About Commercial Rental Property

Commercial rental property is a very wise investment for aspiring business owners or for people who are looking for a place to invest their retirement, annuity or lottery winnings.
Function
The function of commercial rentals is to make money from businesses. Commercial leasers tend to work more often with business owners that want to run their businesses on a commercial level. The primary goal of commercial renters is, of course, to make enough money. The money they make from renting these properties is often used to pay for the high-priced mortgages that are associated with owning these types of rental property.
Types
There are many different types of commercial rental property including: office buildings, retail stores, warehouses, convenience stores and shopping malls to name a few. Office buildings, retail stores and some warehouses tend to have a higher price tag attached to them than convenience stores and other types of small scale commercial property. Other types of commercial properties include: commercial land (for which you can build your own commercial building) and stadiums..
Benefits
The benefits of owning a commercial rental property range in depth from huge profits to the possibility of expansion. In the beginning, the main focus of your commercial property should be benificial gain. If you are just starting out in the commercial rental profession, you need to know how to make your profit. For example, if your property mortgages for $1100.00 per month, it would be beneficial for you to market the rent for your property $400 to $500 higher than the mortgage you pay. This will help you make a decent profit. Once you have enough money saved, expanding your gig would be the best thing you could do for yourself.
Potential
Any type of real estate investment (if planned correctly) can have flourishing potential. You can have very big income potential if you operate by yourself. For example, If you charge $1100.00 per month for rent and you own 3 commercial rental properties (also $1100.00 per month) thats an annual income of almost $40,000.00 ($39,600.00 to be exact). You could possibly retire on that.
Warning
Beware of current economic forecasts. If you try to buy 3 or 4 investment properties when the market forecasts aren't looking so good, you may struggle to get renters or you will forced to file bankruptcy or sell your property. If you are going to invest in commercial properties, you are encouraged to wait until you have saved enough to buy the commercial rental property out-right.

How to Live in Commercial Property

People who live on commercial property are usually seeking to save money by allowing their business location to double as their home. Unfortunately, this decision could end up costing you if county zoning laws do not allow for your business location to double as a residential property. If this is the case, you could be evicted, fined and taken to court. Even if it is legal for you to live at your business, you must still make sure that your living space is safe.

Instructions
Check your county's zoning laws. You may be able to do this on your own by visiting the county clerk. Alternatively, consider hiring a lawyer to help you with this process.
Create a safe space on your property that is separate from the commercial activities of your company. If living and working in an office typesetting, clear a backroom with a window for escaping fire and set up a futon, television, microwave and small refrigerator. If living in a warehouse setting, consider constructing an apartment within the warehouse space. However, be sure to obtain a permit for completing this project.
Develop a plan for keeping your residential life separate from your working life. Otherwise, you may find that you spend every moment working or that, since you are always home, you lack the motivation to get to work. Establishing a set schedule will help you overcome these problems.

Tips & Warnings
• Another alternative is to consider parking a camper on your property and living in the camper. Again, consult a real estate lawyer or county clerk to ensure that you are legally able to bring the camper onto your property.

How to Find Cheap Commercial Real Estate Properties

In the wake of the worldwide commercial real estate slump, few properties are as expensive as they used to be. Some might even be considered "cheap" and thus a good opportunity to make money in the short- and longer-term. But even in hard times, investors looking for commercial property deals need to plan carefully and understand what they are getting into, because a bad property is no bargain even if it's cheap. Successful commercial property acquisition is both complicated and time-consuming and professional help is essential for inexperienced commercial property investors.

Instructions
Understand what "cheap" means in a commercial real estate context. Commercial properties are assets whose value is closely linked to how much income they can be expected to produce, usually in the form of rents from tenants. A property is "cheap" only if its projected income stream will exceed by a significant margin the cost of acquiring it plus the cost of operating it.
Narrow your focus. Commercial real estate actually refers to several main types of property, all with widely different business models, including office, industrial, retail, hotels and apartment properties. No one, not even the most seasoned real estate pro, is an expert in every property type or even more than one or two.

Establish relationships with the professionals whose help you will need to find and acquire cheap commercial property. A good commercial real estate broker will not only know his or her particular market in detail but also most of the potential sellers in the area. A skillful real estate lawyer will understand the ins and outs of structuring the deal.
Look for properties on the market whose owners might have a reason to sell them at a discount. Inspect them carefully and try to determine why they are on the market. Some older property owners look to liquidate their assets as a form of estate planning. In other situations, owners are having a difficult time making payments on their loans and are willing to sell to cut their losses. Also, there is now a sizable number of foreclosed commercial properties coming on the market. Many of them will ultimately be sold at steep discounts by the lender who has taken possession of them.
Arrange your financing. It's quite difficult to borrow money to buy commercial real estate these days and to do so you must prove to a lender that the property you want to buy will provide enough income for you to keep current on the loan. In the case of buying foreclosed properties, you often will need cash to do the deal. That saves you the trouble of finding a lender but it also puts all of your equity at risk if the investment isn't as good as you thought.
Negotiate a price. All pricing in commercial real estate is negotiable, except when the property is traded by auction. Do your math beforehand to determine how high you can reasonably go and still make money from the building once you are its owner.

Tips & Warnings
• Land has a tendency to increase in value as time goes by but, with certain exceptions, commercial buildings often lose value over the decades as they become obsolete.
• If you're buying property for your business, look into the possibility of a Small Business Administration-backed (SBA) loan.
• Building valuation is often expressed as a capitalization (cap) rate. Cap rate is the ratio of income to sales price (your capital investment).

How to Evaluate Commercial Property

Commercial real estate is property leased to business owners rather than residential families. The initial investment on commercial property is often high, but the returns can be far greater than residential real estate. An investor must evaluate the property based upon location, economy, and the risk of repairs versus the possible lease amount.Does this Spark an idea?

Instructions
Contact a real estate broker and determine the best locations to scout commercial real estate. Select a location with few vacancies and a good balance between residential structures and major shipping lanes such as highways.
Hire a contractor to examine the property inside and out, making note of any damage that needs repairs. Tally the list against what the broker believes you could get from leasing the property to a business owner.
Invest your personal time in the area, monitoring the local businesses to see how they are performing. Make the commute from residential areas to the commercial district to determine if the property is easily accessible. Weigh these findings in your decision to purchase the property.
Consult with your broker and determine a threshold price that you are willing to pay but not exceed, keeping any repairs in mind. Arrange a meeting with the seller and attempt to purchase the property below your threshold.

Tips & Warnings
• The best way to know if a commercial property will perform well is to evaluate the businesses nearby.
• Always have someone check the property for asbestos or lead paint.

How to Buy Commercial Property

f you are considering buying commercial property, you might have a large amount of your income at stake. You might want to buy an office or other building for your current business, rather than continuing to pay rent for a space. Or perhaps you want to strike out on a new business venture and want to purchase property to start out on. You may also wish to buy property that you can then rent or lease out, such as apartments. No matter the reason, you have many factors to take in while making this weighty decision.

Instructions
Take stock. You need to know how much cash you have available to put down on a piece of commercial property. This will help you determine your budget for the property. Typically you will need to have at least 20 percent of the sale price on hand to put as your down payment.
Give yourself plenty of time. Even if you have a wad of cash in your pocket and the perfect place already picked out, the process can take time. With commercial property there are many factors to consider in the negotiation process, such as appraisals, safety codes, environmental issues and more. This process can take up to a year or more.
Find a real estate broker or agent. A professional will be able to help you search out the perfect piece of property, as well as walk you through all of the ins and outs of the process. Talk to other business owners that you trust and respect, and ask them for recommendations.
Take time to pick the right piece of property for your business needs. Consider how much time and money you want to put into the initial fix up or changes as well as day-to-day upkeep. Think about how many employees you have, and determine how many bathrooms you will require and whether you need some sort of kitchen. Find out about average utility and other monthly, quarterly or annual bills you will encounter.
Have the property inspected and appraised before you make any type of offer or deal. Find out about past repairs and problems, and whether any type of warranty will be made available. This is a major investment, so you really need to protect yourself.

Tips & Warnings
• Consider pooling your money with someone needing similar space and sharing the property. This might allow you more or better property.
• Take into account any laws or regulations for your type of business. For example, if you wanted to open an elder care home, would you need to install a sprinkler system? Forgetting to factor in these costs could get you in over your head.

How to Buy a Foreclosed Commercial Property From a Security Broker

Foreclosed commercial mortgages can be purchased from many specialized securities brokers without special requirements. Once you purchase the security, you'll have to take over collection procedures yourself to either attempt to restore the mortgage to solvency or proceed with eviction and full acquisition of the commercial property. Commercial mortgage backed securities (CMBS) are an actively traded market with a relatively high level of risk that offers opportunities to commercial real estate investors and speculators alike.
Instructions

Find a securities broker specializing in the trade of individual mortgages, both commercial and residential. Many mortgages are repackaged by lenders into mortgage-backed securities which are too large to be managed by individual investors. Individual mortgage notes are bought and sold on a smaller market geared to individual investors and businesses by specialized brokers. These are private markets that aren't typically publicly advertised.
Purchase a foreclosed commercial property from a broker that gives you access to broader mortgage markets. You will not necessarily need to use a traditional broker. There are brokerage firms that offer mortgage trading platforms for individual investors to meet banks and other lenders looking to sell these distressed securities, such as TradeWeb. These securities will be available for purchase for much less than the total amount of the mortgage because it's already in default. You will either have to trade the security, collect on the mortgage or proceed with the foreclosure process yourself.
Contact the current mortgagor of the commercial property. If the tenant of the property is current with their rent, you will not need to proceed with eviction against them. Attempt to create a repayment plan with the mortgagor taking into account their financial situation. You can renegotiate any previous agreements made by the previous owner of the mortgage with the current mortgagor.
Initiate the foreclosure process if the mortgagor is not able to come to an agreement with you. In most cases, you will end up with sole possession of the commercial property. You will gain responsibility for any tenants still using the property that are abiding by the terms of their lease.

How to Lease Commercial Properties

Leasing a commercial property is one way to give your business permanence and stability. But a commercial lease places most of the financial responsibility for leasehold improvements on the renter, rather than the landlord. It's important to thoroughly research a commercial property before you sign a lease, to determine whether you have a reasonable chance of paying back the cost of leasehold improvements over the course of the lease term.

Instructions
Research whether the commercial space you're considering is zoned for your specific type of business activity. In most municipalities, commercial property must be zoned for general commercial use, but specific types of commercial activity such as restaurants, bars and manufacturing have special zoning requirements as well. You can find zoning maps online through your town or city's website, or you can visit your municipal zoning office to obtain the information you need. Some municipalities allow you to apply for a change of use if the property isn't already appropriately zoned. Make sure that this is possible, before you commit to a commercial lease.
Work with contractors to develop a realistic estimate of the cost of improvements you'll need to prepare the commercial space for the type of use it will receive. Include the cost of plumbing, electrical work, ventilation, and any changes to the layout, such as adding or removing walls. Also calculate the cost of signs, paint, flooring or rugs, and licenses or permits. Add the amount that you'll pay in rent while completing your leasehold improvements.

Calculate the volume of business you'll need to transact to cover the cost of the leasehold improvements. Negotiate with the landlord, to determine if he's willing to extend a lease with a long enough term for you to make back the money you'll need to invest. Also, check with your prospective landlord to see if he's open to you using the space for the purpose you intend, and if he'd be willing to offer you a rent reduction while you complete your improvements.

Review the commercial lease your landlord offers you. Most commercial leases are fairly standard, but it's still important to understand the terms. Ask to include provisions for special circumstances you might encounter -- for example, you might not use your commercial space full time, and might ask to sublet it to another business during off hours.

How to Calculate Commercial Property Insurance Payments

Your business has a commercial insurance policy for a reason. You have invested a lot of time and money into your business and want to make sure that your investment is protected in the event of a fire or other common cause of loss. If you must ever file a commercial property insurance claim, you should be able to calculate the approximate settlement value to expect from the insurer. Though the math is easy, there is often confusion as to how to apply the policy deductible and the maximum amount of money you are entitled to.

Instructions
Read your commercial property insurance policy to determine the maximum benefit and the appropriate deductible. Example: Your inventory was burned in a fire. Your inventory coverage maximum benefit is $100,000. Your deductible is $500.
Determine the value of your damaged property. Methods of doing this will vary by the type of property that was damaged.
Subtract your deductible from the total value of the damaged property. Using the above example, if the value minus deductible is less than $100,000, you should receive that amount. If the value minus deductible is greater than $100,000, you will receive only the maximum policy benefit of $100,000.

Tips & Warnings
• Remember that the deductible applies to the property value, not the policy limit. If the total damage in the above example was $100,499, then the value minus deductible would be $99,999, and you should receive that entire amount. If the deductible were applied to the policy limit, then the maximum benefit you would receive under any circumstances would be $99,500. This is not legal, according to the lawyers at the Merlin law group.
• Your insurance company may have methods of reducing costs that are not available to you. You may calculate your damaged property value at $50,000, but the insurer might be able to replace the same property for only $45,000, thus reducing your expected benefit. You are entitled to a settlement equal to the least expensive method of accurately valuing your property. Therefore, your settlement calculation may be different than the insurance company's.

How to Assess Commercial Property

The process of thoroughly assessing commercial property is a detailed and potentially lengthy process. However, correctly assessing commercial property is important to determine what the land or the land with a building on it is worth. Commercial property assessments should be done yearly so the current worth of the entire property is known for business investment purposes as well as real estate options. A business or land owner must calculate the property's value before deciding on the selling price so the property can be listed appropriately.

Instructions
Calculate the commercial property's value before comparing it to a professional assessor's findings. The Real Estate Investment website real-estate-investment.net recommends checking with a local bank or real estate agent to determine what current market values are in the area. It is also important to obtain a list of the criteria used to determine commercial property value.
Review the factors used to determine the value of a commercial property. According to the website Commercial Building Inspections, market conditions, property location, area development and anticipated area development all contribute to the outcome of the commercial property assessment.

Include the necessary figures if the commercial property produces income. Access the total business or land earnings from the previous year and include the total into the land or business value. The Commercial Building Inspections website explains that a buyer who purchases commercial property based on its income value is choosing to buy the property partially based on its future income potential.

Visit the ASTM International website to purchase a copy of the Standard Guide for Property Condition Assessments. Understanding the conditions that are observed when making a property assessment will help with the commercial property assessment calculation process. Combine all of the assessment figures in order to determine a rough estimate of the property's value.

Compare the individual assessment of the property with the official assessment that was produced by a professional property assessor. It is important that a land or business owner be aware of the property's value so a reasonable sales price can be reached. It is also beneficial to know the commercial property value when the owner is considering offers.

How to Calculate Depreciation on a Commercial Property

Depreciating investment property can be a significant tax benefit. Depreciating commercial property is different than depreciating residential property, and these differences can be used to take full advantage of the tax benefit.

Instructions
1.Straight Line Depreciation
Calculate the total cost basis of the commercial property you are depreciating.
Divide the total value by 39 to get your annual depreciation on a straight line basis.
Apply the depreciation to your taxes annually for at least 39 years until the property has been fully depreciated.

2.Cost Segregation Depreciation of Commercial Property
Separate the commercial property asset using an engineering report into four separate categories: personal property, land improvements, the building and land.
Depreciate the amounts allocated to personal property over five to seven years using a double declining method.
Depreciate the amount allocated to land improvements over 15 years using an accelerated method, such as the 150% declining balance method.
Depreciate the components of the building separately to take advantage of different tax benefits. For example, although the roof is part of the building, you may be able to depreciate it more quickly separately.
Allocate the remaining amount to the land catagory.

Tips & Warnings
• Do not under any circumstances attempt to do this without the assistance and direction of qualified tax, accounting and engineering professionals.

How to Calculate Condominium Depreciation

Investors may choose homes, land, apartments, commercial buildings and more as real estate investments. Investors must depreciate rental properties, according to Internal Revenue Service. Depreciation helps investors maintain an investment property without spending more cash. Depreciation offsets use, age and obsolescence of an investment property. Condominium investments offer 100-percent depreciation potential. Condominiums don't include land value. Land can't be depreciated. Residential income property may be depreciated over a 27.5-year useful life on a straight-line basis.
Instructions

Use depreciation to reduce the costs basis of your condominium investment. Depreciation is an accounting method used to calculate the decline of an asset's value over its useful life. The Internal Revenue Service allows depreciation as an expense against taxable net income. Only income-producing real estate properties may be depreciated. Depreciation theoretically encourages investment in the real estate asset, according to "West's Encyclopedia of American Law."
Calculate net profit or loss on a rental condominium by subtracting deductible expenses, including depreciation, from income. Expenses include operating expenses, mortgage interest and depreciation.
Let's say you purchase a $200,000 condominium. To calculate the annual depreciation amount, divide $200,000 by 27.5 years. The result, $7,272, is added to other expenses -- operating expenses and mortgage interest -- and subtracted from net taxable income. If the condominium has net expenses of $25,000 and rental income of $16,000, a net loss of $9,000 results.
The condominium's value shows a loss on paper even if the condominium may be appreciating in value in the real estate market.
Continue to subtract the annual depreciation figure from the condominium's cost basis each year. Unlike some deductions, taking depreciation against a rental property isn't optional, according to "Every Landlord's Tax Deduction Guide" by Stephen Fishman in 2010. Failing to depreciate the property will cost money in the future. The IRS adds depreciation back to the cost basis when you sell the property.
Talk to your accountant about the computation of depreciation and allowable expenses against rental income. Author Stephen Fishman encourages landlords to take a hands-on approach in calculating real estate depreciation. Understanding the value of depreciation can assist an investor in making real estate acquisition decisions.
Understand the tax impact of depreciation recapture before selling a property. Say you've held a condominium purchased some years ago $100,000. Depreciation of $40,000 over time lowers the cost basis to $60,000. Selling the property nets $130,000, or $70,000 above the depreciation-adjusted cost basis rather than the original $100,000 purchase price, according to "New York Real Estate For Brokers" by Marcia Darvin Spada in 2008

Tips & Warnings
• Insure your condo investments against fire and other hazardous events.
• The condo you call home can't be depreciated.

The Importance Of Property Insurance

The basic goal behind buying insurance is to make you financially whole following a loss. You agree to pay a (relatively) small fee to an insurance company today, causing a small but certain loss to you now, in exchange for a guarantee from the insurance company that it will bear the burden of a large but uncertain loss in the future.

Let's say that you have a house that you own, free and clear - with no insurance. As long as you continue to pay your property taxes, you have every right to enjoy the use of that house for as long as you like, as guaranteed by law. You may live there, rent it out, leave it vacant or even sell it if you like. However, if that giant tree in the back yard falls on your house causing severe damage, it is still up to you to cover the cost to repair the house. This is the basic reason to carry property insurance, which would have paid for your property to be fixed or replaced

Who Needs Insurance?
Thankfully for those of us who might be negligent in our responsibility to have insurance on our property, we are forced in many cases by either law or contract (the mortgage contract) to carry insurance. While not many, if any, U.S. state laws require you to carry property insurance, they do often require some form of liability insurance, especially for cars. This covers repair or financial restitution to someone else besides the individual at fault. For example, the person at fault's liability insurance pays to have their car fixed, or pays their medical bills. Fortunately, when most of us purchase the required liability coverage, we are given the opportunity to purchase the property insurance (i.e. comprehensive or collision insurance) rather easily, thus saving us from financial hardship if our own car is damaged in the accident.

Coverage
According to a survey published in the Journal of Financial Planning, many homeowners have vastly misguided views of what their homeowners insurance actually covers. According to this survey conducted by the National Association of Insurance Commissioners, "One third of homeowners believe flood damage will be covered by their standard policy. Over half think their policy covers them in the event of a water line break. Thirty-five percent say they will be compensated for an earthquake, and a slightly lesser proportion thinks mold is covered."
In actuality, the typical perils (causes of property destruction) that are typically not covered are:
• Flood damage (this is a separate policy)
• Earthquake (this is also a separate policy)
• Mold
• Acts of war
• Parts of the property in disrepair (Including worn-out plumbing, electrical wiring, air conditioners, heating units and roofing).

Policies are often written so that for something to be covered, it must be "sudden and accidental", meaning that it wasn't a slow leak that caused damage over many months. Often this is not covered by insurance. If your roof caves in from old age, and not from storm damage, it will likely not be covered.
The typical perils which typically are covered include:
• Fire
• Wind (tornado or hurricane)
• Hail
• Theft
Liability Coverage
In addition to covering the value of your home or other property, many insurance policies also include an important provision for liability coverage. You may not think this is very important, being the careful person that you are, however, there are scores of eager lawyers in every city searching high and low for lawsuits against people such as yourself. Liability coverage is well known to owners of automobiles, but may be lesser-known to homeowners.

If your neighbor's house catches fire because you left your charcoal grill unattended, who do you think will pay for the damage caused by the fire? You will. You have paid the insurance company your premiums so that they will pay for larger claims when they do occur. The same goes for someone who is hurt and requires medical attention while on your property.

If you are on vacation and your property is stolen, such as a diamond ring, you may be entitled to reimbursement. Be sure to document the theft with evidence that you owned it and you should be able to provide a police report to the insurance company.

Don't Guess - Know
You should know what your policy does and - more importantly - does not cover. Insurance companies don't stay in business by charging a minimal amount to cover any and all things which could possibly happen to your property.

Additional (Non) Coverage
Home-based businesses are not typically covered. This doesn't include a home study, but rather a place where people come into your home as customers, such as a workshop where you repair furniture. You will need a separate business (commercial) policy to properly insure this area and its related liability. Again, these rules vary from state to state and country to country.

Also, if your property, especially your house, is left vacant for more than a certain time period, such as 60 days, then the homeowners policy may be canceled immediately by the insurance company. It is assumed that a vacant house is at a much higher danger of perils such as fire or theft, and therefore changes the risk profile enough to require a separate policy. If you have a second home or a vacation property, you may get another policy to cover this home as well.

Pitfalls to Avoid
Check to see if your policy covers repairs at actual cash value (ACV) or at replacement cost. Replacement cost is usually much better. Case in point: If your roof was damaged and needs to be completely replaced, replacement cost will pay for it to be fully repaired less your deductible, while ACV will pay you what your roof was estimated to actually be worth at the time of the damage. The tradeoff is that ACV costs less than replacement cost coverage.

Art and Jewelry
Additionally, if you have expensive jewelry or art that you want covered, you may need to add a floater. This is an add-on to your main policy. Many policies have standard amounts that they will pay out for losses to particular items, and they will pay no more.

Co-Insurance Clauses
Finally, some property owners only want to insure a property for what they paid for it, which may bring into play a co-insurance clause. This is (depending on local laws) where the property is insured for less than say 80% of its current replacement cost. A lesser amount of coverage and the insurance company will require you to share in a percentage of the repairs above and beyond the deductible amount.

Premium Factors
Do you live in an area prone to tornadoes, hurricanes or floods? Do you own a large dog or a swimming pool? Are you a smoker? How's your credit score?

You may be a higher-than-normal risk based on your answers to these questions, and they will charge you accordingly. These are factors that the insurance company takes into account when setting your insurance rates. The more that these and other risks are applicable to you, the higher your rates will be.

Final Thoughts
One last warning: some insurance companies provide seemingly unbelievable rates for their policies. If the company is unknown and its rates are exceptionally good, this should be a red flag for you. Check around for the company's reputation, and don't just take the salesman's word for it. Have a look at the policy and see what they cover, and what they don't. You may find only too late that what you thought was adequate coverage, was barely the legal minimum in your area. Seek quality coverage - remember, "cheap insurance can be very expensive."

What is Demolition Insurance?

Demolition insurance is a type of insurance protection that makes it possible to absorb the costs of tearing down a building that has been damaged beyond the point of repair. Sometimes referred to as a named perils of insurance policy, the coverage aids in razing structures that have been damaged by fire, wind or some other event and are no longer safe for use. Often, this type of insurance works hand in hand with personal and commercial property insurance to not only level the damaged building, but also to remove the debris from the building site.
One of the main benefits of demolition insurance is that it provides the resources necessary to remove a damaged structure from a piece of property. Most insurance contracts with this type of coverage call for inspection of the structure before the final razing is undertaken. Once both local authorities and the insurance company agree the damaged building is beyond repair and poses a threat to public safety, a crew is engaged and the building is leveled.
Some types of demolition insurance not only provide resources for tearing down structures damaged in a disaster, but also cover the costs of having the debris from the building removed from the property. In some cases, the owner’s property insurance will cover this aspect of the project, even though that insurance does not cover demolition. Should the property insurance cover the charges for hauling away the debris, that policy is considered the primary coverage for that portion of the project, with the debris removal provisions in the demolition insurance classified as secondary. This means that any costs not covered by the primary coverage may be further offset by the coverage in the secondary policy.
As with all types of insurance, any claims submitted on a demolition insurance policy must meet the qualifications named within the terms of the policy itself. For example, if a building is partially destroyed by fire, the insurance provider may not honor the claim until the property is inspected and the building is considered a total loss. Some providers will also require that local authorities examine the property and declare it unsafe for use and beyond the potential for repair as a means of bring the building back into compliance with local safety codes. For this reason, understanding local building codes and the exact provisions of the policy before securing demolition insurance is extremely important.

What is building indemnity insurance

Building indemnity insurance is an insurance policy that builders must obtain in some areas of the world when the building project has a value of a certain amount, and often requires development approval from the local governmental body. This type of insurance policy provides protection to the property owner in the event that the builder dies, disappears, or goes bankrupt during the construction period or within so many years after the construction is complete. Building indemnity insurance helps protect not only the current owner of the property but also subsequent property owners within a certain time frame. A building indemnity insurance policy may also offer coverage for injuries and property damage to third parties resulting from the builder’s negligence. These insurance policies are most prevalent in countries such as Australia.
In South Australia, pursuant to the Building Work Contractors Act (1995), all registered builders must obtain a building indemnity insurance policy before taking on a building project with a value set by law, which is currently $12,000 Australian Dollars (AUD). These builders cannot accept payment for such a project or obtain a local government building license until they have purchased a building indemnity insurance policy and provided a copy to the homeowner or building owner. Any building projects under that value would not be subject to this requirement. Owner-builders, or builders who are building solely for themselves, must also take out this type of insurance policy if they intend to sell the property within seven years of obtaining the building license.
A builder or contractor would normally obtain a building indemnity insurance policy through a regular insurance company that offers such policies and coverage in this specialized situation. This sort of insurance policy only becomes applicable if the contractor does not complete the work or performs it in a faulty manner, and is not around to remedy the situation. Where a law requires the purchase of such an insurance policy, there is in essence a statutory warranty for the property in question under certain circumstances for a strictly defined period.
Most of these laws requiring the purchase of building indemnity insurance only apply to licensed builders and contractors. If a home or business owner utilizes a builder that is not licensed, he will not have the security of building indemnity insurance unless the builder has voluntarily chosen to purchase the policy. This is one reason hiring a licensed contractor is often advised.

How to Insure Against Hurricane Risks

One of the greatest destructive forces to life and property is thehurricane. The satisfaction of helping clients prepare their businesses and homes against these disastrous risks is probably why you're in the property and casualty business.
No greater example of this risk occured in 2005 when Hurricane Katrina devastated the Gulf Coast of the U.S. Insurance companies have paid an estimated $40.6 billion on 1.7 million claims for damage to homes, businesses and vehicles in six states from Hurricane Katrina, the largest loss in the history of insurance.
By contrast, Hurricane Andrew, the biggest U.S. natural disaster pre-Katrina, resulted in $15.5 billion in losses in 1992 ($20.9 billion in today’s dollars) and 790,000 claims.
According to the Insurance Information Institute (I.I.I.), the four hurricanes in 2005—Katrina, Rita, Wilma and Dennis—generated more than $57 billion in insured losses and 3.3 million claims. Some 15,000 adjusters from across the United States were involved in helping policyholders recover from these storms. More than 95 percent of the 1.1 million homeowners insurance claims from Hurricane Katrina in Louisiana and Mississippi, totaling more than $15.5 billion, were settled within one year of the storm.
Those are the big picture industry impacts. Given that level of impact on residents of the Gulf Coast, it was surprising to see the results of a poll conducted by IPSOS Public Affairs in 2006 that found that 89 percent of homeowners in Louisiana and 93 percent in Mississippi are satisfied with their insurance company. The survey reported that four in five people (82 percent in Louisiana and 80 percent in Mississippi) who filed a hurricane-related claim are satisfied with the way it was managed by their insurer. The circumstances of property damage and complete loss of a home for instance, are traumatic experiences. In those circumstance an 80%+ satisfaction rate is astounding.
The numbers above illustrate how Hurricane Katrina was a once in a lifetime disaster.... or was it? The Japanese Earthquake and Tsunami were also a once in a lifetime event, and by the way,...there's another on the horizon... San Francisco, Florida, Virginia Beach, Seattle --- are you next?
So, how do agents and brokers aide their clients in protecting their homes and busineeses against the losses resulting from a major hurricane?
Hurricane Deductible
One of the first steps says Michael Barry, the I.I.I.’s vice president, Media Relations. “It is important that coastal residents know what their hurricane deductible is and how it works.”
A deductible is the amount of money policyholders pay out-of-pocket before their insurance coverage kicks in. A standard homeowners insurance policy deductible is usually either $500 or $1,000. State insurance regulators in 18 states allow property insurance policies to include hurricane deductibles, which are tied to a percentage of a home’s insured value, rather than a flat dollar amount.
The states allowing hurricane deductibles include the suspects you'd expect: Alabama, Connecticut, Delaware, Florida, Georgia, Hawaii, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Rhode Island, South Carolina, Texas and Virginia.
Hurricane deductibles apply solely to damage from hurricanes, and typically vary from 1 percent to 5 percent of the insured value of a home. For example, a policyholder whose home is insured for $200,000, and has a 2 percent hurricane deductible, would have to pay the first $4,000 needed to repair the home, if the loss were caused by a hurricane. In some coastal areas with high wind risk, insurers may incorporate hurricane deductibles even higher than 5 percent. Moreover, in some states policyholders can select higher hurricane deductibles in order to reduce their premiums. Insurers’ hurricane deductible plans are reviewed by state insurance regulators.
It's also important to understand the coverage trigger. Whether a hurricane deductible applies to a claim depends on the specific “trigger” selected by the insurance company. These triggers vary by state and insurer and usually apply when the National Weather Service (NWS) officially names a tropical storm, declares a hurricane watch or warning, or defines a hurricane’s intensity. Due to these differences, homeowners should check their policies and speak to their agent or insurance company to learn exactly how their particular hurricane deductible works.
Business Issues
Every business owner needs the assurance that they possess sufficient coverage to pay for the indirect costs a disaster - the disruption to your business - as well as the cost of repair or rebuilding. Most policies do not cover flood or earthquake damage and you may need to buy separate insurance for these perils. Be sure you understand your policy deductibles and limits and hos they pertain to losses from a hurricane and the nuances of windstorm and flood coverage.
For a business, the costs of a disaster can extend beyond the physical damage to the premises, equipment, furniture and other business property. There's the potential loss of income due to business interruption while the premises are unusable. Business disaster recovery plans should include a detailed review of your insurance policies to ensure there are no gaps in coverage. This includes property insurance, business interruption insurance and extra expense insurance. Even if the basic policy covers expenses and loss of net business income, it may not cover income interruptions due to damage that occurs away from the premises, such as to a key customer or supplier or to the utility company. Insureds can generally buy this additional coverage and add it to the existing policy.

How NRIs can buy property in India

Buying a property undeniably ranks as one of the greatest Indian dreams. So it does not matter which part of the world you live in; a home in India is simply a must. And the Indian laws, over the years, have made this a fairly easy job. The Reserve Bank of India governs such transactions and they fall under the purview of the Foreign Exchange Management Act (FEMA)
In this column, we give you a lowdown on all that you need to know if you are an NRI wanting to buy a property in India. To begin with, we need to understand the definition of non-resident Indian. Since property purchases are governed by FEMA, we need to go by the definition of NRI as stated in FEMA. According to FEMA, an NRI is a citizen of India who is resident outside India.
Now let us understand the rules and implications:
Can an NRI buy property in India?
Yes, a non-resident Indian can buy either a residential property or a commercial property in India. Further, there is no limit on the number of residential or commercial properties that an NRI can purchase in India.
Exception: An NRI however cannot buy agricultural land, plantation land or a farm house in India. He cannot even acquire such property as a gift.
There is however, no bar on inheriting such property.
Do you need RBI permission?
No. RBI permission is not required to buy residential or commercial property.
How to fund the purchase?
Payment for the purchase of property can be made either by way of funds remitted to India from abroad through regular banking channels or through the balance in the NRE, NRO or FCNR Account.
What income taxes are applicable on house properties in India?
According to the Indian Income Tax Act, if a person (resident or NRI) owns more than one house property, only one of them will be deemed as self-occupied. There will be no income tax on a self-occupied property. The other one, whether you rent it out or not, will be deemed to be given on rent. If you have not given the second property on rent, you will have to calculate deemed rental income on the second property (based on certain valuations prescribed by the income tax rules) and pay the tax thereof.
Now, the Income Tax Act does not specify if either or both these properties must be situated only in India. Vikas Vasal, Executive Director of KPMG India explains, "At the time of drafting the Income Tax Act, one did not envisage a situation where an Indian would own properties overseas. But now, more and more Indians are settling abroad. So from the reading of the Act, the rule of 'more than one property' will apply to global properties."
What this means is that if you are an NRI and own only one property globally and that property is in India, you would not have to pay any income tax on it in India.
However, let us say you are an NRI resident in USA. You own and live in a house in USA. You also own a house property in India. Even if you do not give the property in India on rent, you would have to pay income tax on deemed rent in India. The deemed rent is determined by certain valuation rules prescribed in the Income Tax Act.
Remember that even if you have inherited a property in India and that is not your only property, you would have to pay tax on deemed income.
Is deemed income from house property taxed in foreign country?
You would need to look at the tax code in your country of residence. In the case of NRIs in the United States, the US tax code does not tax deemed income. However, Ganga Mukkavilli, a New York City based CPA whose firm, CPAs, Taxes & Associates PC, specialises in international accounting, taxes and small businesses says that you would still have to show the property if it is an investment property in your tax return in the US (even though you do not have any rental income ).
"If you do not show this investment property, the problem will arise at the time of sale of property. Suppose you sell a property on which you had no rental income for US tax purposes but had deemed income as per India Tax code, then the amount spent on the maintenance, repairs and renovations and depreciation on this property which may be eligible for deduction or addition to your cost basis while calculating capital gains would become difficult to establish. However, if you have not declared the property in your tax returns, the US tax code may challenge the cost basis (purchase + improvements + suspended losses)to claim a tax deduction at the time of sale," he explains.
"Of course, any investment properties with rental income and related expenses must be reported on Form Schedule E in the US tax returns and rental activities by nature are always treated as 'passive' investments with restrictions on deductibility of the net rental losses. Always consult a tax expert as passive activity rules are quite cumbersome," he adds.

Commercial Property Sector: On A Rise In India

People seeking high quality life and economic activity will invest in commercial properties. The property market in India is very hot and it is expected that in the year 2020 China will lead the property market, and by 2050, India will overtake China. A commercial property can be bought half constructed, as a full fledged construction or it can be built from scratch. Property investment attracts higher revenue than any other business. So, it is one of the most lucrative businesses.
Main objectives of a commercial property are: maximizing the wealth of shareholders through regular cash flows and regular appreciation, reducing the cost of rent and economic growth.
Benefits of a commercial property are manifold:
Income from Cash Flow/Returns: Choose a property that will produce highest rents and return on your investments faster since there is heavy interest involved on the loan. Location can go a long way in ensuring success so choose a good location.
Principal of Leverage: Principal of leverage means profiting from the use of other people's money. Investment in real estate gives that opportunity.
Appreciation: One of the benefits of real estate business is potential for appreciation. But this potential varies from property to property and from location to location.
Things to be kept in mind while choosing a property:
Location: A good location has the ability to run even a lousy business whereas even a good business will fail at a lousy location. Again a wrong location can mar the business prospects. For example: A five star next to an airport or a business centre can attract maximum traffic, in the same way, too many malls in a small town may not guarantee full occupancy.
Multi-tenanted: Investing in multi-tenanted property will ensure that income keeps coming even if one tenant leaves. Therefore one must buy or construct properties that can house multi-tenants.
Nariman Point in Mumbai, India had the distinction of highest commercial real estate rental space in the world in 1995 at $175 per sq ft and regarded as Manhattan of India. And as per a report on "Office Space Across the World 2012", by Cushman and Weikfield, Nariman Point is the 15th most CBD in the world.
According to Sanjay Dutt, CEO, Business Jones Lang La Salle India, "There are a number of reasons that come to the mind. Firstly, India's growth story remains intact except for a minor turbulence in the short term. Secondly for the NRIs, there is the straight advantage of exchange rate. Thirdly, property valuations have come down. And lastly, vacancy rates are expected to be high. This will force developers to either lease cheap or sell cheap".
With reduced rates of properties, and whirring commercial activities, empty offices and malls will fill up, hospital and commercial buildings will sell. This will boost new investments in commercial properties both in terms of construction and in purchase of existing spaces.

Commercial Real Estate San Diego

The commercial real estate refers to much property other than single family residence or perhaps a residential lot at the neighborhood. Anything other than confidential apartment, everywhere the whole set of real estate makes money, is rented out, otherwise for investments are now considered as commercial real estate. In other words about any method of real estate not including single family or else single family lot can be considered commercial real estate. A single family house can also be considered as a commercial real estate as long as they buy your house meant for the purpose of renting it and generating an income. Commercial real estate can be defined as the home that may be solely used designed for the purpose of trade. A few of the illustrations of commercial real estate consist of malls, office parks, restaurant, gas stations, and office towers. You have 4 types of commercial real estate leases all requiring categories of duties from the landlord and also tenant. The only net lease makes the occupant the cause of paying property taxes. The double net lease creates the renter critical to spending both the property tax as well as the insurance whereas many of the triple net lease makes every one of the tenant critical to spending the home tax, insurance and so the renovation. In the gross lease the tenants pay just tax and then the landlords afford the home tax, insurance along with the maintenance.

The commercial real estate San Diego protects by means of 110 million square feet of place of work space, 192 million square feet of business space plus 138 million square ft of retail space. In San Diego the commercial real estate landlord and the tenants will be repeatedly bobbing up creative solutions benefiting both the parties. The commercial real estate San Diego belongs to the strongest multi family markets along at the country on account of beneficial demographic tendencies numerous barriers to entry, counting high land values, a huge rental inhabitants in addition to incomplete new housing styles. San Diego commercial real estate market may be optimistic when the recuperation is gradual as well as the future angle have been effective intended for kinds of motives. San Diego could be the prevalent commercial real estate firm offering the full range of brokerage in addition to administration conveniences.

The commercial real estate Orange country used for office situate is designed by the standard of the office construction accessible along with ranked accordingly. The highest orange country office spaces reachable might be designed for Class A -office space. Class B Orange country will likely be the second chief top quality building available in the whole orange country office rental space market. These real estate listing shall be leased by a year. The commercial real estate Orange country builds individual relationship by the people and every one the tenants.

The commercial property management San Diego can be business in the midst of many elements such as real estate viable management San Diego may be leasing. Hire could have been a pertinent elements, in the midst of one property being leased most of the owner will not be receiving revenue. Secondly the property inspection makes the corporation acquire it can be marketplace image with the residences they manage. The economic administration have been an extra approach that is from regarded. Each of the marketable real estate waterside attracts most of the s, students, artists, in addition to enormous personnel to look for hold to cheaper households leasing service.

Things Intended For Avoiding Mistakes In Commercial Real Estate Dealings

Property management entails the management of commercial, residential in addition to trade real estate property. A commercial industry continues to be much added complex field and that is certain to higher degree of policy and regulations. Before coming into a final choice just remember to will not be immovable to some bad dealing. Frequently hire a real property seller that could assist you by means of a solid money spent. These picked up one will need to have ample journey along at the commercial commerce also it could facilitate your within creating the things more straightforward. Plenty of sellers may well handle commercial as well residential housing, absolutely finest and avoid the communication by those different types because they are going to fail to adopt the listening carefully choice. You can still undeniably acquire an efficient benefit from the one which handle Commercial Real Estate management only. Without a doubt crucial that you perform an intensive research nearly the property previous to creating the ultimate decision of purchase. It should be since similar to any trade as well as needs many scams. Confirm the data offered as per the vendor has been genuine and the property just isn't prone to much loan or amount overdue. Identifiable managers are available used for helping you ought by the verification of documents plus added official procedure.

The budgeting could have been any more significant restriction but it need to be firstly determined competently prior to getting happening with the property search. Commitment cost or the sale excellence is not the true cost for buying the real-estate. There is much additional commitment plus the documentation fee to property. An extra significant expenditure of money is included with the upkeep necessity of the property which has the landscaping, door or else window replacements, and extension of the sector. Ahead of aged by means of the purchase decide on the situation that has become set whether commercial otherwise rural area may be the priority. Varieties constraints will be delivered by urban along with rural property plus by this means the fee may also show a discrepancy inside both of them.

A genuine and organized Commercial Property Management will enable you take off with the finest deal. A lot of restructured dealers opportunities around the topmost commercially effective places such as San Diego, Orange County plus Riverside. Most of theses teams includes talent team of professional dealers that can handle rightly valuing a particular real estate property. The actual brokers can supply these buyer a strong folder very nearly this company able to be presented since the real marketing strategy. The can detail that you choose to in regards to the effective as well as negative risks of the property following understanding a radical research process. The real band will certainly provide you with an area meant for displaying the desires plus show you how to by means of improved tricks within choosing the right property. The well-organized experts will make out a goal market specifically additional nourishing for creating these investment. They are going to testing on no matter whether there is much these permissible liabilities or debts related to some style agree along with show you how to exclusive of finding rapt in this type of deal.

A great supplier could deal with single area as well as outclass with best decision. Suitably understanding of the profit-making property contact could enable you land in the actual field of investment. Furthermore commercial property has been the perfect sector designed for expenditure of money.

Procedures Within Commercial Real Estate Investment

Real estate basically means the home of earth and so the building in it, in accordance with it truly is congenital funds like crops, raw materials, water and the like. These property can be making the growth to superior heights that encompasses development in equally commercial and residential spheres. Investing cash in land or else property has become popular because it raises these economic increase. These significant functions in commercial real estate real estate property may be the situation, it is required to be well associated to the center of the town getting each the necessary facilities. To determine the perfect commercial real estate investments in the midst of lots of those calls for the help within the net. Good tips would be the provided in the website as regards the usefulness, policies, conditions plus situation, and then a interested person will approach them. The commercial real estate are now rented otherwise purchased, and also is of many varieties via office space to storage space rental.

Commercial real estate investment may be the best method for the make currency, and see if the terms along with conditions tend to be accurately calculated. The retail space arrives under the sort of commercial real estate; this type comprises of clothing stores, office house as well as retail industrial. The retail space means that the shop here is an example may be hire the area through the marketable real estate holder plus many of these retail space more often than not enroll under Triple Net Lease. Along at the stipulations among the Triple Net Lease the tenants pay for repairs and maintenance, these assurance plus the property taxes. An additional type of business real estate could be the warehouse or these office space.

Industrial Property means land improvements, construction, set ups, real property, machinery, device, furniture, equipment, or any part of accessory that encompass done accomplishing this of construction. The leading intention as well as the employment of industrial property should be to get entangled inside a top tools movement, to manufacture merchandise along with amenities , the operation of hydro-electric dam by a personal company besides a public utility, agriculture processing facilities, facilities associated with a manufacturing operation under the same possession together with office, engineering, development, research, research in addition to development of laboratories of corporations other than these kinds of firms that manufacture kits urbanized through the research tricks. Manufacturing real estate on no account carries with it land, property of public effectiveness besides electric producing plant that's not owned based on a local component of state that an application was official by legislative body of an area government unit plus inventory.

Retail property is a worthy part in use manufacturing. These aspects that contribute to locating along with securing an excellent area is easy accessibility for customers, helpful visibility through the streets plus appropriate locate meant for inventory. In retail property, these tenants are going to be to blame for these behavior preservation as well as the landlord have been responsible for leading preservation simply like plumbing, electrical, heating plus air conditioner issues. The next advantage of retail property is the pliability, relocating the manufacturing is straightforward, that the trade uses extra space next moving to larger quarters could have been simplified. Tenants inside a particular property have got to know the way to connect and contact property manager for any protection. Whether the maintenance can be of frequent nature then repairs are actually undertaken in an hr otherwise 2.

NRI's guide to selling purchased property in India

we saw the basic rules and regulations with respect to NRIs buying property in India. This time around, we take a look at what happens when you sell property in India. We will only look at properties purchased by a person either before or after he becomes an NRI. The rules regarding sale of properties acquired as gift or inheritance, will be covered in the next column

Can an NRI sell property in India?
Yes, an NRI can sell residential or commercial property in India. He can sell to:
- A person resident in India (the definition of resident in this case will be as per FEMA)
- An NRI
- A Person of Indian Origin (PIO)
However, an NRI can sell agricultural or plantation land or a farm house only to a person who is resident in India and a citizen.
In which account must the sales proceeds be credited?
There are two scenarios that may arise here:
1. Sale of property purchased as a resident Indian
The sale proceeds in such cases would have to be credited in the Non Resident Ordinary (NRO) Account.
2. Sale of property purchased as a non-resident Indian
If the property was purchased out of rupee resources, that is, income earned in rupees, or the home loan is repaid by a relative who is a resident of India, the amount must be credited in the NRO account.
In all other cases, there are limits to repatriation that are discussed in the next question.
What are the rules for repatriation of sale proceeds of property sold in India?
If the property was purchased while you were a resident of India, then the sale proceeds must be credited to the NRO account. You can repatriate up to USD 1 million per calendar year from your NRO Account (including all other capital transactions), provided you have paid all taxes due.
Now, if the property was purchased while you were a non-resident, you can repatriate the proceeds outside India provided that you fulfill certain conditions:
1. You should have purchased the property in accordance with the foreign exchange laws prevalent at the time you bought the property
2. The amount to be repatriated will follow these limits:
a. If you purchased by remitting foreign exchange to India through normal banking channels, then the repatriation cannot exceed the amount that you remitted
b. If you purchased using funds in the Foreign Currency Non Resident (FCNR) Account, then the repatriation cannot exceed the amount paid through this account
c. If you purchased using funds lying in your Non Resident External (NRE) Account, then the repatriation cannot exceed the foreign exchange equivalent, as on date of purchase, of the amount paid through NRE Account.
d. If you purchased a property by taking a home loan, then repatriation cannot exceed the amount of loan repayment that has been done using foreign inward remittances or debit to NRE/ FCNR Accounts.
e. If you purchased the property using balance in your NRO account, then the sale proceeds must be credited to your NRO account and you can repatriate to the extent of USD 1 million (including all other capital account transactions.)
In all these cases, the balance sale proceeds can be credited to the NRO account and you will be able to repatriate up to USD 1 million per calendar year (including all other capital account transactions).
Vikas Vasal, Executive Director of KPMG India explains, "This limit of USD 1 million is the limit upto which you can repatriate without any permission from RBI. If you have a genuine need to repatriate above this limit, you can make a specific application to RBI for increasing the repatriation limit."
In all cases, repatriation is restricted to sale of two residential properties.
What is the capital gains tax applicable on sale of properties in India?
Before we move on to this explanation, it is important to understand that for all income tax purposes, the definition of NRI would be the one prescribed in the Income Tax Act. For all repatriation purposes, the definition of NRI would be one under FEMA. While in most cases, a person who qualifies under one would qualify under the other, it is better to review both definitions.
If you sell the property after 3 years from the date of purchase, you will be liable for long term capital gains tax of 20 per cent. The gains are calculated as the difference between sale value and indexed cost of purchase. Indexed cost of purchase is nothing by the cost of purchase adjusted to inflation. You can find the index here .
As an NRI, you will be subject to a TDS of 20 per cent on the capital gains.
If you sell the property within 3 years of purchase, you will be liable for short term capital gains tax at your respective tax slab. Short term capital gain is calculated as the difference between the sale value and the cost of purchase (no indexation benefit is available). You will be subject to a TDS of 30 per cent irrespective of your tax slab.

Leasing Tips for Commercial Property

With the growth of trade and commerce, leasing commercial properties has found pace. While leasing a commercial property, which are the points that strike your mind? Is it about rate structure, locations, feasibility or basic infrastructure? Yes, keeping in focus all such aspects can help you in meeting a good deal and can save you from financial losses. The important tips that are to be considered while leasing a commercial property are as follows-
► Engaging real estate broker
The first and foremost work you will do is to find out a real estate broker who will act as an intermediate between you and the landlord. Engage a broker having basic working knowledge of commercial property. A good local commercial broker is a much better option than opting for a chain broker.
► Location of the property
The location of a commercial property always pays in the long run. It should be in accordance with your business profile and should suit the company budgets.
► Rental Tariff
You can’t ignore other expenses and therefore needs to negotiate the best possible deal keeping in focus the rental tariff. The commercial property selected by you should be availed at least possible amounts.
► Basic infrastructure
The basic infrastructure of a commercial property will decide about your expenses and profits. The availability of all the basic infrastructure facilities will make you strike a profitable deal.
Thus, to lease any commercial property that suits your business requirements, a number of facts are to be considered and implemented. All the above mentioned points can help you to make the most out of your wise investment.

7 Tips to Real Estate Agents' Success

With over 2 million real estate agents according to the National Association of Realtors (NAR), becoming a successful real estate agent takes more than just a license and a knowledge of current laws and regulations.The first year drop out range estimated to be from 40% to 80% demonstrates that many real estate agents are not as successful as they could be and research suggests that 90% give up after 3 years. The following 7 tips may help you avoid becoming one of these statistics.
1.First and Foremost YOU are a business. Real estate agents work for a broker, but are independent, commissioned sales people. This means that you are a small business and must run your practice as a business. Again, remember you are a small business owner.
2.Embrace a Planning Attitude. If you don't have a plan, then you are on some else's plan - usually the successful real estate agent's. During the last 10 years, what I have learned as a performance improvement consultant or coach is that most people place more value in planning a trip to the grocery store or a vacation than planning their lives either professionally or personally.
3.Research Your Market Plan. Since you, as the real estate agent, are responsible for your own expenses, do your research specific to your marketing plan within your strategic plan. Time spent in constructing your marketing plan is definitely well spent. NOTE: Remember a business plan usually is data driven, while a strategic plan identifies who does what by when.
4.Establish Sales Goals. Using your strategic action plan, establish sales goals. If you are new to this industry, it may take 6 months before the first sale. HINT: Use the W.H.Y. S.M.A.R.T. criteria for goal setting.
5.Create a Financial Budget. Budgeting is critical given the up and down of this volatile market place. Your financial budget should plan for your marketing costs, any additional costs such as education and your forecasted income.
6.Make Managing Yourself a Priority. Building a business is not easy. You must learn how to manage yourself especially in the area of time management, ongoing real estate business training coaching continuing education units, and personal life balance. Real estate is said to be a 24/7 business much like any small business. However, it is important not to lose sight of your personal life including family, friends, physical health, etc.
7.Find a Mentor or a Real Estate Coach. Going it alone is not easy. Take the time to find a mentor who can help you steer through some of the known obstacles and help you during the "peaks and valleys." If you have the resources, you may wish to hire a real estate coach or an executive coach who specializes in small business help and sales.
Being an incredible sales person and entering the real estate market does not guarantee similar sales success. However, these 7 tips may help you avoid many of the pitfalls by not being one of the four real estate agents who quit within one year or one of the nine who give up after 3 years.

Commercial Real Estate Success Tips

From Day One of your real estate investment career, put and keep yourself in the mindset that all fees (read, all) are negotiable items - whether brokerage commission or fees for other professionals, such as accountants, attorneys, engineers, and special consultants. Never be hesitant to request a lower fee; after all, the most that they can do is refuse. Usually, however, as a business relationship is forged, the service provider will become more amiable to the idea of a reduction in his or her fee in order to guarantee ongoing future business. And because of the typically large amounts of money involved in commercial real estate transactions, brokerage fees can often be negotiated. As a general rule, the larger deal, the lower the commission percentage the broker will receive.
In order to handle potential disputes between landlords and tenants (whether commercial or residential), the real estate laws of most states incorporate some form or another of the Statute of Frauds. This regulation, briefly summarized, states that in order for any real estate agreement to be valid and legally binding, it must be in writing. Simply put, if it's not in writing, a valid agreement does not exist. This effectively eliminates all "this-person's-word-versus-that-person's-word" situations, which can be virtually impossible to prove one way or the other. Therefore, only the points that are specifically spelled out in the lease (including any and all agreed-upon improvements) are binding, and until the lease (or purchase agreement, if the transaction is a sale) is signed by both parties and a good-faith deposit has been made, there is no agreement, no contract, and hence no grounds for contention.

Although many experienced real estate investors often recommend the "hands on" approach to property management for beginning residential investors, when it comes to commercial real estate ownership, the merits of hiring a professional management company for your first investment property shouldn't be overlooked. The education that you'll receive can be well worth the management fees you'll pay for the first year. By overseeing and working closely with the management company, you'll gain first-hand knowledge and experience of the inner workings of commercial property management and the real estate profession in general. The management company actually has everything that you're probably lacking as a novice real estate investor: years of experience in the field; an up-and-running real estate accounting system; and established relationships with contractors, vendors, tenant brokers, and other useful real estate professionals.

Commercial tenants typically fall into one of three general categories: mom-and-pop retailers, which are small local entities; regionals, those organizations of larger area; and majors, which are typically very large, well-known, and creditworthy companies. When negotiating a lease with a major prospective tenant (especially one that will be a substantial draw to the surrounding smaller merchants, such as a big-name drug store or supermarket chain), the more powerful the store with regard to anticipated shopping traffic, the more lease concessions that will likely be demanded. One that you'll almost certainly be confirmed with is a reduction of the rent per-square-foot you're charging. Any rent negotiations that you consent to enter into should be based on the quality of the tenant; the desirability of the location; and your operating, financing, and new-tenant preparation expenses.

One method by which you can command top-dollar rent for your commercial property is with the use of a form of leased land ownership known as a build-to-suit. As the name implies, with this option you'd build on or convert your land or property to meet the specific requirements of a particular tenant. This can be accomplished in one of two basic ways: either the tenant gives his or her plans and specifications to the owner/landlord to build, or the tenant directly handles the construction with the landlord financing the activity. Using the first option, the landlord, after receiving the construction plans from the tenant, would obtain a detailed estimate of cost from a building contractor. The landlord would then use this data to set the tenant's rent. For example, if you own a $100,000 tract of land that you've agreed to develop for a tenant at a construction cost of $250,000, the total value of the improved property would be $350,000. Assuming that you desire a capitalization rate (or, percentage rate of return) of 10 percent, you would charge the tenant $35,000 rent per year ($350,000 x 10% = $35,000).
With the second method, you would finance the tenant's actual construction costs and, again, set a desired cap rate for those expenses. The amount of the tenant's rent would be determined by adding a base rent for the land to the cap rate amount.

Many commercial property investors find it advantageous to buy a property and immediately make all necessary capital improvements and repairs, especially for properties that need a substantial amount of refurbishing. This not only increases the property's value but also quickly allows for higher rents, and could also result in easier overall property management. Additionally (to the extent allowed by the IRS), this strategy also maximizes eligible first-yeartax deductions.

Although a prudent measure for all real estate transactions, it's an especially good idea for commercial deals to engage the services of a competent real estate attorney to represent and protect your interests. Once you've negotiated with the property seller and come to an agreement on price and terms, the contract of sale will be prepared - usually by the seller's broker or attorney. Before signing, be sure to have an attorney that's looking out for youreview the document. Furthermore, an experienced real estate attorney can also facilitate contact with bankers, industry professionals, and other real estate investors.

If a non-broker gives you a tip on a potential investment property, don't neglect to reciprocate with a small token of appreciation. You can give either a gift or cash, with the amount being dependent upon how valuable the information turns out to be. If you follow through with a successful deal at a good price, extend this token as a nice referral fee and incentive to keep an eye out for other properties that might be of interest to you.

4 Ways to Advertise Commercial Real Estate

Commercial real estate is all about exposure. If you expose your property to the most number of people and have it priced fairly, it will eventually sell. Therefore, as long as you feel good about the price, you need to do whatever you can to get your property in front many people. Advertising your property effectively is essential to exposing it to the masses.
1. Local Magazines
Local publications are a great place for commercial real estate listings. You will see these real estate magazines all over the place, most notably in restaurants. You want your listing to have a prominent display in the magazine. Try and get on the cover if at all possible. These real estate magazines are a great way to get the word out to people that may be in the market for real estate.
2. Billboards
Using billboards is another fantastic way to get the exposure that you need. A billboard can advertise for you 24 hours a day, 7 days a week. Get a prominent spot on a major highway or street. Put a picture of the property and any important facts on the billboard with your picture and phone number. Billboards are a relatively cheap way to advertise the property that you want to sell. It can get results quickly if the right person happens to drive by.
3. Internet
The internet is quickly becoming the best resource for selling commercial property. Before a potential buyer ever physically tours a property, they want to tour it virtually first. With online property databases, you can put your entire portfolio out there for the world to see. This way, they can search through listings and find the property that they want. All of this is done before you spend a minute of your time with them.
In addition to online databases, you can use a number of other online alternatives as well. For example, you could use pay-per-click marketing to zero in on those in the market. Whenever someone types in the search term "commercial real estate" or "real estate" you could have an add that pops up on the side of the search engine. You could tailor a specific campaign for a number of related keywords.
You could also have your own website for only your property listings. This is a great way to capture the information from your visitors. This way, you can follow up with them and know exactly what they were looking at.
4. Television
Television is still a powerful way to market your property. With the power of television, you can reach a mass audience for a reasonable price. You can put pictures and video clips of the property in the video and give other valuable information about the property. Put your contact information in the ad and you'll be surprised how many calls you will get from a commercial.

Introduction to the Commercial Real Estate Business

Dealing with commercial real estate is very different than working with residential real estate. With residential real estate you deal with single family homes, duplexes and small apartments. With commercial real estate you will be dealing with office buildings, retail stores, warehouses, and more. Here are a few basics involving commercial real estate.
Value
One of the most important things in any area of real estate is the value of the property that you are dealing with. The way that you value residential property is drastically different from commercial property. When dealing with residential property, you will come up with value by comparing the property to other similar properties. You will gather recent comparable sales and arrive at a value. With commercial real estate, you do not always compare the property to other similar structures. Instead you compare it by how much income it brings in for the owner. The income approach to evaluating property is the most common approach with commercial real estate.
Cap Rate
One of the most common terms thrown around in commercial real estate is the cap rate. Cap rate is short for capitalization rate. This is a figure that helps represent the value of the property and the income that it produces. To get the cap rate of a property that is for sale, you will take net operating income of the property and divide it by the asking price. For example if you had a net operating income of $200,000 and an asking price of $2,000,000 your capitalization rate would be 10%. This is how you can quickly determine the value of a property and see if the asking price is in line.
Agents
The selling process of commercial real estate is also much different than residential real estate. Commercial real estate agents work in a different environment than their residential counterparts. The commercial real estate environment is very professional in nature. Commercial real estate brokers have to deal with CEO's and prominent business people on a regular basis. The commissions in a commercial real estate transaction are much larger than they are with residential sales. Sometimes, a large piece of property can take several years to sell. Therefore, commercial real estate brokers are not regularly paid.
Seller Financing
With commercial real estate, the financing works a little bit differently than when you buy a house. For one thing, seller financing is commonly used. This type of financing is usually very short-term in nature. The seller might offer two years of seller financing in order for the buyer to develop a history of income with the property. Then they can secure traditional financing from the bank and pay off the seller. Therefore, the transaction process can take many months or years to completely go through. If you are trying to sell a piece of commercial real estate, you will have to be open to many options.

How can you invest in commercial real estate?
If you want to invest in commercial real estate, there are a few different ways that you could do so. One way that you could start investing now is to purchase shares of an REIT. This is a type of trust that you can purchase shares of as if you were buying stock. These entities invest in real estate and share the profits with investors. You could also enter into a partnership with other individuals who want to get involved with commercial real estate. This will allow you to combine your funds together and purchase a piece of commercial real estate.

How to Finance Commercial Real Estate
To finance commercial real estate, you will have to be able to meet a number of criteria. You have a few different options when it comes to coming up with the money that you need to purchase commercial real estate. Choosing the right option and then following through is critical if you want to get involved in this industry.
Down Payment
If you want to get a loan for a piece of commercial real estate, you should come up with a substantial down payment. Commercial property lenders like to work with individuals that have a large amount of cash for a down payment. Since commercial real estate is risky, they like to see that you are willing to risk some of your own money in the deal. With commercial real estate, it is common for the lender to ask for a 30 percent down payment or more.
Collateral
If you are going to try to finance the property by yourself, you will most likely have to come up with some type of collateral for the bank. This could be any number of items as long as they are of sufficient value. You may need to put up your private residence as collateral. You might also be able to use securities that you own as collateral for the loan. The lender likes to know that they will be able to foreclose on something of value if you are not able to make payments. In many cases, they will prefer property that can easily be converted into cash so that the foreclosure process is easy to complete in the event that it is necessary.
Balloon Loans
When you are trying to get financed for a commercial real estate loan, you might also need to look at balloon loans. Balloon loans are commonly used for commercial real estate. With this type of loan, you will be making interest-only payments during the life of the loan. Then when the loan is finished, you will have to make a balloon payment for the entire amount that you originally borrowed. This type of loan can be risky because you have to refinance the loan or come up with the money through some other means. At the same time, it can make your payment more affordable.
Partners
Many people also use partnerships to finance commercial real estate. You can set up a partnership in which you are the general partner and you take on limited partners. The limited partners could provide funds for the purchase of the real estate, but as the general partner, you would make all the decisions for the business. You also handle the management of the property while you are in possession of it. Many wealthy investors like to find deals like this, as they allow them to earn a return on their investment without having to deal with the problems that come with property management.

How to Calculate Commercial Property Tax

The tax code is the size of a phone book, full of riddles that change every year. Taxes affect everyone in all areas of his or her finances. Trying to calculate these taxes can be extremely taxing. However, with a few tip and hints it can be easier than expected. Read on to learn how to calculate commercial property tax.
Instructions
1.Identify the taxable market value of the commercial property in question. This figure is established by the tax appraiser and would have been mailed to the commercial property owner. If the records are not in possession of the owner, contact the local appraisers' office for the taxable market value.
2.Determine the tax capacity for the commercial property. The tax capacity calculation will vary depending on the locale of the commercial property. Tax capacity is a percentage value of the taxable market value. Often it is a tiered tax. For example, if the value of a property is five hundred thousand, then the tax capacity may be calculated at two percent of the first two hundred thousand and one percent on the remaining three hundred thousand.
3.Ascertain the fiscal disparity rate, tax capacity rate, fiscal disparity ratio, market value rate and state tax rate. These figures are available from the local tax office and are expressed in percentages.
4.
Calculate the total tax of the commercial property. Add the following together to get the total tax owed on the commercial property: tax capacity tax, market value tax, fiscal disparity tax and state tax.

How to Calculate Depreciation on a Commercial Property

Depreciating investment property can be a significant tax benefit. Depreciating commercial property is different than depreciating residential property, and these differences can be used to take full advantage of the tax benefit.
Instructions
1. Straight Line Depreciation
Calculate the total cost basis of the commercial property you are depreciating.
2.Divide the total value by 39 to get your annual depreciation on a straight line basis.
3.Apply the depreciation to your taxes annually for at least 39 years until the property has been fully depreciated.
Cost Segregation Depreciation of Commercial Property
4.Separate the commercial property asset using an engineering report into four separate categories: personal property, land improvements, the building and land.
5.Depreciate the amounts allocated to personal property over five to seven years using a double declining method.
6.Depreciate the amount allocated to land improvements over 15 years using an accelerated method, such as the 150% declining balance method.
7.Depreciate the components of the building separately to take advantage of different tax benefits. For example, although the roof is part of the building, you may be able to depreciate it more quickly separately.

Tips & Warnings
Do not under any circumstances attempt to do this without the assistance and direction of qualified tax, accounting and engineering professionals.