The benefits of commercial real estate greatly outweigh the costs. In fact, I would say that commercial real estate is the best industry to be involved with because of the profits that can be made, as well as the fun nature of the work.
There are many who feel that commercial real estate is greatly out of their league, but this couldnt be the further from the truth! Commercial real estate is accessible to everyone who is willing to learn about a new industry and reap benefits no other industry can offer. Below you will find the best reasons why you should get involved with commercial real estate. It is truly the best kept secret of those already succeeding or just starting out.
Lets look at the many advantages of commercial real estate.
The first, and probably the most enticing benefit of commercial real estate, is profit. Huge profits, in fact, which can be made with a limited amount of effort. You can make the same amount of money quick turning or selling 100 single family residences as you would make with a single commercial real estate deal. The profits can be astonishing!
It takes the same amount of work for every commercial real estate deal, meaning you must go through the same processes each time. Why not maximize your results and go for the larger returning deals, rather than the smaller ones? Synergy is a key word in commercial real estate, as small changes can yield huge results.
Another great benefit of commercial real estate is you can work full or part-time, depending on your individual situation! Commercial real estate can easily be a part-time job that brings in incremental cash flow. You can even start out part-time, and hold a job until you have enough cash flow and money so that, eventually, all you do is commercial real estate.
Commercial real estate as a full-time job allows you to have many benefits such as being your own boss and having the ability to work from home. You can create your very own commercial real estate business and quickly build a strong net worth as well as positive cash flow.
In commercial real estate, your financial investment is very low, perhaps even non-existent. You can purchase property with 100% of other peoples money (OPM), and create large profits for yourself. This is the only industry where there are literally hundreds of millions of pounds just waiting to be borrowed! Find the money and get to investing!
Commercial real estate is an industry of abundance, not one of limits. In fact, there is very little competition because there is always commercial property becoming available. There is more than enough for everyone, which allows every person to have their opportunity to succeed in this business.
Another great benefit is that you can start right now, today! It does not take years of training or years of moving up the corporate ladder to be successful. You can begin your commercial real estate endeavors whenever you so desire because there are very few barriers of entry to this industry.
Finally, the greatest benefit I think commercial real estate has to offer is freedom. When you become involved with commercial real estate you have the freedom to do as you please. When you are not stressed about making rent, or finding your next job, life can be enjoyed to the fullest.
Commercial real estate can give you financial and personal freedom that, otherwise, would be wrapped up in a 9-5 job and someone else telling you where you have to be and at what time. For you already successful professionals and business owners, commercial real estate can be a great way to build wealth and equity quickly, without much time investment and headache! It is a great alternative to other types of investments that return 1100th of what commercial real estate can return!
No matter what business, job, or current occupation in which you are involved, no other industry can supply you with the ability to be in charge of your very own life and create a lifestyle that best fits you and your personality.
It is truly amazing how peoples lives drastically change with only a few income producing properties in their portfolio. I urge you to delve further into this industry and get excited about it! Commercial real estate is a sound, extremely profitable, extremely doable, tried and true business that will always be available to those wanting the benefits commercial real estate has to offer.
Why Real Estate Attorneys Are the Important Members of the Real Estate Team?
In order to complete, the real-estate deals you need to do a lot of paper work. Paper work is quite essential for all real estate jobs. Do you know how this paper work is being completed? Well, the real-estate agent who shows the property to the buyer is taking the first initiative. You will be surprised to know that the real estate agents are doing about 90% of the real-estate deal. You will hardly find any estate deal, which does not contain the real-estate agent. However, there are many other players as well who participate in the real estate. Realtors are one of the team members who can replace the estate-agents. However, the estate agents are still the favorites. Similarly, the real-estate attorneys also play an important role. One cannot really imagine how tense these estate deals are.
Most of the people do the real estate deals once in their lifetime. They hardly go for any another real-estate deals after that. Hence, most of them do not have the right knowledge about the real estate. That is why they need the estate-agents and the attorneys. It is true that the busiest member of the team is the real estate agent. However, you cannot really discard the real estate attorney. In fact, you are looking at the deadly combination of the estate agent and the estate attorneys.
They both are very active throughout the process and you cannot hope for the deal without them. Some of the estate agents and the attorneys are so experienced that they can solve the deal and complete it within one day and this is really the case. The attorney is preparing all the paper works. However, the credit of controlling the paper work should go to the estate agents who are responsible for finalizing all the requirements of the buyers and the sellers. They note down all the requirements while they have the meeting with the buyers and the sellers. They provide the appropriate details to the attorneys who are experts at preparing the agreements and they dare to finish these agreements within few days.
In some of the countries, you can still see the typewriters being used in the court campus. Those typewriters are quite great and type the whole agreements within few minutes as the real estate agents and the attorneys ask them to do. These are some of the rare sites seeing such a great typewriters working on the old typing machines.
If you feel of viewing such machines then you should go to the court. They are just awesome and you can hope for some of the best scenes. However, the attorneys guide them and it is the attorney who go through the detail of the papers and find out that they are according to the law or not. They try to make sure that no point goes against the seller or the buyer in the future. Most of the attorneys take the responsibility of such condition. They in fact play a major role in finalizing the real estate deals.
Real Estate Investment in Buenos Aires: Buenos Aires, a one way trip
The city’s charm adds to the convenient exchange rate that sets Buenos Aires as an ideal city for international tourism and furthermore, a mine for investment. The investment opportunities are multiple and the channels are open for independent developments: real estate, independent business, technology, importing, and many more.
An attractive road for foreign investors is within the real estate market. It is a realistic option both for small investors and big economic groups. The initial investment cost for a property is quite low and the return is surprisingly high, in short and long term basis. The cost of property and land is beginning to increase in Buenos Aires due to the high demand for permanent housing and short-term rental. There is in fact a deficit of apartments, what also explains the springing of loads of new developments that are.
The acquisition of a property carries along a series of implicit business opportunities apart from its personal use as a private residence: remodeling and resale, traditional rental, temporary rental, among others.
Short-term rentals is one of the most simple and feasible directions for small investors and most especially for those not currently residing in Buenos Aires. Alojargentina, other than selling properties and providing counseling in real estate, offers a full “Property Management” service. This consists in renting the property to tourists and companies following a short-term manner and in the property’s maintenance according to each customer’s particular needs.
Someone using this service from abroad, for example, can forget about taking care of the property since it can be left in the company’s hands. It is a complete service that includes renting the apartment, the guest’s full assistance, bills and taxes payment, property maintenance and coordination of any required repairs. The proposal anticipates the property owner’s interest in being informed of what is going on with hisher apartment and this is why reports are sent regularly. Customers may choose between a full management or a temporary rent solely management.
Frequent visitors may have their property in Buenos Aires to enjoy during their trips and use it as an extra income source through temporary rent. So, purchasing an apartment in Buenos Aires is an opportunity for a double investment: generating short and long term profit added to having a vacation home in an evermore alluring destination as Buenos Aires.
The apartments apt to be offered for temporary rent have different characteristics but there are certain mandatory requirements such as full equipment, basic amenities and demanded location. The preferred neighborhoods are Recoleta, Downtown and Palermo, but guests often ask for Las Caitas, Barrio Norte, Belgrano and Puerto Madero as well.
The Real Estate Sales area in Alojargentina specializes in this type of investment. The firm sells properties for personal use but mostly assists on temporary rent investment opportunities. It holds extensive experience in handling sales for foreign citizens and thus has the necessary know how in regards to processes, paperwork and requirements for non-resident buyers.
To view the virtual catalog you may visit our website or you can send your inquiries directly to ventas@alojargentina.com.
Real Estate Purchase Agreement Form – What You Really Must Know
Whether you are buying or selling property, your real estate purchase agreement is often what makes or breaks the deal. To side-step all the booby traps and gain an unfair advantage, let’s sift through the fine print together:
Earnest Money: How Much and Who Gets to Keep It?
Also labeled as a good faith deposit, earnest money is literally a check that is offered upfront by the buyer to show how sincere he or she is. And here’s the favorite question, “How much is this sincerity going to cost me?” Earnest money can dip as low as a symbolic $1 or climb up to 5% of the purchase price. As a crude rule of thumb, 1 to 2% of the purchase price seems to be the healthy norm for most markets.
If all goes well, this earnest money is often bundled as part of the down payment. Now that’s not a problem. The real headache erupts when things go wrong… and suddenly everyone wants to keep the earnest money. Since there are often no fast-and-hard rules on this, your real estate purchase contract plays a critical role in sorting out this mess. Your real estate purchase agreement form should have a “earnest money” clause that clearly defines when the seller can swallow the money and when he or she has to cough it out.
Property Inspection: How Much Time and Who’s Paying?
Just like you should always test-drive a car before buying, your real estate motto should be “no inspection, no deal”. Your real estate purchase contract should give a reasonable deadline for the initial inspection, plus a time extension if the seller is required to make any repairs.
At the same time, your real estate purchase form should also contain complete answers to both questions: “What type of damages is the seller responsible for?” and “If something is broken, missing or leaking… does the seller have to repair it personally or just give the buyer a discount off the purchase price?”
Closing Costs: Now’s a Good Time for You to Bargain!
While certain closing costs are “expected” to be covered by one party (such as the buyer paying for inspection or seller footing the title costs), nothing is ever set in stone… until you sign that dotted line. Of course if you are already snagging the deal of the century, then it’s probably better not to haggle over the closing costs… otherwise there’s always room for bargaining here.
Your real estate purchase contract should make it crystal clear who’s paying for which closing costs. To help you fill in the blanks, here’s a hair-raising list of closing costs: appraisal fees, property inspection fees, title costs, recording fees, mortgage fees, insurance costs, credit reports, tax service fees, pro-rated property taxes and mortgage interests.
Tackling a real estate purchase agreement is no child’s play, but it certainly can be done… as long as you take the time to read and digest every line of it. Stick to a plain English agreement form and always ask, ask, ask if you have any doubts at all. It does take a bit more effort, but this bit more will go a long way to guarantee you a flawless transaction.
Real Estate Lawsuits – A Guide to Real Estate Litigation Causes of Action
Real estate lawsuits involve a number of possible legal causes of action, including breach of contract, specific performance, partition, breach of fiduciary duty, real estate fraud, quiet title and boundary disputes, among others. How do you know which causes of action are applicable to your real estate lawsuit and what do these different legal terms actually mean?
One of the most common causes of action in a real estate lawsuit, both in California and nationwide, is breach of contract. Oftentimes two parties will have either a written or oral agreement that governs their business dealings together. The contract can include a purchase and sale agreement, a lease, a partnership agreement, an option or any other agreement between one or more parties where each party has made promises to the other. In a breach of contract action the plaintiff must establish that it performed its side of the agreement (or was excused from doing so) but that the defendant did not. The plaintiff is entitled to recover any damages it suffered. This is probably the most common cause of action in real estate litigation.
Specific performance is often used in conjunction with a breach of contract claim. While a breach of contract action entitles the suing party to damages, specific performance asks the court to force the other party to actually perform what it had promised to perform. This is because the law presumes that real property is unique and damages are not sufficient to make a party whole. For example, in a purchase and sale agreement, if a party enters into a contract but later refuses to sell the property, the buyer can seek an order from the court compelling the seller to go through with the transaction.
Partition is a lawsuit among co-owners of property. Partition does not necessarily rest on an allegation that a party did something wrong. It simply allows for co-owners of a property to disengage from each other, either through a buy-out or the sale of the property. Partition actions are usually accompanied by a request for an accounting of how the proceeds from the property have been spent. The court will typically order an accounting to figure out if one owner has contributed or received more than another party so that they can be made equal. If the parties are unable to reach an agreement for a buy-out or sale of the property, the court can also order the property sold and the proceeds distributed equally among the owners.
While partition applies to co-owners of a property, breach of contract and breach of fiduciary duty are used in real estate partnership lawsuits. Oftentimes property is held in a partnership or limited liability company. The partners (or ‘members’ in a LLC) may have a partnership agreement or, for the LLC, Operating Agreement. A breach of the partnership agreement is a breach of contract. Because partners owe each other certain heightened duties, a breach of fiduciary duty cause of action is also common in partnership disputes. For example a partner who steals money from the partnership or who diverts the best real estate deals or tenants to himself or his other properties without disclosing it to his partners could be liable for a breach of fiduciary duty.
Real estate fraud applies when the other party has made a misrepresentation to you, you have reasonably relied on that misrepresentation and you were damaged by it. In a real estate case this can involve a seller who provides a buyer with false financial information or conceals a material defect in the property. In addition to compensatory damages, a fraud cause of action allows the plaintiff to seek punitive damages-damages meant to punish the defendant for committing the fraud.
Quiet title is used in real estate lawsuits to settle disputes over who owns a parcel of land. Whenever there is a dispute over property ownership, a quiet title is usually appropriate. Quiet title actions can also be used to correct problems in the chain of title even if no one is currently contesting the ownership of the property. This occurs when the historical chain of title is not complete.
Boundary disputes are just that-lawsuits arising over misunderstandings between neighboring property owners over where the boundary lines are and who is entitled to use a certain piece of the land. Boundary disputes can be settled by a quiet title claim.
Real estate litigation can be a complex field. Additional causes of action and remedies may be applicable to your situation. States like California have additional statutes and laws which apply specifically to real estate transactions and real estate lawsuits. However, this primer should help you understand what your real estate attorney is talking about when you discuss your lawsuit.
Real estate law involves many processes especially when going through a transaction. Negotiation, sale, and security agreements, mortgages, licenses, escrow, zoning, titles, and ordinances are just some examples of the documentation involved in a transaction. Throughout the buying and selling process an attorney is mandatory; there are many documents which require a lawyer’s approval, advice, or signature.
The Real Estate Settlement Procedures Act (RESPA) states that consumers must receive information multiple times throughout a transaction and forbids payoffs that would increase the settlement service price. New regulations were added to the act on November 17, 2008 but took full effect on January 1, 2010. These regulations stated that loan originators must include a good faith estimate with loan terms and clear closing costs along with a new settlement statement in the settlement transaction.
Real estate disputes are another part of the industry which can get complicated. Litigation may be needed to settle property disputes, in which case you would need an experienced attorney. Situations which may need litigation include landlord-tenant disputes, boundary conflict, property damage, flooding, and property defects. If an issue can not be negotiated it is often taken to court
Commercial real estate law is very different from residential, it has different limitations. One example of this is zoning ordinances; commercial zoning laws are much stricter and more difficult because of the amount of property in a commercial transaction. Land use is another issue which is way more difficult with commercial issues; the property must utilize the land the correct way and with huge property lots comes a lot of paperwork.
Zoning is a large part of real estate transactions. It is a way to regulate land use in municipal areas, including suburbs, cities, towns, and boroughs. Land is used for many different reasons and many lands have permitted uses, meaning the land is designated for specific types of construction. The main zoning districts are residential, commercial, industrial, and special use. Rezoning and zoning exceptions can be made but it is a very legislative process and would require legal help. An example would be a variance, or approval to be exempt from a zoning ordinance.
In Pennsylvania, an act was passed about a year ago making it mandatory that every contractor performing home improvement must register with the Bureau of Customer protection, this was to prevent home improvement fraud. For homeowners, however, this act prevents you from rescinding a contract after three days of signing it without penalty. This simply means that you can be taken to court if you back out on a home improvement contract three days after you’ve signed it.
Owner’s Rep in Real Estate Development – Instrumental in Project Success
Steve Bentley is a high net-worth individual living in Los Angeles, CA. He has been making a good living for years running the family business that he inherited from his parents. Although, Steve considers himself to be a savvy investor, putting his earnings away in stocks, bonds, mutual funds, and the like, he feels that he needs to diversify his portfolio a little bit more. When the market went south in 2008, Steve’s returns on his investments did as well. After researching alternative investments, he has decided to get his feet wet in real estate. He knows a couple of people in the business and is aware of the potential returns of a successful development. He identified a parcel of vacant land near his home that he believes would be ideal to build a multi-family project on. Without really looking at any other properties or running any detailed financial projections on the development, he acquires the property.
Once the property acquisition is complete, Steve hires an Architect to design his vision. You see, Steve is under the impression that all he needs to complete this undertaking is an Architect and a General Contractor. The Architect is quick to alert him that there is much more needed for a project of this magnitude. Not only will he need his Architectural Services to design this 42-unit stick-frame condo structure over podium parking, but he will also need a Planning Consultant to get the project entitled through the governmental authorities; a Structural Engineer to design and engineer the structure; a Civil Engineer to design all of the site utilities and earthwork since his parking has to run subterranean; a Geotechnical Engineer to perform tests on the soil which the building foundation will sit; an MEP Engineer to design and engineer the mechanical, electrical, and plumbing systems; an Interior Designer to design the finishes of the residential units and common areas so they are saleable; a Landscape Architect to design the outdoor hardscape and landscape; an Acoustical Consultant to make sure the sound transmissions coming into the condominiums are code compliant; a Waterproofing/Roofing Consultant to make sure the building design does not allow any water infiltration that could potentially lead to future lawsuits; an Elevator Consultant to design the elevator system; a Building Insurance Inspection Consultant because the insurance provider requires them for condominium work; and since this project is in a neighborhood that is trying to lobby for lower density, he even needs a Political / Community Outreach Consultant to deal with opposition of the local Not in My Backyard (“NIMBY”) contingent.
Steve knows that he is not certified to do any of this work on his own and does not want to get sued for a construction defect in 10 years. As such he decides to hire all of these entities but doesn’t know how he can possibly manage all of them. Steve has no experience in construction, let alone design and engineering. Additionally, he has blown through his budget for soft costs, which were essentially busted to begin with. As such, he decides to try and manage all of them on his own. Several months into hiring all of the consultants, as well as a General Contractor, things start to fall apart. The consultants are not producing their deliverables by the deadlines promised, the drawings reflect conflicting information, and Steve cannot even manage to get an appointment to submit the drawings into plan check with the city. The contractor forgot to submit his insurance certificate before mobilizing onsite and one of their workers was injured when performing structural excavation, city inspectors have already written several correction notices due to unsafe conditions, the contractor’s hard costs are getting carried away, not to mention they are submitting numerous change orders because there were so many holes in Steve’s contract with them. Everything is a huge mess and Steve needs help fast. It is now apparent that he needs an outside consultant to rectify these issues and manage the project on his behalf. In hindsight, he should have brought someone on board, possibly even before he submitted his offer on the property.
Introducing the Owner’s Rep
Herein lies the need for the Owner’s Representative in the real estate / construction industry. The Owner’s Representative, also referred to as the Owner’s Rep, OR, or simply Project Manager, is sometimes an overlooked asset that can be included in any project undertaking. The Owner’s Rep bridges the gap between ownership and all other entities involved with the project. They control the design and construction process, making sure that every decision is made in the Owner’s best interest. A true Owner’s Rep is well versed in development as well, managing the entire development process and not just design and construction. More often than not, an Owner’s Rep has a background in development themselves, so they know what it takes to pull off a successful development project and maximize their client’s Internal Rate of Return (“IRR”). In turn, the Owner’s Rep can use their ownership experiences to solve problems and offer creative solutions that directly affect the bottom line.
As one can see from the litany of tasks mentioned earlier in Steve’s case, there are a myriad of moving parts to a development project, many of which may be a daunting undertaking for most small property owners to handle on their own. If the Owner chooses, the Owner’s Rep can manage every aspect of the project, ranging from approvals to lease-up, something that individual Contractors or Consultants don’t have experience handling either. Hiring an Owner’s Rep is crucial and will allow the Owner to focus their time and resources on more important issues.
Acquisition
A very experienced Owner’s Rep can even be brought on before the acquisition of the property, to help the Owner with things like property selection, acquisition analysis, economic studies and due diligence. They may also provide financial support, assisting in the identification of various forms of traditional and non-traditional financing sources and then help evaluate and analyze each of the options. The compilation of feasibility reports may also be necessary for decision making and reporting to various partners such as equity, banks, and appraisers, which include market research, detailed financial analysis, entitlement summaries, and justification for “go/no go” decisions. The Owner’s Rep may also put together and update the project pro forma and even lead the project through the typically complex entitlement process, providing coordination with the city officials, land-use attorneys, and Architects involved.
Design
When it comes time to start the design process, the Owner’s Rep will assist in selecting the design team, typically at a minimum consisting of all of the players mentioned in Steve’s project above. They may create and issue a formal Request for Proposal (“RFP”) to go out to several different firms, or they may rely on past relationships to select a firm that best suits the particular project. Once the project team is formed, the Owner’s Rep can lead the effective collaboration towards a common goal. Again, the Owner’s Rep is typically involved in every aspect of the process and spearheads the flow of information among Architects, Designers, Engineers, Planners, Consultants, Contractors, Vendors, Property Managers, Sales Staff, Lenders, Governmental Authorities and of course, the client. Due to the number of players involved in the process, the Owner’s Rep should have a commanding influence to lead this synchronized effort to crystallize the design concept so that it can be built in the field. This point in the project is the ideal time to start exploring/visiting the value engineering possibilities. Value engineering is a technique in which the value of a system’s outputs is optimized by crafting a mix of performance and costs. In most cases this practice identifies and removes unnecessary expenditures, thereby reducing the cost. The Owner’s Rep should work with the consultants to remove these unnecessary costs and put the money in places where it should be spent.
This may also be an opportune time to perform a LEED analysis if the client wishes to go in that direction. The Leadership in Energy and Environmental Design (“LEED”) Green Building Rating System, developed by the U.S. Green Building Council (“USGBC”), provides a suite of standards for the environmentally sustainable design, construction and operation of buildings and neighborhoods. Several Owner’s Representation firms have LEED Accredited Professionals (“LEED AP”) on staff, which have the capability of analyzing a design and driving it to LEED certification.
Procurement
The Owner’s Rep may prepare and maintain a Master Cost Report if the client so chooses, which includes the hard and other related development costs, such as acquisition, design & engineering, permits & fees, legal, FF&E & OS&E, administrative, sales, and marketing costs. This budget should include allowances for any anticipated cost exposures.
Prior to construction, the Owner’s Rep can interact with the proper authorities who have jurisdiction to secure the necessary project approvals and permits. Having the design team do this alone may prolong the process as they do not exhibit the same urgency due to their lack of ownership in the project. Many times an Owner’s Rep is needed to facilitate this coordination effort in a timely manner. They will also orchestrate all of the contractor bidding and trade buyouts. Whether the plan is to use a General Contractor, several prime Contractors, many direct Subcontractors, or any combination thereof, formal RFP’s should be issued and sent to at least three different contractors for each trade to ensure sufficient coverage through competitive bidding. All returned bids should then be thoroughly vetted and a comprehensive bid comparison presented to the client prior to awarding any contract. After this “apples-to-apples” bid comparison has been compiled for a particular trade, negotiations will commence to establish a complete scope of work that is cost effective.
Many times, in order to save costs, materials and equipment may be bought directly through a purchase order to the client. Similar to the trade work above, pricing should be obtained from at least three vendors to ensure sufficient coverage through competition.
Construction
The Owner’s Rep should prepare and maintain a Master Construction Schedule which incorporates all construction activities, procurement, material lead times, submittal lead times, approvals, permits, inspections, tenant relations, logistics, sales, marketing and turnover to the end-user. Weekly meetings should typically be held with the General Contractor and Subcontractors to review three-week or six-week look-ahead schedules.
The Owner’s Rep should also maintain a working history set of all project documents in the field, including drawings, specifications, requests for information (“RFI’s”), submittals, sketches (“SK’s”) and all relevant tracking logs. Every RFI response needs to be posted onto the drawings to ensure not only proper quality control in the field, but also a complete set of as-built drawings that can be turned over to the client at the end of the job. Additionally, the Owner’s Rep should review and provide insight to every submittal, RFI and SK that comes through to make sure everything is warranted and properly clarified. In addition to document control, the Owner’s Rep should also provide quality control in the field. In most cases a Superintendent should be part of the OR’s staff, walking the job every day, from start to finish. This supervision is key to having a successful project that is built per plan and spec. It is also imperative to have a Superintendent to manage the field labor so that manpower stays at a consistent and productive level.
The Owner’s Rep should make sure that each contract carries a complete scope of work in order to minimize the amount of change order requests coming in from the contractors. When they do arise, a thorough review and negotiation will take place to determine the validity of the request prior to approval.
The OR’s superintendent should work with the Contractors as they prepare and go through the many inspections required by the authorities having jurisdiction during the construction process with the end goal being to receive final building certifications.
Accounting/Cost Control
As invoices, or monthly applications for payment, come in from the Contractors, the Owner’s Rep should review prior to recommending payment to client. It is beneficial to work with each of the Contractor’s in preparing their schedule of values during contract negotiations to maintain a proper breakdown and format that is consistent and comprehensive for the client during billing. During these billing periods, the OR should also request and gather all conditional and unconditional waiver and release of lien forms from all Contractors, Subcontractors, and Sub-Subcontractors for progress payments and final payments. If payments are made correctly, this will protect the client from having mechanic’s liens recorded on their property.
Every month, as part of the Master Cost Report, a complete cash flow analysis and draw schedule should be updated and presented to the client, projecting costs on a month-to-month basis so that the client has a clear and realistic schedule of anticipated expenditures and bank draws. This service can range from general oversight and direction as to timing the cash with request, and move all the way to full control of the project’s cash management in a fiduciary position.
Project Close-Out
As construction nears completion, the Owner’s Rep should provide a punchlist of all completed work. A punchlist document will be generated listing those items of work which have been observed as incomplete or requiring correction. The contractor then finishes the items on this list before Final Completion may be declared and final payments authorized. Also, near the end of the project, the OR will gather and compile books of all applicable product manufacturer and workmanship warranties, along with all applicable operations & maintenance (“O&M”) manuals for the end-user. In residential construction, these can be put together to be turned over to the individual homeowner, the homeowner’s association and/or the property management firm.
For a residential project, one must be cognizant of the Department of Real Estate (“DRE”) requirements. The Owner’s Rep should be involved with all DRE Filings, creating an itemized checklist of all relevant requirements and then tracking each of these items to ensure that nothing slips through the cracks as a project approaches its various tract map and condo permitting processes.
Sales/Marketing
Some Owner’s Representation firms may have the staff and experience to aid the client with sales, marketing, and/or lease-up, either directly or indirectly by providing oversight. They can help identify a competent and appropriate sales team and establish sales and marketing strategies to be used for the project. Particular importance should be placed upon helping the client devise a sales and marketing campaign which helps the project differentiate itself from the competition and attract the right type of customer to the sales team.
If there is a “for-lease” component to the project, an Owner’s Rep may be able to source and procure various potential tenants for a client, as well as negotiate the terms of their lease. A savvy Owner’s Rep can provide a detailed lease analysis, abstracting and reporting in-place or proposed lease documents, making sure to identify the major deal points and lease clauses which impact the financial results and flexibility of the project.
Conclusion
In broad terms, the Owner’s Representative will be the direct representative of the client, spearheading all aspects of the job and recognizing and solving conflicts. When complex issues arise, they will explore all options available, distill the information, and provide the client with a concise set of options, clearly defined, along with a recommended course of action.
To reiterate, the Owner’s Representative is a critical team member to any successful real estate development project. As noted earlier in Steve Bentley’s case, poor decisions can easily be made by property owners simply because they do not fully understand the issues at hand and have experience with the processes. Sound advice to any property owner or prospective property owner looking into any type of development venture is to consider including an Owner’s Rep on the project team. More times than not, the client will discover that the time, money and hardship saved by having an Owner’s Representative involved will more than pay for the OR’s fee.
Depending on where you live, you may have hundreds of laws, rules, and codes regulating how to build and maintain a property, or you may have a few dozen. Regardless of how many there are, it’s essential as a property owner, investor, and landlord to be intimately familiar with building codes.
Building code can cover each and every aspect of a building – from foundation to roof and everything in between. When building a property, regular inspections are often required in order to make sure everything’s being done right. But with a property that’s already been built, that responsibility becomes yours.
The first step is to become familiar with the regulations governing your area. These regulations can be both on the state level and on the local level, so you’ll need to contact your state, your county, and your city. (And sometimes, you have to deal with community regulations, home owners associations, etc.) Most websites likely have the information you need, but you may need to make some phone calls, especially for the more local rules.
Once you’re familiar with the codes governing your property, you need to make sure it’s up to code. Or, if you’re considering buying a property, you’ll want to find out if there are any violations which will, of course, cost to fix. Now that you’re familiar with the code, you should be able to get a good idea of potential problems, but it’s usually best to hire an inspector to come in and thoroughly check a property from top to bottom. This will give you a better insight of what would need to be fixed.
Once you figure out what needs to be fixed, assuming you currently own the property, you need to fix it. If you’re investing in a property, decide whether or not you’d be willing to put the time, effort, and money into bringing it up to code. Use your network to find a contractor that would be able to resolve any code violations in the most efficient manner. And after everything has been fixed, depending on the type of property, you may need to get an inspector to come in and certify that all the appropriate work has been done.
Stay informed about current code, possible future code, and potential trouble spots with a property and you should be able to avoid any surprises regarding proper code enforcement.
A few weeks ago Canadian interest rates began to rise and the media continued making a lot out of nothing. What I found rather interesting was the expert commentary about how this would affect those with variable rate mortgages. I’m summarizing here but basically the higher payment amount for those with variable rate mortgages was so little that it would have no effect.
No effect? You mean the media spent a month talking about something that nobody will even remember. Yes! And of course they’ve moved on and found their next fear to inflate. This time it’s the real estate correction we’re due for between now and late 2011. They’ve even got reports from two major banks to feed the fear.
As usual I’m here to provide these predictions with a little more context. Fear is either in your head or someone else’s and you shouldn’t be listening to either.
In this article I’ll be talking about what’s happened over the past year to put things in their proper perspective. Let’s start with the not so obvious. We’re currently in the slump phase of the real estate cycle which began in late 2008.
Did you just crawl out from under a rock David? The papers have been talking about significant increases in resale homes, strong price appreciation, and multiple offer scenarios reappearing.
Yes, this is all true and yet as savvy investors we know to look behind the proverbial curtain for the real facts. All of this activity is because of historically low interest rates that have caused folks to move their buying timelines up. The result is that the visible signs of a slump have been delayed and mostly hidden.
Interest rates are only a market influencer. The extent of the influence will become very obvious over the coming months and through 2011. Just watch as the real estate headlines become more negative as sales activity drops.
Why is this happening David? Is it because of the increase in interest rates?
Uh, nooooooo! This is what the headlines want you to believe. It’s happening because a lot of folks to buy now in order to take advantage of the low interest rates. This has significantly reduced the number of buyers in the short term which means fewer sales. So low interest rates have basically caused us to trade future sales for the present and it will take some time for that supply of home buyers to be replaced.
Now to those reports from the major banks stating that our real estate is overvalued and even predicting a 5 to 10% drop in prices. I’m going to offer a different point of view and focus on a relatively recent event here in Ontario a couple of years ago.
If you’re from Toronto like me then you’ll hopefully remember the Land Transfer Tax that came into effect in 2008. There was a huge increase in resale activity in the final quarter of 2007 and early 2008 as buyers attempted to avoid this tax.
The headlines then were similar to many of those we’ve seen in recent months. More similar is that buyers moved up their home purchase to avoid the tax increase back then just like they have now to avoid the interest rate increase. The result was a noticeable drop in sales activity.
Despite this there wasn’t a drastic price retreat in early 2008. The global recession in late 2008 and through 2009 did have an impact, but even then it was most obvious in homes over $300K.
Fast forward to today where our interest rates remain at historically low levels despite three increases of of a percent. Without a drastic increase there won’t be a mass exodus of buyers. The rate is also expected to rise slowly over the next 18 months – the same time it will take for the supply of buyers to gradually return.
Since everyone likes making predictions I want to make one of my own, sans the fear. I expect nearly the same thing to happen now that did in 2008 – values will stabilize and sales will moderate prodicing a balanced market. In other words the real estate market will get a little boring which is something I personally like.
In my next article I’ll dial down the emotion in our real estate investing further and continue the conversation by talking about our worst case scenario. See you then!
Like all professions there are good and ethical people who make up the majority. However, there are also a percentage who are not ethical and will take advantage of others to make their money. Below are some tips to help you get a feel if a real estate agent is really on your side.
I am a home inspector and over the years of business I hear things and have lots of experiences with agents. Do not get me wrong most agents want the best for their clients. Smart ethical real estate professionals will help a home buyer locate the most thorough home inspector in the area. These agents realize that a thorough inspection is the best way to conduct business.
If a real estate agent ever says anything similar to this: “that inspector is too picky” this is a warning sign. You may even want to ask this agent this: too picky…”what areas of the home do you feel that I do not need to know about and how would you know as to if those things are important to me or not?”
I along with good agents believe that the more information that is known the better. Full disclosure from a home inspection avoids conflicts and lawsuits down the road. This is also the way to build a strong, long lasting business.
If an agent answers the phone while showing you a home this is something to be concerned with also. They should be giving you excellent service and helping you search for your new home.
If you ever are in need of a good ethical real estate agent in Central Ohio I can help you find several.