Understanding the difference between Residential and Commercial Real Estate Sales: (Contrast to the concerns of a Home Purchase - Location, Sq. Ft., Cost/Budget, Schools, Proximity to work, Proximity to Needed Services and Relationships such as Doctors, Religious Facilities, Shopping, Family):
  1. What's included in Commercial Real Estate - How should we define it?
    1. Real Estate Portion - Land and Buildings
    2. Business or Going Concern Aspects
    3. Type:
      • Residential/Apts.
      • Office
      • Commercial
      • Industrial/Warehouse
      • Mixed Use
    4. Intake or Contact Sheet
  2. Needs of the Commercial Real Estate: Owner/Investor/Lessor/Lessee and The Business Owner - Matching Their Needs:
    1. Real Estate Owner
      • Purpose/Goal of ownership
      • Marketing - Holding Period
      • Disposition/1031 Exchanges
      • Estate Planning Considerations
    2. Investor
      • ROI
      • Purpose/Goal of Investing
      • Location
      • Market Studies - Business Plan - Marketing - Expansion
      • Appreciation
      • Financial Projections - Financing (Include Blanket Mortgages, Mortgage Originators and Equity Use) - Holding Period/Depreciation/Resale
      • 1031
      • Title and Survey
      • Title V
      • 21 E -We don't Practice as an:
        1. Attorney
        2. Accountant
        3. Insurance Agent
        4. Discuss need for these Professions Being Involved
    3. Lessor/Lessee
      • Mutual Needs: Period, Type Lease, Consideration, Lease Value, Right of 1st Refusal, Options, Effect of Lease on Lessors Resale and Lessee's Sale
      • Effect of Death
      • Detail Orientation re: Space, Power, Height, Parking, Common Areas, Storage, Access, Security, and CAM Charges
    4. Business Owner
      • Purpose/Goal of Business Owner/ Business Plan( Including Growth and Cash Flow Analysis)
      • Location - Budget
      • Square Footage/Type
      • Parking
      • Storage
      • Power/Lighting/Internet Access
      • # of Employees
      • Competition
      • Safety
      • Financing (3 Year History Including Income Taxes with Check List - Include SBA, Economic Development Agencies and Mortgage Originators)
      • Start Ups - ID Markets & Suppliers
      • Chamber of Commerce Assistance
      • SCORE
    5. Ownership Versus Leasing
      • Comparison of all Costs
      • Financing Alternatives (Include Owner Financing and Documentation Required) - Value of Equity
      • Formal Illustration
    6. Valuation
      • Real Estate/Business
      • Main Real Estate Valuation Methods
      • Full Discussion and Example of Income Method (Cap Rates, GIM and Complete Example
      • Show Exclusion of Debt Service and Depreciation) Business Valuation Discussion (Show Income Additions of Personal/Owner Income Items, Interest and Depreciation)
      • Give Detailed Example of a Business Valuation (Point Out Need to Use Accountants and Valuation Experts as Required Through this Process)
  3. Criteria and Concerns in making Commercial Real Estate Decisions:
    1. Location
      • Site and Building Cost and Availability - Visibility/Exposure Required - Traffic Counts
      • Access to Suppliers and Markets
      • Supplier Availability
      • Competition
      • Proximity to Labor Market and Needed Services
      • Quality of All City/Town and Local Services
    2. Labor Supply
      • Type Needed vs. Type available
      • Wage Levels
      • Seasonal vs. Year Round
    3. Transportation
      • Proximity to Major and Secondary Roads
      • Physical Access to Markets and Suppliers
      • Road Maintenance
    4. Housing Availability
      • Quantity and Type Available/Cost - Residential Realtors/Brokers - Apartment Survey/Vacancy Rate & Rental Rates

Resources:

  • Introduction to Commercial Real Estate Sales, by Bill W. McCoy III, Dearborn Real Estate Education
  • Commercial Real Estate, Listing Properties, by Edward S. Smith, Jr., RECS, Dearborn Real Estate Education
  • Commercial Real Estate, Understanding Investments, by Edward S. Smith, Jr., RECS, Dearborn Real Estate Education

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