-->
MENUMENU
(954) 474-1776 |   |       |  Click Here to Receive our Free Market Report

Archives

3 Unique Aspects of Commercial Real Estate Transactions

Keep these factors in mind if you are looking to buy or sell commercial property

Commercial real estate deals are, in most cases, more complicated than residential real estate transactions. They often involve much larger sums of money, different documentation and research, and they can create much greater liability for both parties.

These unique components often require the assistance of a licensed commercial real estate broker to ensure that a client’s best interests are always kept in mind, whether they’re a buyer or a seller. Let’s take a look at three key elements:

1. Contracts are highly binding

The state offers basic consumer protections for the buyer in most residential real estate deals, but the law takes a much more neutral approach when it comes to commercial transactions. Courts typically assume that both parties in a commercial sale are prepared to thoroughly analyze, understand, and negotiate all aspects of the contract. Therefore, judges are more likely to hold parties to the terms of a sales or lease agreement, absent any blatant fraud or illegality.

2. Commercial real estate is valued differently

Because of its nature, a certain commercial real estate property many not have a local, previous sales comparison. This can make it difficult to assess value when compared to residential properties, which have fairly accurate valuations based on a number of previous, similar sales.

Commercial real estate also has an income component that can add to its value. Typically, both the current and any future income streams are considered when determining valuation and the eventual sales price of a commercial property. But just like with residential real estate, buyers and sellers typically hire a professional appraiser to help set a fair market value.

3. Negotiations can be tougher, and require due diligence

Commercial real estate transactions often involve intense negotiations. During these efforts, the buyer seeks to determine facts that could impact the value and attempts to gain concessions from the seller to offset any problems that may be found. In addition to looking for physical defects or other tangible factors, any issues that could impact the revenue stream generated by the property are considered.

Buyers of commercial real estate are expected to conduct thorough due diligence. Unlike a residential real estate deal, where one inspector will likely suffice to assess the condition of a house, a commercial buyer may need to hire multiple inspectors and experts to look at a variety of different factors. These efforts could include:

  • A building inspector to inspect the actual building
  • A surveyor to ensure that all property lines are properly identified
  • An environmental engineering & testing company to determine any environmental hazards
  • A lawyer to review any title reports, land use entitlements, existing leases, and other legal issues

Contact a commercial real estate broker for help

Purchasing a commercial property can be complicated, and if you go into a transaction without the proper assistance, you could be in for more than you bargained for. At Morris Southeast Group, our team of experts has nearly three decades of experience and we are a leading provider of full-service commercial real estate services to clients in South Florida. Wherever you are in the transaction process, chances are that we can help. Give our team a call today at 954-474-1776, reach Ken Morris on his cell at 954.240.4400, or email kenmorris@morrissegroup.com for more information.

More Than Maintenance and Collections: The Essential Functions of a Property Manager

An effective manager wears many different hats when it comes to representing owners and serving the needs of tenants

When many people consider the role of a property manager, they think about handling maintenance requests and processing rent payments. While these are both critical components of the position, there are many other functions that are required to adequately serve clients. Let’s take a look.

Improve and evaluate the property to determine an accurate rental amount

A property manager typically has unique experience in certain markets, and can use this knowledge to set an accurate rental amount. In addition, managers often perform the following services:

  • Perform documentation of the interior and exterior condition of the unit, including taking photos
  • Offer recommendations to the owner regarding cosmetic improvements and repairs that could maximize monthly rent.
  • Discuss the positives and negatives of certain policies with respect to rates, including allowing pets, smoking, etc.
  • Gather data, including rental rates in the area, and work with the owners to determine an optimal price.

Prepare and market the property

One of the most time-consuming aspects of renting a property is marketing the listing, preparing the property, and evaluating prospects. A property manager will have the experience necessary to ensure that you have qualified tenants and the marketing chops to find them. Duties include the following:

  • Preparing the property for rent:

            o Cleaning it and updating the interior, if necessary

            o Maintaining landscaping, if applicable

  • Creating advertisements geared toward the property type. Some of these ads may include:

            o Signs

            o MLS listings

            o Advertising on paid and free rental websites

            o Fliers

            o Ads in print publications

  • Working with other leasing and real estate agents to find a qualified tenant
  • Taking calls from prospective tenants and schedule showings
  • Offering prospective tenants rental applications that are legally compliant with all fair housing laws
  • Collecting all applications and fees from prospective tenants

Collect the rent

Leave the particulars of rent collection to a property manager to avoid directly accepting money from your tenants. A qualified professional will collect the rent, enforce late fees, and track down any outstanding payments.

Manage the move in of tenants

An effective manager will oversee a comprehensive move-in process that includes an inspection and documentation that tracks any issues related to the condition of the property. In addition, he or she will:

  • Create the lease agreement
  • Review all lease particulars with tenants regarding items like necessary property maintenance and payment terms
  • Perform an inspection and have all tenants sign off, verifying the condition of the unit before move in
  • Confirm the move-in date with the tenant
  • Collect the first month’s rent and any security deposit

Handle the eviction process

Eviction is a scenario that no one wants to deal with, but a property manager can make it easier. Managers are well versed in legal proceedings and can act on behalf of the property owner in court. They will:

  • File the necessary paperwork to start and complete the eviction process
  • Represent the property owner in all court proceedings
  • Coordinate with appropriate law enforcement authorities to remove tenants and their possessions from the unit

Conduct inspections

Occasional inspections are needed to ensure that tenants are properly taking care of a property. Spotting issues early can prevent owners from having to spend significant money on renovations. Managers will perform inspections (both inside and outside) on a predetermined schedule to look for any safety hazards, repair needs, lease violations, or code violations, and send the owner periodic documentation about the property’s condition.

Fulfill financial duties

It’s important to accurately track all income and expenses involving rental properties. A property manager will provide you with the necessary details to accurately file taxes, among other functions:

  • Make payments on behalf of property owners when necessary (mortgage, property taxes, insurance, HOA dues, etc.)
  • Provide detailed documentation of any expenses
  • Maintain historical records of all paid invoices, inspection reports, leases, etc.
  • Advise of any tax deductions that could be relevant to the rental property
  • Provide annual reporting and all required tax documents, such as a form 1099
  • Compile detailed monthly cash-flow statements that itemize income and expenses

Address maintenance needs

An effective manager will have an experienced team of contractors at the ready when repairs are needed. They can:

  •  Provide a maintenance crew to handle routine issues
  • Create a preventative maintenance policy to identify and deal with any repair needs
  • Offer a network of licensed, insured contractors who offer good pricing and work that is up to code
  • Maintain all outdoor areas
  • Ready a 24-hour emergency phone line for repairs
  • Offer recommendations regarding larger rehab projects

Manage tenant move out

Similar to the move-in process, a move-out inspection ensures that any damages are identified and deducted from the security deposit. Duties include:

  • Inspecting the unit and preparing a report on the condition after a tenant moves out
  • Providing tenant with a copy of the report as well as any estimated damages
  • Returning the balance of the security deposit to the tenant, if applicable
  • Cleaning the unit and performing any needed repairs
  • Putting the property on the market to be rented once again

While this is by no means a comprehensive list of property management duties, it should give you a good idea of the role that a quality manager can play in overseeing your property. If you’re interested in partnering with a professional property management company that can offload the stress of dealing with your rental in South Florida, contact Morris Southeast Group today at 954-474-1776 or at kenmorris@morrissegroup.com.

Listings

Follow us on Twitter