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Archive for the ‘Commercial Colorado Real Estate’ Category
Wednesday, September 8th, 2010
8-10% cap rate deals on investor rental properties in Denver metro area
With 2010 Colorado housing foreclosure numbers running ahead of 2009 and likely to increase (RealtyTrac foreclosure forecast). Many current homeowners will be forced into rental housing for quite a few years to come. The Denver metro area market still has positive net in migration and
household growth (Population growth forecast). Although this means that single family residential housing is unlikely to appreciate significantly any time soon, these same statistics and trends bode very well for the rental property market.
There are also some macro economic trends that we believe make certain rental properties very attractive from an investment perspective.
- Less governmental support for home ownership – less mortgage market support, stringent loan underwriting, higher FHA insurance premiums will all contribute to a lower rate of home ownership in the U.S.
- Mobile population – Our population is becoming increasingly mobile.
- Public perception that home ownership is not a guaranteed investment.
- If you believe that at some time in the future, inflation will return, then rental rates can be quickly raised to keep pace with inflation.
- There are a great many risks to the macro economy right now. - Five Economic doomsday scenarios for the US economy
As more and more households become renters (whether by choice or not), the residential rental market will outperform most investment asset classes. However, most investors will fail to capture this return for a number of reasons:
- Most investors are NOT suited to be landlords.
- Rental properties need to be purchased carefully – not only for the ‘right’ price, but in the right price points, neighborhoods, with an eye on taxes, HOA dues, etc.
- Most potential landlords cannot deal with a large number of tenants.
- Most investors mis judge which properties will provide the best rates of return. – They probably are NOT the glamorous properties, but this is about making money, not show homes!
We have analyzed the rental market in the Denver metro area and identified the segments that offer the most attractive returns with the least risk. We have provided an example below using our affiliated property management division at Surety Realty Inc.
| Property Price |
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$ 54,950.00 |
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| Monthly Rent |
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$ 800.00 |
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| Gross annual rent |
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$ 9,600.00 |
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| Taxes – Annual |
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$ 564.00 |
| HOA – monthly |
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$ 239.00 |
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| HOA – annual |
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$ 2,868.00 |
| adjusted gross income |
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$ 6,168.00 |
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Leasing commission – one months
rent |
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$ 800.00 |
| annual mgmt fee – 5% of rent |
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5% |
$ 480.00 |
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| Net Annual income |
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$ 4,888.00 |
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| Capitalization rate |
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8.9% |
30 years later…nothing has changed
In the early ’80′s, when the Savings and Loan debacle was occurring, mortgage rates we’re between 12-14%! At that time there was a rule of thumb that used a 6x gross rent multiplier for
evaluating whether a potential rental property offered a suitable rate of return on investment. By looking at the example above, you can see the same rule applies today ($9,600 x 6 = $57,600). However, today’s interest rate environment is extremely different than it was in the early 1980′s. Mortgage rates today are hovering around 4.25%!
The ‘real’ rate of return is TWICE what it as
This makes the ‘old’ yardstick of a six times gross rent multiplier relevant, but in need of evaluation. IF a 10% cap rate was attractive in a 12-14% mortgage rate environment, then a 10% cap rate in a 4.25% mortgage rate environment should be at least TWICE AS ATTRACTIVE!
If you are interested in making a safe, secure, un-leveraged, investment return of 8-10% on your capital with a built in inflation hedge as well, then contact us today and we will discuss your situation with you.
Tags: buying Colorado rental properties, Colorado rental properties, investor rentals in Denver, Purchasing rentals in Denver, rental units in Denver
Posted in Colorado Real Estate and Homes, Commercial Colorado Real Estate, Miscellaneous | Comments Off
Wednesday, August 25th, 2010
Considering Buying a Car Wash – Watch out for these red flags!
As part of the commercial real estate side of our brokerage, and do to experience and some great contacts in the industry, we regularly help buyers purchase and help owners sell car washes. And while most owners are ethical and honest individuals and business people, we occasionally hear and see evidence that makes us very thankful that we don’t deal with scum.
Car washes as businesses have matured from an economical way to hold onto land in the hopes of future redevelopment and appreciation potential into active part time businesses that follow many of the same rules as other companies with respect to advertising, return on investment, cost control and sales.
A few things that potential buyers should always be on the lookout for when considering a car wash purchase:
- Equipment repairs – wash equipment undergoes heavy use, you should ask for receipts from qualified repair companies as well as check the equipment thoroughly for examples of poor quality, repair, and wear and tear.
- Reconciliation of Gross revenues – bank statements should match credit card receipts, cash receipts and financial statements.
- Correlation of utilities with revenues – If a car wash is undergoing revenue growth, you should see and corresponding growth in water and electrical usage.
- Correlation of COGS with revenues – If a car wash is undergoing revenue growth, you should see a correlation with soaps, towels, and other COGS for the increased number of washes being used.
There may be legitimate reasons why any of the above do not apply exactly to every wash, but the reasons should be thoroughly investigated and verified to ensure that the seller is not improperly inflating there revenues.
Inflating Car Wash revenue is easy
Since car washes are primarily cash businesses, the easiest way to inflate revenues, is simply to plug in quarters, tokens, and dollars into the self serve bays. Since no water or soaps would be used, as well as no additional electricity to heat the boilers, or power the washes, this type of increase should be fairly easy to spot. Also, the increased revenues will not be in the automatic bays generally as they would automatically run costing the owner (and potential seller) money. The difficulty in detecting this type of fraud is if an owner has the financial capacity and intelligence to use additionally soaps, water and utilities, and to keep the percentages of auto bay washes consistent with the self serve washes.
There are other red flags as
well
However, we don’t want to give away all our forensic accounting and physical inspection tips and tricks. Instead suffice it to say that purchasing a car wash is slightly different than many types of business purchases and you need an experienced car wash real estate broker to assist you to help ensure you don’t get taken advantage of by an unscrupulous seller.
Tags: buying a commercial car wash, car wash real estate broker, inflating car wash revenue, red flags when purchasing car washes, warning signs when purchasing car washes
Posted in Commercial Colorado Real Estate, Miscellaneous | Comments Off
Thursday, August 12th, 2010
Short Sale vs Foreclosure
Many homeowners these days are ‘upside down’ (owing more on their home than it is worth) on their home and have recently lost a job, had a medical emergency, or other unexpected life occurrence that forces them to consider letting their home go to foreclosure. While the number of foreclosures nationwide is rising again after the brief moratorium imposed by the administration, a short sale may be a better way to proceed for many homeowners.
Benefits of a Short Sale
- You are able to select your own short sale real estate broker.
- You can be current on your mortgage payments and still do a short sale.
- You will probably be able to buy another home again sooner after a short sale vs a foreclosure.
- You can avoid the social embarrassment of a foreclosure.
- The effect on your credit score will probably be less from a short sale than a foreclosure.
- Some banks do not report short sales to the credit bureaus at all.
Drawbacks of Foreclosure
The result of a foreclosure is the bank repossessing your house. Not only will you lose your house, but the lender can get a judgment against you for the difference you owe plus the lenders costs for the foreclosure action. If that isn’t enough, your credit report will be in terrible condition for many years to come. With certain restrictions, you may be eligible to buy another home in 5 years if the home was your primary residence. Without restrictions, the wait is 7 years. If you are an investor and do not occupy the home, the wait to buy with a Fannie Mae insured loan is 7 years. A number of sources have reported FICO score drops from 200 to 400 points after a foreclosure.
How long does a Short Sale take to accomplish?
Short Sale negotiations with a bank can easily take 2-3 months. Many banks still have not caught up with the wave of foreclosures that are occurring and have very high turnover in their credit management departments. We always suggest utilizing a short sale facilitator that has contacts with the banks and lenders, experience, and that we have worked with
before. Effecting a successful short sale for a client should NOT be a ‘learn as you go’ process for your real estate broker!
Exactly how does a Short Sale timeline proceed?
First week – Meet with your short sale real estate broker.
Contact and gather information required for short sale coordinator.
List your home for sale, the real estate broker should have professional pictures and videos tours taken of your home.
Prepare your home for showings to potential buyers.
Second week thru 6th week – By now you should have had multiple showings (between 10-20), and have a workable offer to submit to the bank.
Your real estate broker will be working with the short sale coordinator and you to gather any additional info and submit the offer to the bank.
The bank special assest manager (or their designee) will open a file for your home sale.
7th week thru 12th week – You should be fairly close if not approved for a
short sale at this time.
Hopefully the initial buyer will still be around.
If not, the bank can still approve the short sale as a predetermined price.
Your home will still be aggressively marketed to take backup offers from potential buyers.
13th week thru 20th week – This is the target timeframe and most likely time frame in which your house will actually sell and a closing will occur.
There are many factors that will affect the timeline above. What lender you have? What, if any, stage of the foreclosure process you are in. Will you have to substitute buyers? An experienced short
sale broker will be able to help, guide and and keep you informed thru this difficult process and will greatly increase the likelihood of success!
As always, always obtain legal and tax advice before making a decision between a short sale or a foreclosure.
Tags: Colorado short sale, Colorado short sale real estate broker, short sale real estate broker, short sale vs foreclosure
Posted in Colorado Real Estate and Homes, Commercial Colorado Real Estate | Comments Off
Friday, August 6th, 2010
Jefferson County Colorado Car Wash for Sale
car wash for sale in Littleton, CO. Located within Jefferson County, this car wash incorporates some of the newest amenities, desired features and technical innovations in the industry.
The cash flow is excellent, currently at 7.8% based on ’09 numbers including real estate taxes, and the car wash is UP over 25% year to date for the 2010 numbers!
This makes this car wash an excellent purchase for this price. Replacement cost is over $2.2 million alone.
Additionally, some of the points below make this car wash a very attractive purchase.
1. There are no other open bay uses left in south Jeffco. This means no more washes in South Jeffco.
2. One of a kind under-carriage wash in the self serve.
3. New office with walk out deck, new bathroom, and new receiver and speakers for music in the bays.
4. The first ever Hi-Flo Tri-Foam in self serve. No other competitor in area has this.
5. Scalable design ready for reclaim and solar
6. Proprietary customer list goes with business approx 500 and growing fast!
7. Set up new proprietary partnerships that will go with business.
8. Bays big enough for boats and RV’s from Chatfield state park. We are on Chatfield’s preferred wash list and we are the closest,
this was just done 2 months ago.
9. Extremely well maintained equipment.
10. Busy King Sooper’s shopping Center and getting busier.
11. All encompassing Exacta POS equipment including all bays, Shampoo vacuum, all vacuums, auto cashiers, and paymaster. You can monitor finances from home!
12. Monitor wash from home …brand new camera system installed.
13. Other modifications by owner to reduce energy.
14. Designed and expansion for dog wash potential.
15. New blow dryers installed in self serve bays.
16. New vacuums installed at the beginning of last year.
17. Training available.
18. 10,000 gallon water storage tank and boost pumps ensures constant pressure
19. Weep water reclaim system.
For Car Wash real estate listing info for this property from
MLS.
Offered by Surety Realty Inc
Jason Pavlovic
Managing Broker / Broker owner
303.667.1622 direct
Jason@suretyrealty.com
Stuart Dobson
Broker owner
303.919.0309 direct
Stuart@suretyrealty.com
Tags: colorado car wash for sale
Posted in Commercial Colorado Real Estate | Comments Off
Friday, January 29th, 2010
Broomfield Office Lease Space
If you are looking for small, short term, but very clean, upscale office space to lease in Broomfield, CO. The Broomfield commercial office space for lease in this building may be just right. Located at 6343 W. 120th Ave, which is just west of Sheridan Blvd, this two story building has office suite with windows, mountain views, or interior offices. All of the available office spaces left are on the second floor.
Cheap office space in Broomfield
The lease rates range from $325 per month for an 85 square foot office, up to $975 per month for 630 square feet, with many offices in between. You will not find nicer, less expensive office space in Broomfield! Plus the landlord is willing to enter into short term leases,
so your risk is minimal.
Office space amenities
Each office has drop down ceilings, phone line and one phone provided (more lines are available), and may come with some office furniture for use as well.
Common Area includes:
- Conference Room – suitable for 15 people.
- Copy Room – has professional copier available.
- Reception Area – tiled; well lighted, and professional.
- Break Room – fridge, microwave, stove, sink, etc.
- Elevator access to second floor.
Offered Exclusively by:
Surety Realty Inc.
Jason Pavlovic – 303.667.1622 direct
Jason@suretyrealty.com
Stuart Dobson – 303.919.0309 direct
Stuart@suretyrealty.com
We believe in the building and office space so much, we even moved our office here. If we as Realtors don’t know where the best, cheapest deals are…who are you going to follow?
Tags: broomfield office space for lease, Commercial real estate, office space for lease, office space for lease in Broomfield
Posted in Commercial Colorado Real Estate | No Comments »
Monday, December 14th, 2009
Commercial Real Estate and the Mayan Calender
As the date approaches, many fear the Mayan calendar which states that the end of the world will occur in 2012 – well, December 21, 2012 to be exact. Hollywood seems to buy into it as they’re releasing a film of blockbuster potential aptly entitled “2012”. Maybe the Mayans were referring not to the end of the world but a cataclysmic meltdown of the commercial real estate industry.
Maybe not the entire world, but the Commercial Real Estate Industry is bad.
The commercial foreclosures that will be and already has started to trickle into the media will flood the market soon. We’ve already started to see this with many big businesses going under but one industry is the newspaper and magazine industry. Why are these going out of business? Well, the online industry has had much to do with this as people are getting their information on the Internet and they’re not paying for it. Why pay for something that you can have at your fingertips for free, literally!?
Take the Newspaper business for example
If we take a step back at this predicament, the newspaper company that went out of business is not the only company suffering. Landlords will now have to come up with money they are no longer receiving from these newspaper companies to pay the mortgage to the bank. Well, if there is no newspaper company to pay the bills because subscriptions are down, then the landlord can’t pay the bank and now the commercial bank note is non-performing. See where I’m coming from? This is a huge problem and the newspaper industry is just one of many industries where banks are starting to fret about. Distressed Bank Assets will start flooding the news soon and who knows, maybe December 21, 2012 will be the worst day in the commercial real estate industry…
Tags: Commercial real estate, Commercial real estate foreclosures, commercial real estate notes
Posted in Commercial Colorado Real Estate | 3 Comments »
Tuesday, December 1st, 2009
How banks are making mistakes with real estate agents doing short sales
Working toward the same goals
In theory the incentive a listing agent has to sell a house for more money has to do with the fact that their commission is directly tied to the final sales price. This aligns the agent financial goals along with the sellers. However, now that residential short sales have become commonplace in this market most banks have mandates that total commissions on short sales will often only be 5%. This may contradict the listing agreement that the agent has signed with the sellers, but since the banks have the final approval on the short sale, the listing agreement that defines the commission paid really becomes secondary.
Commission reductions
I’ve done my fair share of short sales acting as both a buyer’s agent and a seller’s agent both for
residential as well as commercial short sales. I’ve also had banks demand that the total commission be reduced on every single sale, some as low as 4% total. While I’m not going to go into the end results of these demands from the banks, it’s important to remember that we as listing agent wind up acting for two interests, the sellers and the banks. And many times, with the banks trying to lower commissions and the sellers just wanting to get rid of the property as fast as possible, those two interests collide.
Sales delayed
For example, banks demand that the property be continuously marketed until short sale approvel is given, however, by doing so the sale process can be delayed if multiple offers are submitted. Most agents I know of are taking and submitting only the first offer that comes in. This protects the buyers interests, the sellers interest to get the deal done quickly, but not the banks interest to obtain the most money possible for the sale.
commission reductions = wrong decisions
Banks demanding that commissions be reduced causes the agents to act in the other parties interests by encouraging fast sales rather than maximizing price. If the banks would not insist on commission reductions they would probably get better results as the agents would feel that their efforts are going to be rewarded rather than attacked. The way that the banks are acting is forcing listing and buying agents to align somewhat against the banks interests. If the banks would speed their response times and leave the listing agreements alone, the sellers and banks would be much better off.
Posted in Colorado Real Estate and Homes, Commercial Colorado Real Estate | 1 Comment »
Friday, May 8th, 2009
Moving your home based business into a commercial leased space
Are you cramped in the basement with your workforce and starting to step on one another? Now is the time to get into a business friendly commercial property to allow your business to grow.
What about the cost of leasing office space? Face it, if you are seeing your business increase in these times how much better will your cash flow improve in the recovery? If you need 1,000 or so square feet there are places in the Denver market where you can lease great office space for around $1,000 a month with the landlord paying the bills (also known as a ‘gross lease’)! Lease rates can be locked in for years at these currently amazing rates due to the recession. Also, there are some great buying opportunities as well! New office condos and flex warehouse projects that were build in the past year are sitting out there waiting for you and your business!
These office condos and flex warehouse spaces are being offered at very attractive prices. If you need dock high doors or drive in doors, assembly, shipping or other type space there is plenty available. Finally, when you are ready to start shopping for space, you should retain the services of a qualified Denver commercial real estate broker. This doesn’t mean just one who works the Denver city proper area, but one who is familiar with the entire Denver metro commercial office space region. We’ll be happy to help, and even if you think you might not be ready to make the move for a while still, give us a call so we can discuss your needs and start educating you with the process of commercial leasing. – Jason Pavlovic
Posted in Commercial Colorado Real Estate | No Comments »
Tuesday, April 28th, 2009
What are CAD or CAM
charges?
CAD (Common Area Development) and CAM (Common Area Maintenance) charges are used by developers and landlords to covers their costs of developing or maintaining property. The battle over CAM charges has been going on for a long time and has become very relevant again as many newer developments have CAM charges that are approaching base rental rates.
How to negotiate CAM charges
Negotiating CAM charges is difficult, but there are possible solutions that may be acceptable to both parties. Most businesses and real estate brokers looking for lease space for their clients never think to negotiate the CAM charges, but they are open to negotiation like most issues involving real estate.
Some specific CAM negotiation Tips
- Limit the inclusion of replacements or capital expenditures – Savvy tenants will ask the landlord to amortize the costs over a number of years or limit them to a fixed dollar amount.
- Get a fixed dollar cap on annual CAM increases
- Limit the amount of gross leasable area a landlord can deduct from CAM calculations – Require that calculations be based on leasable space or minimum occupied floor area.
- Agree to a fixed CAM cost – This amount may increase annually but is not directly tied to the landlords costs.
This last solution is the easiest to implement and may be the most palatable for all parties involved as it can avoid lenghty battles over CAM charge calculations annually. For this to work, the landlords need to be able to forecast their CAM costs accurately. For the tenants, it has a number of benefits; It can add certainty to pro-forma financial statements, which will improve budgeting and may help with obtaining loans from banks since the maximum gross rental costs are now known.
Landlords also benefit by avoiding annual audits with tenants seeking to verify the costs as well as protracted minute discussion in lease negotiations with prospective tenants.
It can be a win – win scenario for both sides. It just has
to be proposed and negotiated by a skilled real estate broker. – Stuart Dobson
Posted in Commercial Colorado Real Estate | 4 Comments »
Monday, April 20th, 2009
Need I-25 Interstate or Boulder Turnpike highway frontage to succeed in your Colorado business?
What is value to your customer? If you can get the answer to that question the world will beat a path to your door. Consider why you are reading this blog. You are on the internet and like 90% of folks in the free world you begin researching purchasing real estate online. The ease of shopping for the deal has in many cases trumped the old location, location, location mantra of commercial real estate.
If your business is driven by impulse, yes you need highway exposure. If you are selling gas or food, people have urgent need often times that influences their purchase. If your business is selling refrigerators, not so much. If your sales are internet driven or you have a product or service that customers expect delivery to their premises, your location may not matter at all!
The money you save on a business location without highway frontage can benefit your bottom line, by giving the customer more value for their dollar as your total cost of operations are less. Price point often matters. Prices of frontage land have historically been higher than non frontage.
A professional real estate broker can show you the tradeoffs and increased return possibilities of one property vs. another. Don’t step over a dollar to pick up a penny! – By Jason Pavlovic
Posted in Commercial Colorado Real Estate | No Comments »
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