Tag Archives: Tips and Tricks

The Top Five Commercial Real Estate Investing Tips

Pros Offer Tips for Best Commercial Real Estate Investing

The advantages of real estate investing have been touted over the years as a profitable, consistent source of passive income that can continue to generate funds over the span of many years. While both residential and commercial real estate investments have proven to meet each of these qualifications in recent years, commercial real estate often holds better financial rewards for investors as compared to residential properties. However, there can also be increased financial risk depending on the terms of your deal.

No two commercial real estate investments are the same. Identifying these key differences and using the information available to pinpoint which properties to invest in, when the opportunity is ideal, and how to proceed once the time is right are crucial to determining whether a commercial real estate investment will be successful or ultimately fail. This brief set of commercial real estate investing tips is designed to assist potential real estate investors in reviewing some of the most important strategies, common mistakes, and other risks associated with commercial real estate investments.

1. Know Your Market

“Know your market” is a common catchphrase among residential realtors and commercial real estate agents for a reason; it is essential to know as much as you can about the market area you’re considering before you pursue investment. Not only does each unique area have its own characteristics, but its own supply and demand as well. Before you make a purchase, you’ll want to investigate your target market to determine the needs there, as well as the probable success of an investment.

Research the current supply of commercial investment types in the area, focusing on those you hold most interest in. In addition, keep an ideal working size or function in mind, including any improvements you’d be willing to make to a property. If multiple properties of this type and size are currently on the market, you may risk entering a saturated market.

Alternatively, if you are open to numerous types of properties, watch for property types that seem underserved for the area. These properties are often more in demand than the average property and have the potential to be lucrative. However, additional research regarding the potential for future growth should not be overlooked.

2. Commercial Property Type Matters

There are many commercial property types, and each comes with its own unique set of challenges and advantages. For instance, multi-unit, commercial residential properties usually demand the services of a maintenance staff or individual, available 24/7 or as emergencies occur for each individual unit. Commercial office or retail space comes with unique maintenance issues of its own, while industrial properties often require special licensing for technicians working around large machinery.

While there are certainly many considerations other than maintenance involved with commercial properties, such as security, repair costs, and more, the point is that it is essential to determine your readiness for handling the issues that come with each property type.

In addition, the supply and demand and ultimately the profitability of commercial property is largely dependent on the type of property you’ve chosen.

In general, commercial property consists of five main sectors, including multifamily, office, retail, industrial, and special purpose. However, within those types exist subgroups, such as hotel properties, medical facilities, and many others. Extensive research into which types are most profitable in your chosen market can help you make the most of your commercial real estate investment.

3. Build Up Adequate Down Payment & Reserves Funds

Commercial property investment requires, on average, a larger initial investment than residential property. Property values are usually higher, and when coupled with regular 20 to 30% down payment requirements, you’ll need more capital up front. Consider, too, that any immediate expenses you’ll need to undertake, such as remodeling, maintenance, rezoning, and other fees, are typically more substantial than residential real estate costs.

As such, you should build a contingency fund into your initial cost estimates for your commercial property purchase. This fund will help pay for unexpected expenses in excess of the purchase amount, expenditures for improvements before you find renters, and other various costs. Depending on your lender, you may be required to show a 5 to 15% contingency budget.

After you’ve made your purchase, it’s ideal to have additional capital reserves to cover expenses if further unexpected situations or the need for other improvements arise throughout the life of the loan. If you need to replace a roof or cover expenses between tenants, for example, having cash in a reserve fund or account to meet these needs is a good practice. Plan on reserving between three and five percent of your gross rent for these purposes.

4. Do Your Due Diligence

In commercial real estate, due diligence isn’t just an expression used for “doing your research,” although that is primarily the gist of what you’ll do during this time period. For the commercial real estate investor, the due diligence time period is where you’ll do comprehensive research on the property you’ve chosen. Information you’ll need will include:

  • Your financial statements
  • Previous owners’ profits and losses
  • Tax returns
  • Surveys (if necessary)
  • Property tax and zoning information
  • Property inspections
  • Feasibility studies

With your necessary information in hand, determine whether your property can be used as you intend (crucial if you’re developing vacant land), which improvements it can feasibly or legally support, as well as what the local market looks like for both of these factors. Due diligence is also the perfect time to learn all you can about the city or county that covers the property, particularly regarding permitting, zoning, applicable ordinances, and associated fees.

Finally, you’ll need to do your due diligence regarding your lender and other investors as well. Speak with others who have worked with this broker to get a feel for what’s expected of you during this time as well as what their procedures for due diligence consist of. If you’re entering a partnership or real estate investment trust, you may want to consider conducting a background check.

5. Plan for the Unexpected

Planning for the unexpected may seem like an oxymoron, but preparing yourself to experience at least a few setbacks, unplanned hurdles and even failures along the way will make dealing with them once the situation arrives much easier. Whether you’re starting a partnership or real estate investment trust, awaiting confirmation from a municipality or forging a construction contract, working with other people has the potential to alter your timeline beyond your initial plans. Taking precautionary steps like building plenty of extra time into any improvement timeline to account for unexpected delays or increasing your contingency funds to cover potential additional costs unique to your property type can prevent you from financial and emotional stress later.

Once you’ve made your initial investment, it’s also important to remain flexible regarding your expected returns. Potential hurdles include waiting for tenants, changing management, and implementing your initial rental terms. Your timeline and capital reserves should be able to withstand these common issues.

Work With a Seasoned Team

If you’re considering investing in commercial real estate, I urge you to use these five tips to your advantage. You’ll find yourself better prepared to enter into the commercial real estate world, and your first meeting with your broker will proceed smoothly. A wealth of other commercial investing tips, tricks, and advice can be found elsewhere on this blog.

When you’re ready to learn more about either commercial real estate investing in general or the properties currently available in the Phoenix area, contact COBE Real Estate at your earliest convenience. Our seasoned brokerage team can assist you on your way to commercial real estate ownership with all the necessary precautions.

Complete our contact form to request a consultation, or call 480-610-2400.

2017’s Major Developments and 2018’s Opportunities

This entry was posted in News and tagged on by .

COBE Real Estate’s 2017 Highlights and 2018 Projections

It’s hard to believe that its time to start another year already! 2017 brought several incredible successes to COBE Real Estate, we are grateful for these opportunities, and hope to continue to grow and achieve even bigger things in 2018.

At the end of 2016, we looked at some of COBE’s highlights from the year, and mentioned things that had us excited about 2017. ( you can read that article here ) As we close out the year, we thought it might be a good time to reflect on those projections, as well as some additional opportunities 2017 brought us.

2017’s Success and Opportunities

Downtown Phoenix

Last year we mentioned the renovations to the Phoenix Warehouse District and how it was primed to once again become a thriving area of the valley.  This has proved to be true for not only the Warehouse District, but much of Downtown Phoenix.  With developments like Block 23, Downtown’s first urban grocery and mixed use high rise, several residential projects ,and a 25 Million Dollar make-over for the Arizona Center, Downtown Phoenix is a booming market.

A recent closing of COBE Real Estates offers a clear example of the interest in Downtown Phoenix. COBE Real Estate broker TJ Zaharis represented the sale of 136 E Washington, a 4,138 SF building directly across the street from the new Block 23 Development. This property had 9 offers in 1 week, and closed for over $140k over the asking price, after 2 weeks on the market.

We are excited to see the continued growth in Downtown Phoenix as it becomes a hub for business, education, culture and entertainment.

Growth in Queen Creek and San Tan Valley

Predicted to be prime growth areas of the East Valley in 2017, Queen Creek and San Tan Valley met expectations.  Pinal Professional Village has continued to grow, COBE Real Estate represented 3 building sales in the development during 2017, and Queen Creek has remained focused on advancing economic development. Queen Creek’s population is projected to reach 44,700 in 2018, an increase of over 10,000 since 2016. The population increase, along with strong demographics such as an average household income of $103,589, has encouraged growth in retail.

COBE Real Estate represented the sale of 8.98 Acres of land in Queen Creek on Ellsworth Rd, which closed after a rezoning to C2.  This rezoning will allow for the development of Retail Shops and Pad along Queen Creek’s major thoroughfare.

These areas will continue to be centers of growth in the new year, for medical and professional services, and retail alike.

Retail and Restaurants

With the number of articles and reports we see about retail giants closing stores, and the “Retail Apocalypse” one would assume that 2017 was not a strong year for retail in the valley.  The Greater Phoenix retail market gained momentum however. Leading in employment and population growth, the Greater Phoenix Market posted strong performance, with its net absorption rate reaching the highest figure in years.

Restaurants seem to be especially benefiting from the growth. The East Valley welcomed over 27 new restaurants this year and Gilbert has seen a wave of new eateries and bars join its downtown scene.

COBE Real Estate Broker TJ Zaharis helped local Henhouse Café secure their third location at the growing Mesa Riverview outdoor shopping mall, and Linda Miskho represented Buffalo Jump Winery in the leasing of their first Arizona location in Chandler, AZ.  The Shops at Agritopia were another hotspot of activity, Backyard Taco was joined by Orange Theory Fitness, Colair Beauty Lounge, Coldfront Cryo and Argo Real Estate. The amount of interest in this location clearly illustrated the growth and demand for retail in this Southeast Market Corridor, which we expect to continue into 2018.

Looking towards 2018

2018 will see continued growth in Greater Phoenix Area.  In an article posted by Wallet Hub, which ranked the Best Places to Find a Job in 2018, Chandler, Scottsdale, Peoria and Gilbert Ranked Top 5 in the Nation. Chandler, Peoria and Gilbert also landed the Top 3 for Highest Employment Growth.

This will continue to attract work forces and businesses, and foster further development.

Tempe is predicted to hold its place as one of the hottest office markets in the country. This area remains desirable due to its walk-ability and an abundance of restaurants and retailers, which help occupiers attract and retain top talent.

There is also increasing interest for development and redevelopment in Mesa.  Several large scale mixed-use projects are in the planning stages, focus remains on the Light Rail to create sustainable, transit-oriented development, and promoting Downtown Mesa as the hot area for entrepreneurs, artists, students and businesses stands as a key priority for the City of Mesa.

Additionally, the “Downtown Façade Improvement Program” which is designed to assist property owners and tenants in making improvements to the appearance of their building frontages, is helping bring new life into the area, encouraging the development of a younger, hip arts and culture vibe downtown.

Currently under construction downtown, The Artspace Lofts, will provide 50 units of live/work space for artists and their families. The project will include 1,450 square feet of ground floor commercial space for nonprofit arts organizations and creative businesses as well as 2,900 square feet of community space for events, exhibitions, and educational programs.

Another development, Falcon Field Business Center, a 96,000-square foot speculative industrial facility designed to attract manufacturing and/or distribution users to the Falcon Field District, is expected to complete construction in May. Mayor John Giles believes this will be any excellent addition to Mesa “The decision by EastGroup Properties to bring a new light industrial facility for aerospace and defense companies to the Falcon Field District is a great endorsement of our business-friendly environment.”

We are excited to see this increased interest and growth in the East Valley, and anticipate 2018 will be another year of terrific opportunity for COBE Real Estate and our clients.

6 Ways a Property Manager Will Benefit Your Investment

Property Manager

6 Benefits of Hiring A Property Manager

A Commercial Property can be an excellent investment, however being a landlord is a full-time job and requires many hats. For this reason, many investors choose to hire a property manager, assuring the property’s long-term profitability and efficient management.

 Here are a few of the benefits a property manager can offer:

  1. Tenant Screening: An experienced property manager will help ensure tenants are a right fit for the property and that they are compatible with neighboring tenants. This additionally aides in tenant retention, as those who are happy and feel their needs are met, are more likely to stay for longer periods of time.
  2. Marketing and Advertising: A full service property management service will have access to several platforms, and possibly a designated team, to market any vacancies your property may have. This will offer a significant advantage when it comes to filling your properties quickly and avoiding long vacancies
  3. Maintenance: Repair and Maintenance expenses are inevitable, whether its basic repairs or emergency failures. An experienced property manager has a network of vendor contacts, as well as the problem-solving skills, to find the best solution in a timely and cost-effective manner.
  4. Accounting: Financial Reporting is the key to measuring a property’s performance. Property managers will provide comprehensive reports including budget vs. actual variance analysis, profit & loss statements, general ledgers, and bank reconciliations.
  5. Rent Collection: Having a third party between the owner and tenant is often an effective way to aid the rent collection process.  A property manager will consistently follow and enforce the owners rent collection policy, handle tricky situations, collect late charges and serve any legal notices.
  6. Legal Issues: Any property may be encumbered by legal issues or subject to code requirements and government regulations. Knowledgeable property managers are familiar with local, state and federal regulations and codes and can help identify compliance issues that may require further legal counsel.

An experienced Property Management Service can increase the efficiency and profitability of an investment, while also relieving the property owner from some of the time and stress that is entailed.

For more information on COBE Real Estate’s Property Management Services Click Here  or Contact Us 

Dave Collins

Vice President / Senior Advisor

Dave’s background includes extensive experience with over 20 years in real estate investments. Dave’s expertise in real estate investment is a critical factor in assuring favorable rates of return for clients of COBE Real Estate.

Dave obtained a bachelor’s degree in Japanese from Brigham Young University, and a Master of Business Administration degree from Brigham Young University. He is active in several local and national groups including the Downtown Mesa Association, National Oil Recyclers Association, The East Valley Partnership and The Boy Scouts of America. He is also an active supporter of PREHAB of Arizona, La Mesita, and the Mesa Story Telling Festival.

Purchasing Commercial Real Estate: Identify the Right Property

This entry was posted in News and tagged , on by .

5 Factors to Consider When Purchasing a Commercial Property

There are several details to consider when looking for suitable commercial real estate to purchase. We all know the old adage “location, location, location” is true for commercial properties just as much as it is for residential. But there are many other issues to consider as well:

  1. Location, Location, Location.  This is still the No. 1 priority. You need to have good visibility, close to customers, workers, and vendors or suppliers. Businesses need to be convenient to customers to the extent that they have a location where the customer can find with easy accessibility.
  2. Physical condition. After identifying the general location, research the history of the property. Consider how the building was previously was used, the wear-and-tear, whether there are any environmental issues or potential liability issues, such as asbestos or lead paint. Verify the building was properly permitted and walk it with either a license general contractor or building inspector.
  3. Allowable uses. If your business is an accounting firm, you likely need commercial office space. If you are a manufacturer, you need an industrial space. Either way, you need to make sure the zoning allows you to do what you need to do on the property.
  4. Adequacy of access and parking. You need to make sure your customers can park and take into consideration whether access is compliant with laws such as the Americans With Disabilities Act.
  5. Opportunity for expansion or leasing. Entrepreneurs often have a rosy outlook about growth and so the potential to expand is a consideration as is the flipside – if you don’t grow as much as planned, can you lease out extra space?

Each of these five factors contribute to the overall satisfaction with your space and success of your purchase. A Commercial Broker can help you identify the right space, and navigate the purchasing process.

For more information on purchasing or to view available properties visit COBE Real Estate 


Brad Broyles

Senior Advisor

Brad Broyles is a real estate professional with over 11 years of experience in real estate investments, management, development, leasing and sales.

Since joining COBE Real Estate in March 2013, Brad has participated and closed over $50 million of commercial real estate transactions. Prior to joining COBE Real Estate, he spent 4 years as a Vice President of Commercial Banking which he was responsible for managing and selling a $30 million commercial portfolio. Brad also specialized in business start-ups, SBA lending, cash flow capital and special asset management. His unique business and real estate background allows him to be the best representative to any business owners who are wanting to expand or relocate their company.

Brad has a Masters of Real Estate Development from Arizona State University and a Bachelors degree in Accounting and Finance from the University of Phoenix. He is a member of the Arizona Small Business Association and is active with the Mesa Chamber of Commerce.

brad@coberealestate.com

Building Wealth in Commercial Real Estate Investment

This entry was posted in News and tagged , on by .

Exploring the Rewards of Commercial Real Estate Investment

by Brad Broyles

Commercial real estate investing can be very rewarding, both financially and personally. For many business owners and entrepreneurs, the objective of investing in commercial real estate is for wealth and security, which can be grown into a portfolio and passed down to future generations. Commercial real estate also offers an abundance of tax benefits for investors and increased diversity on their investments.

Office/ Retail Investment Property with Parking Lot

Commercial real estate investment offers the following advantages:

Higher Potential Income: The biggest reward of investing in commercial real estate is higher potential income. Typically, commercial properties have a better return on investment, which could average from five to twelve percent, while single-family home properties struggle between one and four percent annually.

Longer Leases: The hallmark of commercial real estate is the attractive length of leasing contracts.  Residential properties are typically set for one year, while commercial leasing contracts are set for three up to twenty years.  These leases offer impressive returns and considerable monthly cash flow to investors.

Investment Property: 2 Office Buildings, Warehouse and Fenced Contractors Yard

Cash Flow: Commercial investing has one very clear advantage: a relatively consistent stream of income. Remember, the tenants are business professionals and need the property for company operations. Therefore, rental payments are steady and thus deemed a reliable monthly income.  Some commercial properties consist of more that 1 unit, resulting in multiple streams of income.

Tenants Pay Property Expenses: In most leases, tenants will also pay operating expenses on a commercial property. This is commonly known in the industry as triple net (NNN) lease. Triple net leases generally state that the lessee must pay the building’s real estate taxes, property insurance and maintenance costs, in addition to monthly rent.

Lower Vacancy Risk: Another perk, is that commercial real estate provides lower vacancy risk with leases spread over several units or properties. Typically, vacancy rates range between ten to fifteen percent and can be leased within two to four months.

Auto/ RV Sales and Repair Investment Property

Building significant wealth through commercial real estate investing requires planning, patience, and persistence. It may take time, but the right property investment  it will generate genuine wealth and security that can carry on for generations.

For more information on how COBE Real Estate can help you find your next investment visit COBE Real Estate , or for listing information visit our Property Search 

Brad Broyles

Senior Advisor

Brad Broyles is a real estate professional with over 11 years of experience in real estate investments, management, development, leasing and sales.

Since joining COBE Real Estate in March 2013, Brad has participated and closed over $50 million of commercial real estate transactions. Prior to joining COBE Real Estate, he spent 4 years as a Vice President of Commercial Banking which he was responsible for managing and selling a $30 million commercial portfolio. Brad also specialized in business start-ups, SBA lending, cash flow capital and special asset management. His unique business and real estate background allows him to be the best representative to any business owners who are wanting to expand or relocate their company.

Brad has a Masters of Real Estate Development from Arizona State University and a Bachelors degree in Accounting and Finance from the University of Phoenix. He is a member of the Arizona Small Business Association and is active with the Mesa Chamber of Commerce.

brad@coberealestate.com
(480) 610-2400
Cell: (480) 797-5266

2016 Highlights & Things to Watch in 2017

This entry was posted in News and tagged on by .

Looking back on 2016 highlights and identifying some key areas of interest in 2017

2016 has been a great year for COBE Real Estate. We are thankful for those who contributed to a successful year, and hope for even better and brighter things from 2017. Here are some of our 2016 highlights and things that have us excited about 2017

2016 Highlights- Phoenix Warehouse District

Phoenix Warehouse District

The Warehouse District, located just south of downtown Phoenix,  was once an economic hub where produce from Arizona’s farms was warehoused. Thanks to recent renovations in the area, it seems the Warehouse District will once again become a thriving area of Phoenix and home to a number of creative companies.

WebPT and Galvanize are among the list of new tenants in the area.  The highly successful tech companies signed long term leases for a 122,000 SF building in December of 2015. COBE Real Estate broker TJ Zaharis, who represented the owner of the warehouse in the negotiations, sees the Grant Street Warehouse project as a catalyst for future investments and employment.  “This announcement is a big win for the Warehouse District that has been years in the making – all the collaboration between the public and private sectors should be celebrated for truly being pioneers in this revitalization” stated Zaharis.

WebPT and Galvanize are expected to bring more than 800 new employees to the area as they complete the renovations on the Grant Warehouse space. The increase to the number of people in the area will then bring a larger demand for restaurants, coffee houses, and housing.

More details on the closing of the 515 Grant Street Warehouse click here:  Phoenix Warehouse District

new-site-plan-colored-10-5-15

Agritopia

Agritiopia is a unique and growing fixture in Gilbert.  A residential development with a working farm as its central feature, this agrihood is built on what used to be the Johnston family farm.  Agritopia was designed to preserve urban agriculture, to be neighborly and walkable, to breakdown barriers between people and to be multi-use.

With the developments of Generations at Agritopia, Barnone, Epicenter, and The Shops at Agritopia Village South, Gilbert is set to see growth in commercial, retail and housing. We are excited to have this iconic community in our area and anticipate that it will continue to be a destination for locals and tourists alike.

For details on leasing availability, click here:  The Shops at Agritopia Village South

2016 Highlight, Pinal Professional Village

Pinal Professional Village offers highest quality buildings in prime growth area

Pinal Professional Village

Located in a prime growth area, the Pinal Professional Village will host a wide variety of medical and professional tenants, including Rural Metro Fire, Pinal County Public Health Clinic, SimonMed Imaging and Arizona Public Safety Advocacy Center.

The San Tan Valley has a projected growth rate of 47% and is considered the Fastest Growing Region in Arizona. With the Master Planned Community of Encanterra Trilogy Homes and Golf Resort, and Banner Ironwood Medical adjacent to the property, this professional village is in the highest area for growth in residential and medical industries.

With these planned developments San Tan Valley and Queen Creek continue to establish themselves as prime growth areas of the East Valley in 2017.

For more information on the Pinal Professional Village visit:  Featured Property : Pinal Professional Village

866-n-higley-rd-building-2-edit-medium

 Commercial Real Estate Investment

One of COBE Real Estate’s  2016 highlights was the representation of a number of investment deals across the Valley. COBE Real Estate brokers Steve Beck, Brad Broyles and TJ Zaharis represented commercial investment sales and acquisitions alike throughout 2016.

Some of COBE’s investment closings included:

Dobson Grove Plaza

Automotive Investment Property

Higley Retail Center

1355 S Higley Rd Suite 101

Investing in Commercial Real Estate can offer attractive returns, steady cash flow, and the benefits of possessing tangible assets. We are excited to see an increased interest in this market, and look forward to aiding our clients in future investment transactions.

For more information on available investment opportunities, Contact Us or visit our Property Search 

From all of us at COBE Real Estate, thank you for being a part of our 2016 highlights. We look forward to ringing in 2017 with you.