specializing in marketing and leasing industrial property in the West Central Ohio region. Through an association with CCIM networks, Industrial Property Brokers provides local and worldwide property services. Tim Echemann, Broker, of Industrial Property Brokers has 20 years experience in industrial sales and leasing. Prior to starting Industrial Property Brokers, Tim served as Vice President of Sales and Marketing for Miller Valentine Brokerage in Cincinnati. He also managed the Dayton office for Ostendorf-Morris Colliers and was instrumental in the tremendous growth of Colliers International in the Dayton, Ohio area. Focusing on the Greater Dayton/Cincinnati and exurban areas, Tim has successfully completed over $14,000,000 of transactions in a three year period including a number of "Fortune 500" companies. Among his many accomplishments, is the sale of the 119,000 sq. ft. Aerovent facility in Piqua. The sale of 125 acres of industrial ground located near the Honda of America plant in East Liberty, Ohio was another significant transaction. In addition, Tim negotiated the sale of the Alcoa Corporate Administration Services facility in Sidney. Tim also sold the 191,000 sq. ft. Honda Distribution Center in Dayton, Ohio to Foster & Gallagher. This sale was significant as other brokerage firms had marketed the property for over five years and Tim sold it within one year. Clients Served Honda, Campbell Soup, Alcoa, Union Camp, Medalist Apparel, Dayton Walther, Paul Sherry, Pioneer Standard Electronics, Visador, Nestle, Miami Valley Steel, Lucas Ledex Inc., United Technologies, General Motors and JW Harris Commercial Property Insurance Commercial Property Coverage Outline Property Insurance is any type of insurance that indemnifies an insured party who suffers a financial loss because property has been damaged or destroyed. Property is considered to be any item that has a value. Property can be classified as real property or personal property. Real property is land and the attachments to the land, such as buildings. Personal Property is all property that is not real property. The Building and Personal Property coverage form is the form used to insure almost all types of commercial property. The insuring agreement in the Building and Personal Property coverage form promises to pay for direct physical loss or damage to covered property at the premises described in the policy when caused by or resulting from a covered cause of loss. The following is a brief outline of coverages and how they are used within the Commercial Building And Personal Property coverage form. Buildings and Business Personal Property Coverage for the building includes the building and structures, completed additions to covered buildings, outdoor fixtures, permanently installed fixtures, machinery and equipment. The building material used to maintain and service the insured's premises is also insured. Business Personal Property owned by the insured and used in the insured's business is covered for direct loss or damage. The coverage includes furniture and fixtures, stock, and several other similar business property items when not specifically excluded from coverage. The policy is also designed to protect the insured against loss or damage to the personal property of others while in the insured's care, custody or control. Coverage Extensions and Additional Coverages In addition to the limits stated in the Building and Personal Property coverage form, the policy has a coverage extensions section and an additional coverages section. The coverage extensions section provides limited coverage for newly acquired or constructed property, property of others, certain outdoor property, and the cost to research and reconstruct information on destroyed records. When coverage is placed on the all risk form, two additional extensions are added for property in transit and coverage for certain repair costs related to damage caused by water. The two additional extensions are covered by certain perils only. The additional coverage section provides coverage for indirect losses that result from a direct loss. The coverage applies to removal of debris, preservation of property, fire department service charges and pollutant cleanup and removal. The coverage extensions and the additional coverages have limitations and are subject to certain conditions. Limit of Insurance The most the insurer will pay for loss or damage in any one occurrence is the limit of insurance stated in the policy declarations. Deductible The standard deductible is $250. However, other deductible amounts are available and the deductible applies only once per loss. Causes of Loss The term peril is used when discussing losses. A peril is a cause of loss. Basic property insurance policies are written to cover the perils of fire, lightning, explosion, windstorm, hail, smoke, aircraft or vehicle damage, riot or civil commotion, vandalism, sprinkler leakage, sinkhole collapse, and volcanic action. Other property insurance policies, often referred to as the broad form policy, add coverages for water damage, weight of snow, ice or sleet, breakage of glass and coverage for falling objects. The broadest coverage is the special form, which is best known as the all risk form. All risk covers all causes of loss, except those specifically excluded from coverage. It is possible for a commercial property policy to have more than one cause of loss form. Replacement Cost and Actual Cash Value Property can be valued in several different ways. Insurance companies commonly use two approaches to determine value, which also determines how a loss will be paid; the replacement cost method and the actual cash value method. Insurers consider replacement cost of a property item to be the cost to replace it with new property of like kind. Actual cash value is replacement cost, minus the accumulated depreciation for age and condition. Agreed Value When the agreed value option is used the coinsurance requirement is removed and the insurer agrees to cover loses for it's agreed value. As an example, the insured has property insured for $100,000 and the agreed value is also $100,000, if a loss occurs, any loss up to $100,000 is covered at 100% When this option is used the insured and the insurance company agree on the value of the property before the policy is issued. This option is usually assigned to one-of-a-kind property. Coinsurance Most building and business personal property polices have a coinsurance clause which requires the insured to carry insurance equal to at least a specified percentage of the actual cash value of the property. If a loss occurs, and it is determined that the amount of insurance carried is less than the amount required, a penalty could be placed on the insured. Inflation Guard An insured can insure a building for its full value at the beginning of the policy year, but, at the end of the year, it might not be covered for it's full value. This problem can be corrected by adding inflation guard coverage. With inflation guard, the policy limit increases gradually during the policy term so that the total increase amounts to the desired percentage increase at the end of the policy term. Earthquake Coverage This endorsement extends your cause of loss to include damage that results directly from an earthquake. Coverage is provided for replacement of buildings only. All earthquake shocks that occur within a 168 hour period (one week) are considered to be a single occurrence. A separate deductible applies and is determined by the value of the insured property. Business Income Coverage Business Income is the net profit or loss that would have been earned or incurred if the suspension of the business had not occurred, plus any normal operating expenses that must continue during the suspension of the business. Business Income insurance pays the actual loss of business income sustained by the insured because of a necessary suspension of the insured's operation during the period of restoration following a loss. The suspension must result from direct physical loss or damage to real or personal property. Coverage is provided against the same causes of loss covered under the insured's property policy. Under certain conditions, the policy also provides an extension of coverage for newly acquired property. The insured's operations are the business activities of the insured, which occur at the location listed in the policy. The period of restoration is the period beginning on the date of the direct loss, and ending when the damaged or destroyed property could have been restored. The business income and extra expense form provides the following additional coverages: Extra Expenses Extra Expenses are any expenses over and above those that would have been incurred during normal operation of the business. Some of the covered extra expenses are; expenses incurred to avoid or minimize the suspension of operations, expense to repair or replace property, and expense paid for overtime work to speed up the restoration of the business. Civil Authority Civil Authority is when access to an insured's premises is denied by civil authority as the direct result of damage or destruction of a neighboring or adjacent property belonging to others. If the damage or destruction is caused by a cause of loss covered by the insured's policy, this coverage would apply. The insured's premises would be covered for the loss of income during the period of suspension, up to a maximum of two weeks. Alterations/New Buildings Alterations/New Buildings provides coverage for loss of income resulting from a delay in beginning operations. The delay must be the result of damage to new buildings or structures, either completed or under construction. Damage to additions or alterations to existing buildings are also covered. The damage must be the result of a covered cause of loss. Extended Business Income This coverage provides the time needed for the insured's former customers to return once the business suspension is over by providing coverage for loss of income until sales return to normal, or up to a maximum of thirty days. Optional Coverages Maximum Period of Indemnity Maximum Period of Indemnity is a restriction of the period of restoration provided under the policy. If this option is selected the insured's loss payment is limited to the lesser of (1) the amount of loss sustained during the 120 days immediately following the loss or (2) the policy limit. The coinsurance requirement does not apply if this option is chosen. Monthly Limit of Indemnity Monthly Limit of Indemnity is an option that allows the insured to recover a percentage of the actual policy limit during each thirty day period of interrupted operations. If a loss occurs, payment would be made for the lesser of the actual amount of the loss, or the maximum amount allowed to recover with this option. Under this option, the coinsurance requirement does not apply. Extended Period of Indemnity Extended Period of Indemnity is an option that extends the "extended business income coverage" over the standard thirty-day period. The insured can extend the coverage to 60 days, or up to a maximum of 360 days. The selected time would depend on the time the insured estimates it would take for revenues to return to normal after a suspension of the business. Agreed Value Agreed Value is an option that requires the insured to complete a business income report/worksheet showing the actual financial data for the previous twelve months, and estimated financial data for the next twelve months. An agreed value is determined from the financial data submitted. If a loss occurs, the insured's policy limit must be equal to the agreed value amount, if loses are to be paid in full. When this option is in force, the coinsurance clause does not apply. Equipment Floater Coverages The primary function of the ACORD Equipment Floater Application #146 is to collect underwriting and rating information for the Contractors Equipment Form. However, the application may be used for any other Inland Marine coverage that will fit into its structure. Since there areseveral Inland Marine Coverage Forms that fit into the structure of this application this document will briefly explain the many kinds of inland marine policies that cover many kinds of loss exposures. Inland marine policies are divided into two categories; filed and non-filed. Filed policies are characterized by a large number of potential insureds and reasonably similar loss exposures. The rates and forms of filed policies must be filed with the state insurance department. Non-filed policies are characterized by a relatively small number of potential insureds, and diverse loss exposures or both. The rates and forms for Non-filed policies are not filed with the state. Non-Filed Forms Contractors Equipment Floater The property covered on the contractors equipment floater might range from simple hand tools to very large cranes. Virtually any type of mobile equipment or tool can be insured. The equipment covered can be used in a wide variety of operations such as, home improvements to strip mining. It might be used to build roads, buildings, pipelines, or many other types of structures. The coverage provided is for direct physical loss to the equipment. Rental reimbursement coverage can be added by endorsement to cover the cost of renting substitute equipment if covered property is out of service by a covered cause of loss. Builders Risk / Installation The inland marine builders risk portion of the policy form covers structures being built, temporary structures at the building site, and building materials that have not yet become part of the building. The building materials are covered while on the insured location, in transit, or in storage at another location. Business income coverage can also be provided on the policy. The installation portion of the policy usually insures a contractor's interest in building supplies or in fixtures that the contractor has been hired to install. Electronic Data Processing Equipment Form The inland marine electronic data processing policy is used to insure damage to data processing hardware, software, and media. The policy also covers the extra expense to continue data processing operations following a covered loss that resulted in damage to the system. Bailee Policy Bailee policies are written to insure dry cleaners, repair shops, public warehouses, and several other types of businesses with large amounts of the customers' goods in the insured's possession. There are two major types of bailee policies. The Bailee Liability Policy covers damage to customer's goods only if the insured is legally liable for the damage. The Bailee’s Customers Policy covers damage to customers' goods without regard to the bailee's liability. Filed Policy Forms Sign Coverage Form The sign coverage form is used to insure neon fluorescent, automatic or mechanical electric signs, and lamps. All covered signs must be written on a schedule with a limit of insurance shown for each item on the schedule. Equipment Dealers Coverage Form The primary purpose of the equipment dealers coverage form is to insure the stock in trade of dealers in agriculture and construction equipment. Coverage is provided for customers equipment in the care, custody, or control of the named insured. The coverage can be written on a reporting basis or non reporting basis. Commercial Articles Coverage Form The commercial articles coverage form is used to cover photographic equipment and musical instruments used on a commercial basis. Coverage is provided for photographers, motion picture producers, professional musicians, and others. The form is not intended to provide coverage for dealers of these types of property. Coverage can be written on a schedule or blanket basis. Mail Coverage Form The mail coverage form is written for banks, trust companies, insurance companies, investment brokers and similar firms that frequently ship securities by mail. The mail coverage form purpose is to cover securities and other negotiable instruments while in transit by first class mail, certified mail, express mail, or registered mail. Jewelers Block Coverage Form This form was designed to meet the needs of retail jewelers. The form provides coverage for damage to the jeweler's stock of jewelry, precious and semi precious stones, watches, precious metals and similar merchandise. Similar property of others in the insured’s care, custody, or control is also covered. Commercial Property Insurance (December 2007) Commercial property insurance helps businesses, including farms and ranches, pay to repair or replace buildings, associated structures, and contents damaged or lost because of fire, storms, theft, and other events outlined in the policy. Note: Commercial property policies generally don’t cover building contents belonging to a tenant. If you rent or lease your building, you should buy your own policy to insure your on- premises property, including machinery, furniture, and merchandise. The cost of tenant coverage will generally be significantly less than building coverage because the policy will only cover contents, not the building itself. Typically, business owners can buy a single policy to cover businesses operating at multiple locations. However, you might need separate policies if some locations serve different functions and have different risk profiles. This could be the case, for example, if your business has an administrative office and a separate factory. Almost all commercial property policies have a “deductible,” which is the amount you must pay toward the cost of a claim before the insurer will pay. The higher your policy’s deductible, the lower your premium should be. Keep in mind, however, that you’ll have to pay more out of pocket if you have a claim. Your policy will also have a “policy limit,” which is the maximum amount the insurer will pay for any covered loss. Commercial property policies provide either “replacement cost” coverage, “actual cash value” coverage, or a combination of both. Replacement cost coverage will pay to replace your property with new property of like kind and quality, up to the policy’s dollar limit. An actual cash value policy will pay the replacement cost of the property minus depreciation due to age and normal wear and tear. Although replacement cost coverage is more expensive than actual cash value coverage, it might better ensure that your business fully recovers after a significant loss. In Texas, commercial property policies are not standardized. Insurers must comply with minimum requirements but have a great deal of flexibility to develop their own policies. As a result, coverages and policy terms may vary significantly by insurer and by policy. Types of Commercial Property Policies Different types of commercial property policies protect against different risks, or “perils.” Some policies will cover only those risks specifically named in the policy. Other policies will cover all risks, unless the policy specifically excludes them. Be sure to read your policy carefully. You may need to buy additional coverages or specialized policies, such as flood, windstorm, or crime coverage, to fully protect your business. Commercial property policies in Texas generally fall into one of three categories: Basic form policies typically cover common risks or perils, such as damage from fire, lightning, windstorm, vehicles, aircraft, or civil commotion. Broad form policies typically provide basic form coverage plus coverage for additional perils, such as water damage, structural collapse, sprinkler leakage, and losses caused by ice, sleet, or weight of snow. Special form policies cover against all types of losses except those the policy specifically excludes. Common special form exclusions include losses from flood, earth movement, war, terrorism, nuclear disaster, wear and tear, and insects and vermin. Note: Most commercial property policies cover damage from windstorms, except in counties on the Texas coast. If your business is in one of Texas’ coastal counties, you’ll probably need a separate windstorm policy. (Refer to the section on windstorm coverage for more information.) Types of Commercial Property Coverages Commercial property policies provide various types of coverage, either as part of the base policy or through policy “endorsements.” Endorsements expand or amend a policy’s coverages and usually increase your premium. You can buy certain coverages as separate stand-alone policies. Following are some typical commercial property coverages: Business interruption coverage pays for actual or projected lost income if loss from a covered peril prevents normal business operations. Extra expense coverage pays any additional costs to expedite resumption of your operations after a covered loss. Building occupied by the insured coverage insures a building that you regularly use but do not own. This coverage can be important if you lease or borrow a building that is critical for your operations. Newly acquired or constructed buildings coverage insures a new building if you add it to your policy within a specified amount of time. If you don’t notify your insurer within the time period – usually 30 days – your policy won’t cover the new building. Commercial property policies generally only cover buildings named in the policy. Off-premises property coverage covers your property located off site. Some policies might not cover off-premises property, or may provide only limited coverage. You can usually buy an endorsement to cover off-premises property. If you can’t buy an endorsement, you may have to buy a separate policy. Employees’ personal property coverage insures your employee’s personal property against covered losses if the property is on your premises. Generally, you must buy this coverage as an endorsement if you need more than a limited amount. Valuable papers coverage provides limited coverage of your business records and other essential information. You may be able to buy an endorsement to increase this coverage. Ordinance or law coverage pays any additional costs required to repair or rebuild a facility damaged by a covered peril in order to comply with current building codes. Many policies provide limited ordinance coverage, but you can increase it with an endorsement. Boiler and machinery coverage covers boilers, air conditioning units, compressors, steam cookers, electric water heaters, and similar machinery. Coverage generally extends to machinery specifically listed in the policy and to any subsequent losses, such as when a boiler explosion or water heater leak causes damage to other property. You can usually purchase this coverage as either an endorsement or a separate policy. Inland marine coverage insures goods in transit over land, by air, or by inland waterways. It also covers projects under construction and transportation and communications structures, such as bridges, tunnels, and communications towers. Commercial multi-peril (CMP) policies combine multiple coverages, such as commercial property, liability, inland marine, and commercial auto, to ensure full protection within the convenience of a single policy. CMP policies typically have lower premiums than purchasing the coverages individually. Business owner program (BOP) policies are a common type of commercial multi-peril policy primarily for small businesses. BOP policies combine property and liability coverage in one policy. Other Coverages to Consider Crime Coverage You can buy several types of coverage to protect your business from crime. Common crime coverages include: Loss of glass and money due to theft pays for damage to glass and any loss of money resulting from a break-in. Robbery and safe burglary, property other than money is a more limited form of coverage that does not include money or securities. Forgery or alteration protects your business against forgery or alteration of checks, drafts, promissory notes, or other directions to pay. Theft, disappearance, and destruction coverage insures money, securities, and other property against losses, both on your premises or in the custody of an employee or messenger while off premises. A policy may pay losses from crime on either a “loss sustained” or “discovery” basis. Loss sustained coverage pays for losses that occur during the policy period, while discovery coverage pays for losses that occur at any time. Both types of crime coverage require that losses be discovered during the policy period or extended reporting period. Flood Insurance Some insurers may include flood coverage in their commercial property policies for areas with a low flood risk. However, most flood insurance in the United States is available only through the National Flood Insurance Program (NFIP). Some insurer may provide flood coverage as excess over the NFIP coverage. To qualify for NFIP coverage, your business must be located within an NFIP-participating community. These communities have adopted federal building and floodplain management programs to reduce the likelihood of flood damage. “Special Flood Hazard Areas” are areas within NFIP communities that are at high risk for flooding. NFIP requires all structures within these areas to have flood insurance. Note: More than a quarter of all floods in the United States occur in areas designated as low-to- moderate risk. You should consider flood insurance even if your business is outside a hazard area. You can buy flood insurance through licensed insurance agents. For a list of agents selling flood insurance in your area, call NFIP Understanding Commercial Property Rates Insurers use a process called “underwriting” to evaluate the likelihood that a business will file a claim. The greater the likelihood, the higher the premium will be. If an insurer determines that a business poses a high risk for a loss, it may decline to issue a policy entirely. Fire risk is typically the primary factor that determines a business’ commercial property rates. State-licensed fire inspectors contract with insurers to perform inspections as part of the underwriting process. Inspectors use a standard rating system and weigh five factors to determine a structure’s “fire rating.” The five factors are: Construction materials. Buildings made of potentially combustible materials will have higher premiums, while those made of fire-resistant materials could earn a discount. Additions to an existing structure might negatively affect a fire rating, so it’s a good idea to consult with your agent or insurer before remodeling. Internal structural elements can also affect a fire rating. Using wood partitions, floors, and stairways in an otherwise fire- resistant building will likely nullify any rate reduction. Fire-resistant interior walls, floors, and doors can help preserve a good fire rating. Location. Buildings in cities or towns with good fire protection, as assessed by the Texas Commission on Fire Protection, typically cost less to insure than buildings outside a city where fire protection may be limited. Occupancy. A building’s use also affects its fire rating. An office building will likely rate favorably. A restaurant – with grills and ovens – or an auto repair shop will likely rate less favorably. One relatively hazardous occupant will negatively affect the fire rating of an entire building. If your business is in a building with a more hazardous occupant, your premiums will be higher than they would be for your business alone. Fire protection measures. Automatic sprinklers can reduce a building’s fire rating by as much as 50 percent. Buildings with fire extinguishers and automatic alarms and those within 500 feet of a standard fire hydrant will generally have lower ratings. Exposure. Nearby hazards increase a building’s fire risk. Proximity to external fire hazards, such as a lumberyard or oil storage tank, will negatively affect a fire rating to an even greater degree. Internal exposure risks might include cluttered buildings and grounds, heavy mechanical or electrical equipment, or on-site storage of volatile materials. To learn the fire ratings of the buildings on your business’ premises, ask your insurance agent. Your agent can access a statewide database of the ratings for all commercial properties. If you disagree with your buildings’ ratings, first try to work with your agent, insurer, and the inspector. If you are still dissatisfied, contact TDI’s Inspections and Fire Safety Office, the state’s final arbiter of disputed commercial property ratings P.O. Box 149104 Austin, TX 78714-9104 512-322-2259 Shopping for Commercial Property Insurance Commercial property insurance rates and coverages can vary significantly from one insurer and policy to another. It pays to shop around. The following tips can help you save money or avoid other pitfalls when buying a commercial property policy: Minimize all possible risks before applying for coverage. Examine your business premises and operations carefully for things that could contribute to the likelihood of an insurance claim. Improving employee safety, security, and inventory management can reduce the amount you pay for commercial property insurance and other types of coverage, such as workers’ compensation and general liability insurance. Most insurers also offer loss-control or risk-reduction services. Contact your agent or insurer for help identifying and eliminating potential risks. Get quotes from several companies. When comparing prices, make sure you’re comparing policies with similar coverage. A cheaper policy might also provide less coverage. Keep shopping if an insurer declines to cover your business. Insurers have different underwriting criteria. If one company turns you down or is too expensive, another may be willing to issue coverage or offer a lower premium. Consider higher deductibles. Higher deductibles can lower your premium. Remember that your out-of-pocket costs will be greater if you have a claim, however. Verify your agent’s and insurer’s licenses. Agents and insurers must be licensed to sell commercial property insurance in Texas. An unlicensed insurer may not meet the state’s minimum financial and regulatory requirements, meaning the company may not have the financial resources to pay your claim. To learn an agent’s or insurer’s license status, call TDI’s toll-free Consumer Help Line or use the “Insurer Search” or “Agent Search” feature on the TDI website Commercial Property Types Here is a short list of properties that we can finance. If you don't see your type of property here, please ask us as we are adding different property types regularly to meet our client's needs. Multifamily - Structures containing five or more dwelling units with common area facilities such as entrances, lobby, elevators, stairs, mechanical space, walks or grounds. Units must be rented on a non-transient basis such that tenants consider their unit their permanent residence. Properties that offer weekly or monthly housing would not be considered multifamily properties. Retail - Retail buildings are designed for retail sales and display and usually have display or decorative fronts. This retail classification encompasses a wide variety of uses including, but not limited to: markets, convenience stores, drugstores, department stores, big box retailers, barber shops, laundromats, etc. Bed & Breakfast - Bed and Breakfast inns are residential-type buildings designed for transient boarding and are family style in character. B&B inns are usually one structure but some may include an adjacent guest cottage with similar quality amenities as the main unit. Owner operators live on-site, usually within the main building. Light Industrial - Light industrial is characterized by a small size facility where no heavy manufacturing or specialized industrial process takes place. Office space within light industrial ranges from 3% to 25% of the total area. Buildings must include sufficient plumbing and lighting to accommodate personnel. Common uses found in light industrial properties may include: cabinet making, assembly processes, home service industries, etc. Absent from these properties is any type of heavy machinery, welding operations, cranes or hazardous materials. Mixed-Use - Mixed-use properties must contain at least one commercial unit (retail, office etc.) and at least one residential unit. Common types of mixed-use properties include a ground floor retail or office unit with apartment(s) above, all within the same building. The primary use at the property must be for residential purposes in order for it to be considered Tier 1 mixed-use. The mixed-use property type can be classified in any tier depending on the percentage of the multi-family component and the type of commercial use. Mobile Home Park - Mobile home parks are considered as long as not more than 25% of the total spaces are used for RV. Mobile home parks vary in quality and amenities and all will be considered unless the RV component is too high. Office - Office buildings are buildings designed for general commercial occupancy and are normally subdivided into smaller units. Office use implies a general business use that does not include retail, manufacturing or warehouse type operations. Self Storage - Mini-warehouses are warehouses subdivided into a mixture of cubicles of generally small size, designed primarily to be rented for small self- storage or noncommercial storage and may include some office-living space. Warehouse - Warehouse buildings are designed primarily for storage purposes. An amount of office space included is usually commensurate with the quality of the building but typically rages from 3% to 12% of the total area. Plumbing and lighting are usually limited due to anticipated light personnel load. The design of the building usually includes a light frame with large open interior areas. Cold storage and transit warehouses (truck terminal) are included in this category. Automotive - Automotive is a somewhat broad category and encompasses a variety of uses that support the automotive segment. Included within this category are auto repair shops, used car lots, quick-lube facilities, tire repair shops, etc. The type and size of building will vary with the use. Many buildings are designed specifically for the auto trade characterized by overhead doors, car lifts and usually a small office area. Flagged Hospitality - Hotels with national franchise affiliation are considered "flagged." Hotels must be in good standing with their affiliated franchise to maintain this tier. Funeral Home - Funeral homes include those used for viewing purposes as well as those that include embalming services. Industrial - Where the principle structure is designed for manufacturing processes, heavy assembly or involves the use of heavy machinery. It contains an average amount of office space commensurate with the quality of the building and the intended use. Their heavy frames, walls and floors, specialized manufacturing processes and power or utility-service characterize industrial facilities. Rooming House - Rooming houses are similar to that of multifamily but the nature of the occupancy is more transient. Rooms are rented on a daily, weekly or monthly basis and usually only include a bedroom. The residents share the bathroom and the kitchen. Rent paid usually includes all utilities and units may be furnished. Most rooming house properties contain less than 20 units. Day Care - Day Care Centers are early childhood, handicapped, adult, and senior care facilities; or developmental centers, such as kindergartens, nurseries, or children's pre-schools. They have light kitchen facilities, activity rooms and multiple rest rooms, and are more residential in character than schools. Health Care - Included in this category are all Assisted Living or Nursing Home types of operations where a license is required to operate the business. Quality and service levels vary considerably. Also included in this category are hospitals and medical treatment facilities, such as out patient care or walk-in emergency medicine. Restaurants - Restaurants are constructed for the purpose of preparation and sale of food and/or beverages, which include cafeterias, bars, and taverns, where design is of restaurant type. RV Park - RV parks are those that are designed for recreational vehicles. May include mobile home pad rentals but will be considered an RV park if 25% or more of total park is for RV. Transient type occupancy is common. Unflagged Hospitality - Hotels or motel properties with no national franchise affiliation are considered "unflagged." "Mom & Pop" style operators typically run these types of facilities and the quality and level of service varies considerably. http://www.ventureworkscapital.com/, Commercial Property Funding Top 3 Commercial Real Estate Property Types - Niche Commercial Real Estate Types From James Kimmons, Your Guide to Real Estate Business. FREE Newsletter. Sign Up Now! Commercial real estate covers a diverse group of structure types and uses, as well as vacant land. Learn specifics about some of the most common ones here. These categories are discussing the sale of "real property", the land and/or buildings. Though business owners frequently sell their business entity together with the real estate, the valuation of the business enterprise itself is not treated in this discussion. 1. Multi-Family Commercial Real Estate Multi-family commercial real estate property types include duplex homes, and other construction for habitation by mulitple family groups. Condominiums are frequently called multi-family because of their construction as a group, but are normally listed and sold as single family residential units. Duplex homes are also frequently listed and sold as residential units to a buyer that lives in one side and rents out the other. Sponsored Links Commercial RE InvestmentsTriple Net Lease, Tenant in Common, 1031 Exchanges, REITs, Funds, LLC.www.invernessrei.com Covington CapitalSearching for Real Estate Opportunities Nationwidewww.covcap.net Commercial PropertySearch 1000s of commercial real estate listings for sale or lease.www.LoopNet.com/CommercialForLease 2. Retail Space Real Estate Properties This category would include single buildings used as stores for clothing, electronics and other consumer products, as well as malls, strip centers and the like. Restaurant spaces are a specialty subset of the retail category, with some listings shown as restaurant/retail. Valuations can be based on size and land value, retail sales per square foot or other investment return calculations. 3. Office Buildings and Office Complexes A single building designed for office use, or a group of offices in a single building or cluster of buildings would fall into this category. When offices are grouped in structures with single ownership, they are listed as commercial office rental property. The owner derives income from the rental payments of the office tenants. These can be valued based on the rental income return on investment, rather than methods using square footage and land value. Medical & Dental offices are a subset. Real estate investing can be an excellent career, if you keep your wits about you and handle things right. However, it’s possible to make big mistakes if you’re not well educated. That’s why knowing about the different types of commercial property can be a big help. Being aware of the different kinds of commercial real estate gives you access to the benefits and drawbacks of each. Here’s a little bit of information to help you get started. Commercial real estate covers a wide range of properties, including apartments, malls, office buildings, shopping centers, distribution locations, warehouses, and research properties. Some properties fit into two of these categories at once, such as buildings that combine office and industrial uses. These are referred to as flex properties. If the property contains more than half its area in office space, it’s called office/flex. When it’s mostly industrial use, it’s called industrial/flex. Other flex properties may include shopping areas or laboratory and research and development areas. Hotels may also be included in the category of commercial real estate. However, some investors consider a hotel to be more of an operating business, and categorize them with the subset of properties including nursing homes or assisted living facilities and casinos. The one thing that all commercial properties have in common, with the exception of raw land, is that they’re capable of producing income. That income may come in the form of capital gains, or it may be through the receipt of rents from tenants. In addition to these major property types, you may also see commercial real estate categorized as niche property. This category includes specialty properties like apartments built for students, age restricted living meant for older residents, self-storage, and office buildings that are suited to a particular sort of business, such as the medical field. Raw land is the last category of commercial property. This is undeveloped land without any existing structures on it. Some investors acquired this land, intending to obtain the right permits to build commercial properties on it, within local zoning laws. These properties can then be used to obtain income, either as rentals or in the form of capital gains. So, raw land can eventually produce income, too. It just does so less directly. Each type of commercial property comes with its own benefits and problems. For instance, raw land allows the developer to build as he or she chooses. However, the cost of building and the time required is often greater than fixing up an existing property to your standards. Raw land can make up for this by being less expensive than property which has already been developed, and is a great choice if your project needs a specific location or you’d like to control the building process. Raw land can also be a great choice if you can buy it while it is still zoned agricultural and change the zoning to commercial. The change in zoning alone can add great value to the property. Shopping malls provide a great deal of rental income, provided that they’re properly designed. Shopping centers are similar, but may require a lower initial investment, since they can be purchased at a smaller size. It’s important, when building these kinds of facilities, to plan properly. Provisions for food and beverage outlets and adequate parking make a big difference in the amount of trade that is available to provide income for your property. Warehouses and self-storage units have the benefit of requiring minimal staff and upkeep, although it’s important to maintain them. Properties such as research and development or research laboratories may sell for a greater amount than if the building were put to a lower use. Each type of property has its own characteristics. Picking the right one can take some work. Therefore, it’s a good idea to talk to people who have experience in the field to decide what kind of commercial property investment is right for you. Doing your research before you invest and staying informed is an important part of being successful in a commercial real estate investment career. Knowledge is the best way to avoid making a big mistake, and can turn a potential money sink into a profit. Anthony Seruga and Yolly Bishop of Maverick Real Estate Investments, Inc. work with builders, developers and other players in the commercial real estate industry to acquire and develop properties. They use progressive investment strategies that have proved extremely profitable. In addition to their own deals, they teach both seasoned and inexperienced investors how to be big players in the game. Visit the website for more info. When it comes to commercial real estate investment, investors often want to know which types of properties they should consider investing. This article discusses about 5 groups of properties and reasons why you should or should not consider them. 1. Land: the people who invest in raw land often hope to buy agricultural land near commercially-zoned land at a few thousand dollars per acre. They dream their lot will be re- zoned to commercial in the near future which is worth hundreds of thousand dollars or more an acre. People who convince you to invest in raw land often try to sell you this dream. While this dream actually happens just like it’s possible to hit the jackpot in Las Vegas, the reality is most investors lose money or get little return in land investment. It is a very risky investment as land generates either no or very little income. From an income tax viewpoint, land does not depreciate in value so you cannot claim depreciation. On top of that the interest rate to land loan is also very steep compared to other types of commercial properties. So each month, you would need to come up with money to pay for the mortgage while collecting none. You should consider invest in land if you - Know how to develop so you could convert raw land into a shopping center. - Know exact what you do and have deep pocket. - Own the land of a shopping center (you don’t own the buildings). 2. Apartments: this is a management intensive investment as the turn over rate is high. The leases are short-termed often at one year of month to month. As tenants move in and out, you would need to spend money to get the unit ready for occupancy. Apartment tenants tend to have higher late payments history than other tenants as they are more often have a tighter budget. If you don’t like the headaches dealing with lots of tenants, you probably want to stay away from apartments. The key to successful apartment investment is to - Control or minimize the expenses. This may sound like a trivial task until you see the expense list provided by the property manager. These expenses include: advertising, accounting, bank fees (for insufficient funds), capital improvement, coin laundry subsidy, cleaning, collection fees, garbage disposal, insurance, landscaping, legal (eviction) fees, maintenance, offsite property management, onsite property management, pest control, painting, repairs, sweeping, security, property taxes, utilities and water. - Invest only in properties in a good location with no deferred maintenance. - Stay away from areas with rent control, e.g. Berkeley, Los Angeles. Otherwise you may end up getting little cash flow or even having negative cash flow. If one of your investment objectives is to get high cash flow, you may want to stay away from apartments. In California, if you own a 16 or more units apartment you must have an onsite manager. This increases the expenses further. In general, apartments are easy to buy and harder to sell. There are always lots of them on any markets. The upside about apartments is they tend to have high occupancy rate as everyone needs a roof over their heads. Due to this fact the interest rate for apartments is often ¼- to ½ percent lower than other commercial properties. 3. Special Purpose Properties: These are properties designed for a specific business, e.g. restaurants, gas stations, and hotels/motels. - Restaurants: some investors like to invest in brand name fast food restaurant like Burger King, Pizza Hut, Jack In The Box, KFC. These are single tenant properties with long term absolute triple-net lease which often require no management responsibilities from the landlord. However, the rental income or cap rate for these restaurants is often lower in the 5-7% range. Emerging regional brand name restaurants like Johnny Carino’s, Back Yard Burger, Zaxby’s or Tia’s TexMex tend to offer higher cap rate in the 7-8.5% range. However, when you look deeper in the financial statements they may not make a profit yet. The restaurant operators sell the real estate to investors higher cap rate and lease back the property for 20 years. They in turn use the sale proceeds to expand their business by building more restaurants. So if you are willing to take higher risks, you will be rewarded to high income with these emerging restaurants. - Gas stations: when you buy a gas station, you buy both real estate and the gas station business. Most gas stations also have convenience stores and sometimes several car repair bays. The profit margin for gas is fixed at 10-20 cents per gallon [many customers wrongly blame the high gas prices on the innocent gas station operators] but is pretty high for convenience store. This is considered an owner-occupied property which qualifies you to a SBA loan with as little as 10% down payment is required. If you don’t plan to get involved in running the gas station, auto repair and convenience store business, you may want to stay away from gas stations as gasoline is a chemical that could contaminate the soil. Once a leakage occurs and contaminates the environment, it takes years and lots money to clean up the soil. You may even be liable to damages from owners of adjacent properties as contamination may spread out to their properties. It’s almost impossible to sell your property as no lenders want to loan the buyers the money to buy it. - Hotels/Motels: once you buy a hotel/motel, you buy the real estate and a 24-hour-a-day 365-day-a-year business. This business requires hard work, and marketing skills to get the rooms filled. The rooms are worthless if they are vacant. The business tends to be seasonal and may be affected immediately by economic downturns and political events, e.g. 9-11. Many of these properties are owned by Indians with the last name Patel as they seem to work harder and know this business well. 4. Office Buildings: these properties are single or multi-story buildings. The older two- story office buildings without elevators tend to have trouble finding tenants on the upper floor as many service businesses may have physically-challenged customers who cannot walk up the stairs. - Single-tenant buildings: the properties are used as corporate headquarters of big corporations like Cisco. These big buildings tend to be more sensitive to the economy. Once vacant, it’s hard to find a replacement tenant. - Multi-tenant buildings: these properties are leased by small businesses, e.g. real estate, tax accountants. Investors who purchase these properties want to spread out the investment risks. When one tenant vacates a unit, you lose just a small percentage of rental income. - High Quality Tenants: most of them have good credits, lot of assets and promptly pay the rent when due. - Leases: The leases for office building vary from full service [landlords pay property tax, insurance, maintenance and utilities] to NNN [tenants pay property tax, insurance, maintenance and utilities]. The NNN lease is a litmus test on whether the office building is in high demand by tenants or not. - Medical buildings: these properties are leased primarily by doctors and dentists. A good medical building should be in front of or across the street from a hospital. This makes it convenient for doctors to go back and forth between hospital and their offices. Some investors prefer medical buildings as medical tenants are very recession proof. 5. Shopping/Retail Centers: These centers are mostly single-story and can accommodate wide varieties of tenants: retail and service businesses, restaurant, medical, school, and even church. As a result, this is the most popular type of commercial properties that investors look for. They are always in high demand as there are more buyers and few sellers. - Multi-tenant strip: the advantage of this investment is when a tenant moves out, you only lose a portion of the total income while you are looking for a new tenant. So you spread out the risks in this property. - Single-tenant building: The advantage is you just have to work with one tenant. Some of the tenants, e.g. Costco, Home Deport, Walmart, CVS Pharmacy sign 10-20 year lease and guarantee with their corporate assets which could be worth billions of dollars. This makes your investment very safe. - High Quality Tenants: most of them have good credits, lot of assets and promptly pay the rent when due. They often sign long term 5-30 year leases so you don’t have worry about finding new tenants every year. They keep your property in good condition and sometimes even spend their own money to make it look better in order to attract the customers to the stores. - Triple Net (NNN) Leases: the leases for retail centers are often in favor of the landlord. The tenants pay a base rent and reimburse the landlord for property taxes, insurance, maintenance and sometimes even property management fees. This takes away a lot of risks from you as an investor. The NNN lease in a sense is a litmus test on whether the property is in high demand by tenants or not. - Ground Lease: occasionally a retail center with ground lease is for sale. When you buy this center, you only own the improvement but not the land underneath. It could be a trophy property but you should think thrice about investing. Once the ground lease expires and the land owner refuses to extend the land lease, you own nothing! So it’s easy to buy this center but very hard to sell. 3 Reasons Why Commercial Properties Are A Better Investment Than Residential Properties Commercial properties should be the cornerstone of your investment portfolio. When investors were leaving the stock market in droves, they turned to investing in real estate. And real estate is an excellent choice compared to stocks. The tax deductions and potential for price apreciation are enough reasons for burned out stock market investors to make the switch. But real estate is a wide open field, where should you focus your time and money? Many people might believe that residential property investing is the best way to go. Just look at all the television programs that are now on the air, such as "Flip This House" on A&E and "Property Ladder" on TLC. They focus on buying residential properties as investments. But I think the better solution is investing in commercial properties. Here are 3 reasons why... #1 No More Qualifying For Loans With commercial properties, the properties qualify the loan...not the borrower. Lenders concentrate primarily on the income produced by the property to determine the financing risks. So with a few financial calculations, you can determine if the property will qualify the loan amount requested. #2 No More Personally Guaranteeing Loans There is a term that is never heard of in residential financing...non-recourse. Non-recourse financing is a type of debt in which the borrower is not personally liable. If you default on a non-recourse loan, the lender must recover the amount you owe by foreclosing on the property by which the loan is secured. This won't affect your personal credit score. #3 Deal With Professional Tenants Investing in residential property, you will eventually find yourself in the world of tenant hell. Where excuses and non-payment go hand in hand. And government entitlement programs, such as Section 8 can cause you to lose your mind with bureacracy. But with commercial property tenants, you will find them to be more professional. They are in a business and treat their leases as such. With these leases, they can be long term (5, 10, 15 years) and the they can be written so that the tenant pays for maintenance, taxes and insurance. Most investors want to invest in commercial properties but let the fear of the unknown stop them. But with proper training and education, buying them is not that difficult. Types Of Commercial Lenders There are different types of commercial lenders that will loan you money for your projects. The type of lender you use will be dependent on several factors: property type, LTV’s, amortization, recourse, interest rates, time to close and other factors. Lets take a look at the major commercial lenders in the market. Conduit Lenders These CMBS (Commercial Mortgage Backed Securities) are long term, fixed rate financing that is typically permanent and non-recourse. Portfolio Lenders Banks or Savings & Loans They have shorter terms (3-5 yrs) with fixed or variable rates. Usually they are for permanent and construction financing and they are full recourse. Credit companies They offer long or short term with fixed or variable rate financing. As well as permanent and construction. Life Companies These commercial lenders are institutional quality with long term, fixed rate financing. Typically the loans are permanent and non-recourse. Government Sponsored Enterprise (GSE) Fannie Mae/DUS and Freddie Mac Fannie Mae and Freddie Mac are purchases loans from commercial lenders. The rates on 5+ multifamily apartments are comparable to CMBS loans, but they are properties that would not otherwise qualify. FHA HUD 223(f) FHA loans are backed by the U.S. government. They offer higher LTVs and better terms & rates on 5+ unit multifamily apartments for properties that would not otherwise qualify. Small Business Administration (SBA) Backed by the U.S. government, these are loans for 51%+ owner occupied properties. Non-Bank Lenders These types of loans are also known as Stated Income, Low or No doc, private and hard money. These loans are more flexible with fast closings (great if you’re in a pinch for financing). But they also tend to have higher interest rates and back end or participation fees. According to the Mortgage Bankers Association of America, about 20% of commercial mortgage loans done in the U.S. are with conduits, 20% are done with commercial banks, 20% done with life insurance companies, 13% with Fannie Mae and 8% with FHA. The top commercial/multifamily originators in 2005 were: Wachovia for commercial bank/savings institutions and Conduits Capmark Financial Group for Freddie Mac and FHA/Ginnie Mae MetLife for life insurance companies Deutsche Bank Berkshire for Fannie Mae TIAA-CREF for pension funds Cohen Financial for credit companies Key Bank for REITS, mortgage REITs, investment funds and for other investors Tremont Realty Capital, LLC for specialty finance companies In general, there are basically two types of commercial lenders in the market: those that hold the loan on their balance (portfolio lenders) and those that sell the loan into the secondary market (conduit lenders). The secondary market represents Wall Street funds, also known as Commercial Mortgage Backed Securities (CMBS). A portfolio lender makes their profits from the spread or margin above the interest rate index. A conduit lender makes their profits based on the difference from what they can sell the bond for on Wall Street and the value of the sum of all of the loans in the pool. That is the main reason why conduit lenders are able to price a commercial mortgage loan more aggressively than a portfolio lender. So which lender is the best for you? Well…it depends. It really depends on your project and investment strategy. So ask yourself some questions: 1. Is this a development project or is it fully developed? 2. What are your short term and long term plans for the property? 3. What are your needs in regards to interest rate? 4. As you build equity, will you want to refinance? Portfolio loans have fixed-rate structures, such as fully amortizing loans, with no calls or balloons tied to a long-term, historically, stable index. Portfolio loans can better meet the needs of rehab or development projects. Conduit loans are good for properties that are stable with good tenants (such as NNN properties). They offer low, fixed rates with long amortization and are non-recourse. While both portfolio and conduit lenders may have a lock-out period and yield maintenance, conduit loans also have defeasance issues if the loan is refinanced. This is because if the loan is refinanced, you are pulling the loan out of the pool of loans that backs the bond, thus changing the risk structure of bond. As such, the borrower has to pay to have another bond with similar risk, yield, duration, payment priority put in place of their loan. Conduits also don’t allow for secondary financing and have high pre-payment penalties. Conduit lenders are not known for moving quickly—typically taking 4 to 6 months to close. Generally, regardless of the loan size, the fees for doing the loan (3rd party and closing costs) are the same for conduit and portfolio lenders. Because there are so many different factors when looking for a commercial lender, it really pays to have a good commercial mortgage broker on your team, that can provide the know- how in getting the best lender for you. http://www.boma.org/, About BOMA International BOMA International was founded in 1907 as the National Association of Building Owners and Managers. The association assumed its present name in 1968 as it broadened its reach to include Canada and other affiliates around the globe. Today, BOMA International represents 92 local associations throughout the United States and 12 affiliates in Australia, Brazil, Canada, Finland, Indonesia, Japan, Korea, Mexico, the Philippines, Russia and South Africa. BOMA's 16,500-plus members own or manage more than nine billion square feet of commercial properties in North America. BOMA International is a primary source of information on office building development, leasing, building operating costs, energy consumption patterns, local and national building codes, legislation, occupancy statistics and technological developments. Throughout BOMA International's 100-year history, its goal has always focused on actively and responsibly representing and promoting the interests of the commercial real estate industry through effective leadership and advocacy, through the collection, analysis and dissemination of information, and through professional development. Learn more about BOMA International's 100-year history. Who are BOMA's Members? BOMA International's members are building owners, managers, developers, leasing professionals, medical office building managers, corporate facility managers, asset managers, and the providers of the products and services needed to operate commercial properties. Collectively, BOMA members own or manage more than nine billion square feet of office space, which represents more than 80 percent of the prime office space in North America! More than 80 percent of individual members have annual operating budgets exceeding $1 million, while more than 75 percent of individual members are responsible for multiple buildings. What Does BOMA International Do? Monitors and lobbies pertinent legislative, regulatory and codes/standards issues, including electricity deregulation, capital gains tax relief, telecommunications, indoor air quality, private property rights, risk assessment, and codes and standards. Publishes The BOMA Magazine, the official publication of BOMA International. Publishes research documents and "how-to" guidebooks, including: o Standard Method for Measuring Floor Area in Office Buildings (ANSI/BOMA Z65.1) o The Experience Exchange Report - the industry benchmark for 75+ years! - a compilation of income and expense data for office buildings across North America; The Real Estate Professional's Guide to the Design-Build Process o The Real Estate Professional's Guide to Emergency Preparedness o The Real Estate Professional's Guide to the ANSI/IWA I-14.1 Window Cleaning Safety Standard Hosts the North American Real Estate Congress and The Office Building Show every June; conducts seminars on topics including office marketing and leasing, asset management, technology, and security and emergency preparedness planning. In January, BOMA International sponsors a Winter Business Meeting and biannually hosts the National Issues Conference. Presents The Office Building of the Year (TOBY) and Earth Awards, the most prestigious and coveted awards in the commercial real estate industry. The TOBY honors buildings demonstrating excellence in building management, operational efficiency, tenant retention, emergency planning and community impact; the Earth Award honors environmentally-friendly buildings. The mission of the Building Owners and Managers Association International is to enhance the LEBANON - A group of community and arts leaders is fine-tuning its vision for a regional arts and culture center for Warren County. The board of trustees of the Warren County Arts and Culture Center met Friday to further review details of a feasibility study. "I get the impression we're going to do something," said Richard Finan, board member and former president of the Ohio Senate. The initial feasibility study from consulting firm AMS Planning & Research shows that the growing population of Warren County has a higher-than-average household income - about $68,000 versus about $51,000 for the overall Cincinnati-Dayton region. The study also indicates that some arts patrons would like to avoid driving into Cincinnati or Dayton for shows, and a variety of local arts and music organizations would welcome a new place to perform. Based on interviews conducted with community leaders, the study indicates a demand for at least a small arts center now with a potential demand for a bigger center in the future. But details about the size, location and cost of an arts center remain undecided. According to one leader interviewed in the study, Warren County should not attempt an Aronoff-scale project that could cost as much as $100 million. Instead, the arts center should be developed in smaller steps, with an initial phase costing $7 million to $10 million. The size of the proposed facility - be it 2,000, 1,200 or 500 seats - is still being discussed. So is the location. The study mentions several potential sites, including the Warren County Fairgrounds, the former Rivers Crossing development site between Lebanon and Mason, and undeveloped parcels controlled by the Otterbein retirement community and Bishop Fenwick High School. More questions may be answered when the second phase of the study is completed sometime in June. The arts center board plans to complete a full review by October. During the summer, a vision and a mission statement will be approved, committees will be formed, and a Web site will be created to keep community members informed of progress. Meanwhile, Warren County residents can look for an appearance by the Cincinnati Ballet on a stage in Warren County in the fall of 2008 or spring of 2009. Dan Cunningham, arts center chair and member of the Federal Reserve, said Friday that Henkle Schueler Realtors will sponsor the performance. Cincyland.com firstname.lastname@example.org 721-LAND (5263) Here at CincyLand.com we promote and sell commercial property for sale in Cincinnati Ohio.
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