Real Estate's Next Level Training Systems
The Fundamentals of
Listing and Selling
COMMERCIAL REAL ESTATE
The Fundamentals of Listing and Selling Commercial Real Estate provides a complete foundation for a career in the Commercial Real Estate Industry. The text contains two sections:
- The Fundamentals of Commercial Real Estate
- The Practice of Commercial Real Estate
The Fundamentals section includes a comprehensive study of property types and how each is analyzed, the process of investment property analysis, understanding commercial leases, understanding commercial mortgages, zoning, and market analysis techniques. This section includes examples, figures and tables, including step by step instructions in the use of Microsoft Excel and financial calculators.
The Practice section integrates the foundation learned in the first section with training in the sales process and specific techniques used by successful commercial Realtors. This section includes prospecting methods, creation of successful buyer and seller presentations, negotiation techniques, client servicing, property inspections, due diligence and sales contracts.
(See the full table of contents below)
Table of Contents
Chapter 0 - Introduction 7
Chapter 1 - Introduction to Commercial Property 12
Types of Commercial Investment Real Estate 12
Office Buildings / Office Space 13
A, B or C Classification 13
Types of Office Buildings 15
Classifications of Office Properties 15
Measuring Office Space 15
Retail Buildings / Retail Space 17
Major Types of Retail Building 17
Major Types of Retail Uses: 18
Shopping Centers 20
Types of Shopping Centers: 21
Industrial / Flexible Space 23
Types of Industrial Property 24
Locations of Industrial Space 25
Hospitality Properties 26
Categories of Hospitality Property 26
Important Terms for Hospitality Property 27
Types of Hotels 27
Grading Hotels 28
Timeshares and Vacation Ownership 29
Multi-Family Property 31
Categories of Multi-Family Dwellings: 31
Methods of comparison for Multifamily Property 33
Farm and Ranch Property 35
Types of Commercial Farm Uses: 36
Business Opportunities 36
Important Questions to ask any Business Owner considering selling 37
Considering a business’s SWOT 38
Vacant Developable Land 39
Senior Housing / Long Term Care Facilities 39
Forms of Long Term Care Facilities include: 40
Key Terms for Long Term Care investment: 41
Summary 41
Chapter 2 - Data Gathering and Property Analysis 45
Gathering Data 45
Gathering Information 46
Zoning Data and Potential Uses 55
Zoning Regulations 55
Restrictions on Building 56
Setbacks 57
Maximum Height Restrictions 58
Site Coverage 58
Parking Restrictions 58
Improvements 59
Understanding the Market Area 60
Research Specific to the Property 60
Where to find Property Comparison Data 62
Comparisons for investment properties 63
Comparisons for office properties 64
Comparisons for Retail properties and Shopping Centers 65
Comparisons for Industrial properties and Warehouse properties 65
Research on the Marketplace 66
Finding and Compiling Market Data 67
Vacancy and Absorption Rates 69
Factors that affect vacancy rates 70
Calculating Vacancy Rate for a Marketplace 71
Understanding Absorption Rates 71
Summary 72
Chapter 3 - Investment Analysis 75
The Benefits to Owning Investment Real Estate 75
Types of Real Estate Investors: 76
Understanding Investment Income 78
Understanding Operating Expenses 81
Fixed Expenses 81
Variable Expenses 81
Reserves 82
Return on Investment 82
Cap Rate 84
Understanding Cash Flows 85
Calculating Annual Cash Flows 86
Accounting for Taxes 87
Complete Cash Flow Calculation 88
Calculating Property Sale Cash Flow 89
Multi Year Cash Flow Forecasts 90
Estimating Incomes and Expenses 91
Understanding Present Value 95
Discounted Cash Flows 95
Calculating Net Present Value Using Excel 97
Internal Rate of Return (IRR) 97
Calculating Internal Rate of Return Using Excel 98
Appraised Value VS Return on Investment 99
Appraised Value 99
Putting the Numbers Together 100
Evaluating and Price Investment Property 100
Chapter 4 - Commercial Leases 104
What is a Commercial Lease? 104
End-User or Tenants Objectives in Leasing Property 105
Owner’s or Landlord’s Objectives in Leasing the Property 106
Points at which Tenants and Landlords Agree 106
Types of Lease Payments 106
Parts of a Commercial Lease 108
Common Lease Clauses 110
Term of a Lease 111
Quoting Rental Rates 111
Landlord and Tenant Improvements 112
Other Types of Leases 112
Chapter 5 - Introduction to Commercial Mortgages 116
Borrower’s Perspective VS Lender’s Perspective 116
Understanding Commercial Financing Terms 117
Important Terms 117
Closing Costs 119
Amortization 120
Fully Amortized VS Partially Amortized 121
Calculating Mortgage Payments 122
Using Microsoft Excel 123
Using a Financial Calculator 123
Calculating Maximum Purchase Price 123
Understanding the Loan Process 125
Types of Lenders 126
Types of Commercial Loans 127
Qualifying for a Commercial Loan 128
Loan to Value Ratio (LTV) 128
Debt Service Coverage Ratio (DSCR) 129
Debt Ratio 129
Commercial Loan Applications 130
Summary 131
Chapter 6 - The Practice of Commercial Real Estate 134
The Seller’s Side 134
The Buyer’s Side 135
The Sale 136
Chapter 7 - Prospecting 137
Introduction to Prospecting 137
Long Term Prospecting Methods 139
Sphere of Influence 139
Client Gatherings 144
Farming for Business 144
Workshops 145
Networking Organizations 146
Other Networking 146
Short Term Prospecting Methods 146
Cold Calling 147
Vacant Property Owners 148
Expired Listings 149
Other Methods 149
Summary 150
Chapter 8 - The Listing Presentation 152
Introduction to Listing Commercial Properties 152
The Listing Track 153
Pre-Listing Package or Resume Book 155
Introductory Letter and Company Profile 156
Agent Credentials 156
Testimonials 156
Properties for Sale 157
Personalizing your resume 157
Working in Teams 158
The Presentation 159
Pricing the Property Correctly 161
Types of Listing Contracts 163
Exclusive Right to Sell, Exclusive Right to Lease 164
Exclusive Agency 164
Showing Agreement 165
Parts of a Listing Contract 166
Handling Objections 169
Real Estate Commission Objection 169
Price Objection 170
Listing Exclusions 171
Summary 172
Chapter 9 - Providing Service and Marketing to your Sellers 174
Introduction to Service 174
Feedback on showings 175
The Golden Rule 176
Staging and Showing the Property 176
Signs 177
Using MLS Systems 178
Internet Resources 179
Personal Web Site 179
Search Engines 179
Online Yellow Pages 180
Commercial Databases 180
Brochures 181
Faxing, Mailing and E-Mailing to Other Brokers 183
Broker’s Open Houses 183
Postcards 184
Local Newspaper Advertising 185
Asking your clients for Referrals 185
Chapter 10 - Working with Buyers 188
Agency Relationships 188
Handling Incoming Calls 190
Switching Properties 190
Sign Calls 192
Newspaper and Magazine Advertisement Calls 194
Internet Calls 195
Follow Up, Follow Up, Follow Up 196
Alternate places to find buyers 197
Explaining Buyer Agency 198
The Buyer Presentation 198
Pre-Qualification / Pre-Approval 200
Handling Buyer and Tenant Objections 200
Summary 202
Chapter 11 - The Sale 204
Broker Co-Operation Agreement 205
Letter of Intent 205
Negotiating 207
Due Diligence Periods 207
Property and Building Inspections 208
Environmental Testing 209
Verifying the Income and Expenses 209
Zoning Verification or Zoning Approvals 210
Negotiating Repairs 210
Parts of a Sales Contract 210
Contingency Clauses for a Sales Contract 213
Title Insurance 215
Types of Title Insurance Coverage: 216
Settlement 217
Summary 217
Appendix A - Depreciation and Cost Recovery Charts 221
Appendix B – 1031 Tax Exchanges 223
Avoiding Capital Gains 223
The Ground Rules 223
Calculating a Realized Gain for
the IRS 224
Acknowledgements 229
For More Information 229
Monica Villasenor, John L. Bowman, James A. Randel, Stuart Leland Rider, Jack Cummings, Martin I. Zankel