There it was in the Wall Street Journal last week. The headline in the Real Estate Section blared,

"Apartment Vacancy Rate Hits 22-Year High !"

and I murmured to myself … here we go again.

It just reminded me why newspapermen are NOT Real Estate Investors … »»]]> By Monte Lee-Wen

There it was in the Wall Street Journal last week. The headline in the Real Estate Section blared,

"Apartment Vacancy Rate Hits 22-Year High !"

and I murmured to myself … here we go again.

It just reminded me why newspapermen are NOT Real Estate Investors … they are just out to sell papers and a sensational headline will always beat out a rational article.

But wait … there’s more …

If you read the last line of paragraph three you found that, "Of the 79 Markets tracked by REIS, 45 showed an increase in Vacancies." That sounds really BAD now doesn’t it? We should panic … right? Hmmmm … Remember now, this is coming from a newspaper and there is most certainly more to this story. Hold on just a minute …

As an Investor, what I find MOST interesting in this article is this.

    * In the face of the worst economic downturn since the great Depression.
    * In the face of the worst residential housing market in anyone’s living memory
    * In the face of hundreds of thousands of foreclosed / vacant / rental single family homes competing with apartments for renters
    * In the face of ALL of this …

43% of the markets tracked by REIS showed STABLE OR DECREASING VACANCIES !! That’s right 34 of those same 79 Markets preserved or decreased their vacancy rates. That statistic is truly amazing given the national economic circumstances. And that’s not all … In the next to the last paragraph we learn that suburban Maryland and Washington, D.C. even saw a 0.3% rent increase in the second quarter. WOW.

What is the Press Missing here?

The media propagates one of the big myths in Real Estate when they report on national statistics in this fashion.

Here is the myth … "There is a "National Real Estate Market" That statement is simply not true … never has been and never will be.

Here is the truth…

You can aggregate statistics and report on the national data with big screaming headlines, but All Real Estate Is Local. There is no mythical "National Apartment Market" that moves in sync from coast to coast taking all Multifamily Projects up and down with its gyrations.

The Profit is in the details

The savvy investor is still doing the same things despite this article …

    * Working to find a market in the right phase of the market cycle
    * Then finding well priced properties where they can make a profit by improving the performance under their management.

And those local markets exist right now.

The timeless rules still apply … LOCAL market conditions will determine much of the profit in your Commercial Real Estate projects. One of the key skills for Commercial Property Investors is understanding Market Cycles and timing the markets to ride the LOCAL wave. If you are invested one of the 43% of Markets where vacancies are stable or falling … you and your investors are doing just fine. These headlines may cause your investors to give you a call with concerns … AND the cash flow from your property is probably stable.

Here is the biggest challenge for Project Sponsors in Multifamily as a result of this article … Your Investors and potential investors read this article too … darn.

Now you have to provide some education about the myth of the "National Apartment Market" to bring them on board.

It won’t be that difficult to do. Some local market research will quickly prove to them that you know more than the Wall Street Journal about your local market and why Apartments are still an excellent investment. The ability to find a profitable apartment project may actually be increasing in this economy because of distressed commercial property for sale in many solidly performing markets at once in a lifetime prices.

Here is my advice. Don’t believe ANY headline in ANY article claiming to report on ANY national trends in Real Estate in your chosen niche. All Real Estate is Local … from now until the end of time.

Your job is to find those local markets where you can make a buck. And there are a lot of them still out there despite the WSJ blaring, "Apartment Vacancy Rate Hits 22-Year High" last week. Then show your investors the difference between what you know about Real Estate as an Investor and what the Wall Street Journal says as a bastion of the media.

I am sure both of us would have written a different headline.

Learn the Insider Secrets of Commercial Property Investment from Monte Lee-Wen who has personally purchased over $200M in Commercial Real Estate. CLICK THIS LINK NOW to start your Commercial Real Estate Training with his 14 page FREE Report "35 Reasons You Should Invest in Commercial Real Estate".

Article Source: http://EzineArticles.com/?expert=Monte_Lee-Wen

By far the most positive aspect of commercial real estate financing is now SBA loans.  Via the Obama Stimulus Package, SBA loan are still funding and the banks that are still in the market, are pushing all of their customers to go this route.   

For banks, the Stimulus Package increased »»]]>

By far the most positive aspect of commercial real estate financing is now SBA loans.  Via the Obama Stimulus Package, SBA loan are still funding and the banks that are still in the market, are pushing all of their customers to go this route.   

For banks, the Stimulus Package increased the guaranteed portion of the SBA 7a loan from 75% to 90%.  Though many bankers will tell you this doesn’t mean that much, because the government can get out of following through on the guarantee, having some type of backing is a lot better than none at all.

For borrowers the main benefit is having a closed loan.  A lot of borrowers don’t realize the significance of this point.  Others include the widely published reduced fees (for example on the SBA 7a program, the normal fee of 2.75% has been temporally eliminated ).  Other major benefits include 90% financing and 25 year amortization schedules.

More info on SBA loans: http://www.cfa-commercial.com/SBA-7-Loan.html

Conventional financing continues to tighten, whether for owner occupied or investment properties (non multifamily).  What we are seeing actually close, on the conventional side is loans below 60% loan to value, with very strong borrowers.  Most banks now want to see strong secondary sources of income and high levels of post close reserves.  Though there’s no set number/ratio a lot of banks want to see 30% in liquidity, compared to the proposed loan amount…  Some are establishing it as 12 months of mortgage payments in reserves or more.

Another issue on conventional financing that keeps appearing, for borrowers with investment properties, is lease term.  Banks now want to see a minimum of 5 years left on leases.  Just a few months ago, there was still flexibility with this, now it seems to be gone.  

For most of us the obvious choice of properties »»]]> We all are thinking about it and some of us are actually taking action and getting their hands on real estate  investment properties. The longer the NY Stock Exchanges doesn’t produce desirable returns the more people are starting with real estate invesments.

For most of us the obvious choice of properties are single family homes. Although you can invest in real estate without owning a home, most people follow the experience they made while purchasing their own home. This is familiar ground and the learning curve for doing a real estate deal of this type is pretty slim.

Of course there’s a drawback with this approach. The competition is fierce and there are markets where investors are artificially driving up the cost of the properties while completely discouraging first time home buyers. If this is the case, the burst of the real estate bubble is just a matter of time.

How do you avoid these situations and still successfully invest in real estate? How do you get ahead of the competition and be prepared for bad times in real estate investments as well? The only answer I have is commercial real estate.

Why commercial real estate you might ask? Commercial real estate is a solid invetment in good and bad times of the local real estate market. The commercial real estate I’m referring to are multi unit apartment buildings.

Yes you will become a landlord and No you don’t have to do the work by yourself. You are the owner and not the manager of the apartment building. The cost of owning and managing the building is part of your expenses and will be covered by the rent income.

Apartment buildings are considered commercial real estate if there are 5 or more units. To make the numbers work you should consider to either own multiple small apartment buildings or you should opt for bigger buildings. This will keep the expense to income ratio at a positive cash flow. Owning rental
properties is all about positive cash flow.

With investing in single family homes it is easy to achieve positive cash flow. Even if your rent income doesn’t cover your expenses 100%, the appreciation of the house will contribute to the positive cash flow. With commercial real estate the rules are different.

While single family homes are appraised by the value of recent sales of similar homes in your neighborhood, commercial real estate doesn’t care about the value appreciation of other buildings. The value of the property is solely based on the rent income. To increase the value of a commercial real estate you need to find a way to increase the rent income. The formula on how this is calculated would be too much for this short article. I listed a few very helpful books where you can find all the details.

What’s another advantage to invest in commercial real estate? Commercial real estate financing is completely different than financing a single family home. While financing a single family home you are at the mercy of
lenders who want to make sure that you are in the position to pay for the house with your personal income. Commercial real estate financing is based in the properties ability to produce positive cash flow and to
cover the financing cost. After reading all these information about commercial real estate you want to go out there and dive into the deals. Not so fast. First, you need to learn as much about real estate as possible. In commercial real estate you’re dealing with professionals. If you come across too much as a newbie you will waste these guys’s time and your commercial real estate career ended before it actually started. Second, no commercial real estate lender will lend you any money if you can’t show at least a little bit of real estate
investment experience.

What’s the solution to this? Go out there and do one or two single family home deals yourself. It doesn’t matter if you make huge profits to start off with. Most newbie investors are loosing money on their first deal anyway. If you can manage to show positive cash flow with your single family home deals you are ahead of
the pack.

My advice, buy a small single family home in a decent neighborhood and rent it immediately. This will keep your out of the pocket expenses at a minimum and you will have rent income to cover for your monthly expenses. Bonus, you gain experience as an investor and as a landlord.

Here’s another observation I made during my real estate investment career. Most people like to analyze, learn, discuss and analyze some more. They never actually got to do a real estate deal. They love to talk about real estate ivestments, but never did it themselves.

My approach to real estate investment was simple.

- I bought some books about real estate investment.

- I read every single one of them.

- I put together a simple plan on how I want to get started.

- I started looking for properties.

- I bought my first investment property 30 days after I started reading my first book.

- I made positive cash flow with all of my properties so far.

What is my point? You have to go out there and practice what you’ve learned. The only valid credential in the real estate business is practical experience. Having a couple of deals under your belt, you can go out there and start looking at commercial real estate and even impress seasoned investors with your knowledge. Because you made this experience by yourself and you know what you’re talking about.

Book reference for commercial real estate investments:

Gary W. Eldred, PhD: “Make Money with Small Income Properties”

Jack Cummings: “Real Estate Financing and Investment Manual”

You will find these books and many more on my real estate investment website at http://www.suncoastrenttoown.com/author_directory.htm

Sincerely,
Peter Dobler

Permanent link to this post: http://blog.theestateinfo.info/2009/01/beat-the-crowd-when-investing-in-real-estate/

The region could be vulnerable because financial service companies rent much of the office space in Greenwich and »»]]> As the recession devastates the banking, brokerage, retail and automobile industries, landlords and commercial real estate brokers in lower Fairfield County ponder when and if the office market will be the next victim.

The region could be vulnerable because financial service companies rent much of the office space in Greenwich and Stamford. Greenwich has been called the nation’s unofficial hedge fund capital.

“We are still in a very good market. However, a lot of our clients are financial services companies,” said Jim Fagan, senior managing director of the Westchester County, N.Y., and Connecticut operations of New York City-based Cushman & Wakefield Inc. commercial real estate. “They include everything from hedge funds to reinsurance companies to investment banks, not to mention advertising agencies and other professional services companies.”

Those former mainstays in the office market will be shrinking, he said.

“As tenants try to lower their fixed costs, they are slimming down their commercial real estate exposure, where it is practical and pragmatic,” Fagan said. “The market is going through an adjustment. While it was white hot in July of 2007. It certainly is less than that now.”

John Hannigan, principal of Choyce Peterson commercial real estate in Stamford, said, “The quantity of tenants looking to grow has decreased precipitously.”

Reported office vacancies are not really bad – yet.

In the third quarter, 17 percent of the 14.5 million square feet of office space in Stamford was available for lease or sublease, up slightly from 16.4 percent at the same time last year, according to an average taken from five real estate firms. Available space are locations that are empty or slated to become vacant soon.

The numbers do not include large, single-occupant buildings such as the main UBS AG investment bank and trading floor in downtown Stamford.

But vacancy reports might not tell the whole story, said Jeff Gage, executive managing director at the Stamford office of Chicago-based Jones Lang LaSalle commercial real estate. Some companies have space they are not using but will not admit it unless a broker approached them about subleasing, Gage said.

Sublease space, that which is leased but currently unused, is rising in Fairfield County, he said.

“We are going to see vacancy rates going up to 25 percent or higher (countywide),” Gage said. “My guess is that 40 percent of that will be sublease space.”

The big subleases include 112,000 square feet that UBS put on the market at 201 Tresser Blvd. in Stamford at Purdue Pharma’s headquarters. Others in the city are 50,000 square feet from Legg Mason at First Stamford Place and 120,000 square feet at 290 Harbor Drive.

Greenwich has smaller office vacancies, but its 4.8 million square feet of office space depends largely on financial services, hedge funds and private equity firms. About 9.3 percent of the town’s office space was available in the third quarter, which was unchanged from the same time last year.

“Greenwich and Stamford are not immune from the downsizing and reorganization from a new model of doing business,” said John Goodkind, managing principal at the Greenwich office of New York City-based Newmark Knight Frank commercial real estate. “The days of abundance are gone.”

“Large users are unlikely to make decisions on space unless they have to,” he said, referring to lease expirations.

On the positive side, Goodkind said many people who had worked for hedge funds, financial institutions and banks will be looking for office space in which to start their own companies.

“We have already seen significant numbers of new companies looking for smaller spaces,” he said. “That will be the mode for the next 12 to 18 months.”

But Gerald Celente, a trends forecaster known for gloomy predictions, said the downturn in the retail sector will affect office space because fewer customers will exist for service firms such as ad agencies.

“In 2009, the focus will broaden to include a range of calamities that will leave no sector unscathed,” Celente said in a report issued by his Rhinebeck, N.Y.-based Trends Research Institute. “Next in line is retail, which accounts for some 70 percent of consumer spending, 26 percent of which is holiday sales.”

“Add to the (retail) empties the commercial space vacated by defunct financial firms and an array of troubled businesses from restaurants to architectural firms, to high-tech operations, to offset printers, etc.,” the report said. “The inescapable result (that we predicted over a year ago and is only now being discussed in the business media) is a commercial real estate bust that will be costlier, wreak greater havoc and prove more intractable than the residential market decline.”

Local landords, by contrast, are more optimistic.

“We have been here before (in a recession), and we will get through it,” said Jo Ann McGrath, director of leasing for the Merritt 7 Corporate Park in Norwalk. “We just have to stay positive.”

She said the 1.4 million square feet of office space in Merritt 7’s six buildings is 95 percent occupied.

A 51,000 square feet sublease might occur in the complex’s 301 Merritt 7 building. Applied Biosystems is moving out of 301 Merritt 7 in July because it merged with Invitrogen Corp.

Applied Biosystems’s lease expires in 2011, and it has an option to sublet the space, McGrath said.

Margaret Carlson, director of leasing for New York City-based RFR Realty’s seven office buildings in downtown Stamford, said the market is slowing, but not to a crisis stage.

“We are still continuing to sign deals, and we are starting to see concessions for tenants creep in,” Carlson said. “Velocity is slowing down, but we remain optimistic. There are a lot of deals out in the marketplace, and we do not have a lot of sublease space in our portfolio.”

RFR’s Stamford buildings are 90 percent leased, she said.

Another landlord representative, Jeff Newman of W&M Properties, said the recession offers a chance to recruit new tenants. W&M manages First Stamford Place and Metro Center office complexes in Stamford and the MerrittView office building in Norwalk.

“We are well-positioned to ride out a down market,” Newman said. “We always have more than enough cash flow to cover debt service and operating needs.”

Gage of Jones Lang LaSalle predicted rents will drop 20 percent to 30 percent during the recession, which offers local companies a chance to move into better buildings.

In March, Stamford-based Choyce Peterson began telling its clients to pursue renovation subsidies and lower rent from landlords.

The average asking rent for Class A office space in downtown Stamford is $48 per square foot per year, according to Cushman & Wakefield.

“We have been out there ahead of this (recession) news and have been meeting with many area companies to help them navigate these tough economic times, with regard to their office space,” said Hannigan of Choyce Peterson.

“The smart landlord are the ones who will lead the market in (lower) pricing,” Gage said. “If you follow the market, you are already too late.”

- Staff Writer Peter Healy can be reached at peter.healy@scni.com or at 964-227
Read article source – http://web-best.info/2008/12/for-rent-is-office-space-the-final-frontier-in-financial-crisis/