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Is Commercial Real Estate a Good Investment?

Is commercial real estate a good investment? Some investments can be considered risky because there is no guarantee that you will make your money back, let alone see a significant return. When choosing where, when, and how to invest your money, you’ll want to choose an avenue that has a long history of being generally safe and profitable. 

Throughout the years, and even the volatility of the pandemic, commercial real estate investment has remained one of the most profitable industries. In fact, Forbes recently published a list of the top 10 industries that produce the most billionaires. Investing holds that #1 spot, while real estate jumps in at #7!

Also, real estate investing positioned John Jacobs Astor as the first American millionaire and the richest person on the Titanic! Although the markets have changed considerably since the 1800s, this just goes to show that commercial real estate is a good investment then and now. 

What is Commercial Real Estate Investment?

Before we dive into what makes commercial real estate a good investment, let’s describe what commercial real estate is. 

According to Investopedia, commercial real estate is “property that is used exclusively for business-related purposes or to provide a workspace rather than as a living space, which would instead constitute residential real estate. Most often, commercial real estate is leased to tenants to conduct income-generating activities. This broad category of real estate can include everything from a single storefront to a huge shopping center.”

Commercial real estate buildings include:

  • Retail buildings
  • Office buildings
  • Warehouses
  • Industrial buildings
  • Apartment buildings
  • Mixed-use buildings (buildings that include a combination of property types, i.e., retail, offices, and apartments)

 

What Makes Commercial Real Estate a Good Investment?

Here are 7 reasons commercial real estate is a good investment:

 

1. Passive income

Investing in commercial real estate can provide a strong stream of income that is collected regularly. In most cases, investors collect income while a property management company takes care of the property and the details that come with being a property owner, like rent collection, evictions, and tenant screenings. 

If done properly, you can see a steady stream of income while you sleep, travel the world, spend time with your family… whatever your heart desires! 

 

2. Diverse portfolio

A diverse investment portfolio is a strong portfolio! If you want to be serious about investing your money, you must have a portfolio that includes more than stocks and bonds, mutual funds, and crypto. Not only does this prove that you’re an experienced investor, but it protects your investments whenever the market turns down.

The real estate market doesn’t have a strong connection to the stock market. Therefore, if the stock market crashes, there’s a good chance that your commercial real estate investment will be unaffected. Your income from commercial real estate will be able to make up for losses until the stock market evens back out. 

 

3. Tangible assets

Commercial real estate will always hold value because it’s a tangible asset. Even if the real estate market has a dramatic downturn, your property will never be completely worthless. Unfortunately, the same cannot be said for the stock market. 

While it’s absolutely possible to become extremely wealthy from investing in the stock market, you always run the risk of investing in a business that won’t exist in a few years. Commercial real estate properties will hold value as long as they are habitable. Therefore, there is always the possibility of profitability. 

 

4. Tax breaks

Many commercial real estate investors get into the industry because it has incredible tax benefits. Investing in stocks and bonds requires investors to set aside some of their profits to pay for capital gains taxes.

When it comes to commercial real estate investing, however, investors can write off property depreciation value even if their property increases in value year after year. As such, capital gains can be reduced or completely avoided. 

Additionally, commercial real estate investors can reduce their taxable income after selling a property by filing a 1031 tax-deferred exchange. The only stipulation is that you are required to purchase another property of similar value within a given time period.

 

5. Inflation-proof

Consumer prices have risen over 8% in the last year. This concerns many people because their incomes haven’t risen to match – it makes it difficult to keep up. When you invest in commercial real estate, however, you have much more control over your income. 

As consumer prices rise, you can increase how much rent you charge. Theoretically, you could absolutely increase your rent prices by 8% to make up for inflation, and you won’t lose a penny. If you own commercial real estate in a high-value area like New York City, Los Angeles, or Miami, you may be able to raise rents more than the inflation rate. Business owners are often willing to pay premium prices to settle into a prime location.

 

6. Business relationships

When it comes to business, it’s all about who you know. Getting into commercial real estate investing opens you up to a whole new world of networking opportunities. Not only can you meet other investors, but you can connect with dozens of business owners who sign leases with you. 

These business relationships could lead to other great investment opportunities and make you a well-rounded business professional. As a result, you may find it easier to make smarter investments in the future and close deals faster. People enjoy working with others who have a good grasp on the industry and seem like they have “been there, done that” already. Every investment can essentially be seen as a networking opportunity that will take you further and further in your career. 

 

7. Assistance opportunities

There’s no reason you should have to get into the investing industry alone. In fact, many people branch into commercial real estate with business partners or co-investors. If you have the capital and a desire to learn, you may be able to find a co-investor who is willing to go in on an investment property with you. 

This type of relationship works because it’s mutually beneficial. Your co-investor will get to make income on the property and you get to learn how to be a great commercial real estate investor – while also making income! Even some of the most successful real estate investors partner up with other people to obtain new properties. Most of the time, it provides a safety net and makes for smart investments. 

 

There’s no doubt that the answer to the question “Is commercial real estate a good investment?” is “yes!” 

When you’re ready to start investing in commercial real estate or grow your investment portfolio, Speed Commercial Real Estate will be here to support you. 

 

Allow Speed Commercial Real Estate to Find Your Office Space

Speed Commercial Real Estate can help you find an investment property that is perfect for you, whether you’re a seasoned investor or buying a property for the first time. Contact us today to discuss commercial real estate investment properties!

How to Choose an Office Space for Your Business

There are a lot of things to consider when deciding where to find office space for rent. A great office environment will make you and your employees more productive, strengthen your brand image, and provide a sense of comfort and security. 

Studies show that 97 percent of workers feel that their office space directly represents how their employers feel about them. Further research shows that only around 10 percent of workers are satisfied with their work environment. 

Carefully choosing the office space for your business will ensure that you see a great return on your investment and build a business that you – and your employees – can be proud of.

 

10 Steps to Choosing the Right Office Space for Your Business

 

1. Determine how much space you need

A business that requires space for 100+ employees will have drastically different space requirements than a business that only needs one or two desks. While large enterprises will likely need an entire floor in an office building, smaller businesses may be perfectly comfortable in a studio or co-working space. Either way, here are a few questions that will help you estimate how much space you need:

  • How many people are on your team?
  • Does your business require employees to sit at their desks every day? In other words, can you offer remote work or a hybrid option?
  • Do you need to leave room for growth?
  • How much space do you need for each person? (It’s recommended to allow for about 70 square feet per employee. However, you know your business best! Consider everyone’s job requirements and day-to-day activities)

 

2. Think about the amenities you want and need

What kind of things are absolutely necessary for the function of your business, what would take your office environment to the next level, and what kind of things would be nice to have? Also, take into consideration what your clients need. While some offices don’t invite clients in at all, others may need to provide a waiting area, snack bar, etc.

Here’s a list of amenities you might want to look out for:

  • High-speed internet capability
  • Fully-furnished offices
  • A property management team
  • Printing, scanning, and copying services
  • Private conference rooms and offices
  • Mail service
  • Beverage bar or kitchenette
  • 24/7 access

 

3. Compare the types of offices in your area

There are many different types of offices available to business owners, and each has its own set of benefits. Understanding what’s available in your area will help you decide which is best for your business.

  • Office suites. This is a great option for businesses that require large teams. Office suites offer enough space to collaborate and typically can be customized to your unique needs. Some suites offer private entrances for business owners and their employees, as well as full kitchens.
  • Private office. Private offices are usually great for teams of about a dozen people. This option might be best for start-ups, an office in a brand-new location, freelance teams, or teams that prefer to stay small and tight-knit.
  • Dedicated desk. A dedicated desk is the best option for a business of one. This might be a small business owner who runs an online store, an entrepreneur who wants a place to network with other entrepreneurs, or a freelancer. Dedicated desks are typically seen in co-working spaces, but business owners can certainly rent a single studio and customize a dedicated desk space for themselves.
  • Virtual office. If you are comfortable operating your business from home or have a team that works remotely, you may just need a space to hold occasional meetings and pick up business mail.

 

4. Check out the area

Once you’ve located a few areas that have the office space you’re looking for, it’s time to get out there and explore! Check out the other local businesses, places to grab a bite to eat or something to drink, the parking situation, and scope out some relaxing outdoor areas that would be nice for mid-day breaks. You might also want to see if the location is accessible using public transportation, so you can accommodate employees and clients that use those services.

 

5. Carefully consider lease options

You don’t want to get caught off guard by lease terms that you weren’t aware of before you signed on. Pay close attention to the lease duration, what your renewal options are, what would happen if you need to break the lease, and what actions would give your landlord grounds to evict you.

Also, you should have a clear understanding of what is included with your rent. Are you only paying to use the space or does the rent payment include property taxes, insurance, and maintenance? Are there common areas you have access to?

 

6. Determine what you can afford

Office space can a valuable investment that leads to more business and, therefore, more revenue. However, you don’t want to pour too much money into leasing a space that your business can’t afford. Sit down with your finances (we recommend hiring a professional accountant to help with this) and see what your business can afford.

 

7. Keep an eye out for leases with flexible terms

As we saw in March of 2020, you never know what’s going to happen! If there’s another life-disrupting event, you want to be sure that you’re not stuck paying for something you don’t need anymore. At the same time, you want to see if there are opportunities for lease discounts. For example, if you commit to a 3-year term, can you pay less per month than you would for a 12-month lease? 

 

8. Consider health and safety features

Health and safety are top priorities these days. Does the building offer a security team or secure entry? Are there automatic doors, locks, and bathroom fixtures that reduce touchpoints? What’s the protocol in the event of an emergency, like a fire or earthquake? When was the last time the building was inspected? Not only are these things crucial for peace of mind, but they can help keep you and your business out of legal trouble.

 

9. Personalize your space

As we stated at the beginning of this article, employees care about their work environment and many don’t think their offices are up to snuff. So, involve your employees in curating a workspace that everyone loves! Talk to the building owners or management company and see what your customization options are – can you paint the walls? Move desks around? Are dogs allowed? These things can make a huge difference to employee happiness!

 

10. Consider business growth

Does your office space and lease duration support business longevity? In other words, is this space you can grow into or will you quickly grow out of it? What would happen if you expect to grow a certain amount and you end up with more space than you need – can you transfer to a smaller space with a different lease? What if you grow faster than expected – can you get into a bigger space? These are great questions to ask before you sign!

 

Allow Speed Commercial Real Estate to Find Your Office Space

Speed Commercial Real Estate can get you into an office space that is perfect for your business and employees. We will take the time to sit down with you, understand your unique needs, and offer a property that exceeds expectations. Contact us today to start your office space search!

What Are Cap Rates in Commercial Real Estate?

Cap Rates in Commercial Real Estate

If you’ve been looking into investing in commercial real estate, you’ve probably wondered “what is capitalization rate?” at least once!

There is a lot of real estate jargon that is important to understand so you can make the best decisions for your business. Capitalization rate (cap rate) is a term that is very important for making smart purchases. The cap rate on a property can make the difference between a good investment and a bad investment. 

If you’re just starting out with commercial real estate investing, you might find yourself getting lost in conversations with brokers and other investors who have been in the industry for a while. We want you to feel confident in a room with your peers, so we’re going to tell you everything you need to know about cap rates in commercial real estate.

 

What is Capitalization Rate?

What is capitalization rate? According to Investopedia “The capitalization rate (also known as cap rate) is used in the world of commercial real estate to indicate the rate of return that is expected to be generated on a real estate investment property.”

Essentially, a cap rate tells you how much money you’ll be able to make on your investment. The number is determined by dividing net operating income by how much the property is worth, and then it is expressed as a percentage. For example:

Say a $500,000.00 property has a net operating income of $75,000.00. The cap rate would be 75,000.00/500,000.00 = .15, or 15%.

This is a good way to measure how profitable a piece of commercial real estate might be, but it should not be the only deciding factor. You should also consider leverage, inflation, the condition of the property, future income from property improvements, and the real estate market. 

Cap rates are used almost exclusively in commercial real estate. In residential real estate, the value of a home is generally based on the price per square foot of comparable properties in the area. In commercial real estate, however, cap rates are used to tell an investor about how much money they can expect to make on a property, per year.

 

What is Cap Rate in Commercial Real Estate?

As we mentioned in the previous section, cap rate in commercial real estate helps estimate how much income an investment property will generate. It can also measure how risky an investment property might be. 

Properties with higher cap rates tend to have higher risk, and vice versa. Moreover, property prices tend to be inversely related to capitalization rates, and vice versa. 

Capitalizations rates are a simple way to compare prospective investment properties before you dive in and start spending money. It’s a great place to start, but it should not be considered as the extent of your research efforts. An investment property should be examined from many different angles before you decide. For example, you might want to look into the Levered Internal Rate of Return, which considers debt. 

Cap rates are a good way to feel out the market and begin to decide where and how you want to invest. If you’re investing in other cities/states, calculating a cap rate can help you decide which area is most deserving of your money, time, and effort. For example, say the average cap rate for a large apartment building in Miami is between 4.5%-4.75%, while those in Phoenix are closer to 3.9%. 

A building with a 4.6% cap rate is not out of the ordinary in Miami, but it’s higher than average in Phoenix, which suggests higher risk. Similarly, a large apartment building with a cap rate of 5% would look normal compared to these examples, but it could be outside the average range for the city it’s located in.

Here are some things to keep in mind when considering a property’s cap rate:

  • Tenants. The net operating income of your property can change when you change tenants. For example, if you have a valuable tenant (for example, the only pharmacy in the area), you will have a high cap rate while they’re settled in. This is great news… until their lease expires, and they leave. If an investor jumps in right before the ending of the lease because they are excited about that 8% cap rate figure, they will likely find themselves struggling to make the same return when the pharmacy moves.
  • Timing. Cap rate calculations are typically done yearly. Many factors can change within a year to affect a property’s expenses and revenue. 
  • Vacancies. If a space is not fully leased, you, the investor, could lose out on a significant net operating income. Some investors might think that an investment is safe because it has a low cap rate, only to discover that it is quite unstable.
  • Location. The location has everything to do with perceived property value. You might see lower cap rates in expensive neighborhoods and higher cap rates in up-and-coming neighborhoods. 

 

What is a Good Cap Rate in Commercial Real Estate?

There is no cut and dry answer to the question “what is a good cap rate in commercial real estate.” That said, certain factors go into a ‘good’ cap rate. 

Different properties will have different cap rates. Generally, you can use a cap rate to determine how long it will take for your business to make back the amount of money that you invested into it. For example, a property with an 8% cap rate will take about 8 years to see a complete return on investment. 

Here’s another way to determine a good cap rate:

Imagine two investment properties are almost identical except for their location. One is in an upscale downtown area, while the other is located in the suburbs. It’s known that the building in the downtown area will generate more income because it’s in a highly desired area, but that income will be partially offset by higher maintenance costs and higher tax rates. Therefore, the downtown property will have a lower cap rate than the one in the suburbs, although it has a higher market value.

This goes to show that a cap rate with a lower value corresponds to a better valuation of a property and a better-expected return on investment with less risk. Whereas a cap rate with a higher value corresponds to a relatively lower expected return on investment and a higher level of risk.

Speed Commercial Real Estate

Speed Commercial Real Estate serves the Metro Jackson Area by offering comprehensive services in development, commercial brokerage, property and asset management, investment sales, and property owner and tenant representation. We can help you start building your investment portfolio today. Give us a call to set up an appointment and we will begin by covering the most important real estate terms that are necessary for your success.

Buying vs Leasing Commercial Real Estate

Buying vs Leasing Commercial Real Estate

Is it better to buy or lease commercial real estate? There are pros and cons to both, and there’s not a one-size-fits-all answer. Here’s what you need to know about the difference between buying your own commercial space vs. renting or leasing from a landlord.

What Does It Mean to Buy vs. Lease?

When you go the route of buying commercial property, you are paying for full ownership. An upfront payment, at least 10% down, is required. Once purchased, you will have complete control of the property. 

When you go the route of leasing commercial property, you are renting the property from a landlord. You will be responsible for monthly rent and associated costs. You have temporary rights to the property until your lease ends. 

Benefits of Buying Property

Gaining Equity

When you own your property, you gain equity with each mortgage payment. This could be a good investment for your business. Typically, over time, property value increases. Most commercial properties experience a notable increase in value from inflation rates, higher supply and demand, and similar factors. Marketable renovations will also increase your property value. With a higher property value, if you choose to sell your property, you could make a considerable profit.

Leasing Potential

When you have full rights to a property, you have the choice to lease a portion or the entirety of the property to another business. This is especially helpful if you are only using a portion of the real estate property or if you outgrow it after a few years. You’ll not only be making a profit from your own business but from rent as well.

Tax Benefits

You’ll receive yearly tax benefits for interest, depreciation, and many expenses that aren’t related to your mortgage. Talking to an expert will help you understand what tax benefits you qualify for. 

Why You May Not Want to Buy 

Pricey Upfront Costs

When you are buying commercial property, you have considerable expenses. Purchasing properties requires paying a down payment, which ranges from 10-40%, closing costs, inspection fees, and due diligence. If you choose to buy, you need to have a large budget. 

Liability and Insurance

Owning commercial real estate means that you are responsible for several things. First, you are responsible for anyone on your property. This requires liability insurance to protect against emergencies or injuries. Your insurance additionally needs to protect the property from any damages or losses that can occur. Insurance can be expensive and requires extensive research to find the best option. 

Maintenance Fees

Property owners are also responsible for all maintenance. Regular and unexpected maintenance can become very costly. 

Risk of Lower Property Value

While property value is normally projected to rise over the years, that’s not always the case. You run the risk of your property value lowering significantly over time. This can make selling the property difficult. 

Permanent Location

If you no longer like where your business is located, it is a long and difficult process to sell your property and find new real estate. You need to be confident that you have the perfect location,  preferably one that will continue to suit your needs for years to come.

Benefits of Leasing

No Expensive Upfront Costs

Leasing may require a down payment, but this payment is typically returned to you at the end of your lease term. You aren’t responsible for other expenses, like closing costs. Depending on the lease, you could have common area maintenance charges and other fees, but the tradeoff is that your landlord will take care of maintenance so you don’t have to worry about it. 

Tax Benefits

When leasing, you may receive tax benefits for lease payments, property taxes, utilities, and more. Talk with an expert about what tax benefits you qualify for from leasing a commercial property. 

Nonpermanent Location

Leasing a property is flexible. You may choose to stay there for just one or two years, or you may choose to remain there for many years. This is an excellent advantage if your business may need to expand or relocate in the near future. 

Easier to Get into Existing Developments

Existing developments typically bring in more profit, especially if they are in a high-traffic area. Purchasing properties in these desirable developments can be difficult. Renting commercial property in desirable areas is often easier.

Why Leasing May Not Be the Best Choice

Higher Monthly Payments

Depending on your situation, commercial lease payments could be costlier than a mortgage. Your monthly rent may be fairly costly, especially if it is located in a desirable existing development. Plus, you’ll have to pay for things such as utilities, parking, and maintenance. 

Limited Control of Property

Your landlord is completely in control of your property. This includes renovations, maintenance, and changes to any part of the property. Depending on the lease, you may have limited ability to change the property to suit your needs.  

Payments Aren’t Fixed

Leasing a property runs the risk of your monthly payments being raised when you renew your lease. If the property value of the building increases or supply and demand change, your landlord may increase your rent. This could potentially make the property unaffordable for your business. 

In a Nutshell, Should You Buy or Lease?

You should choose to purchase commercial real estate property if:

  • You’re positive this is where you permanently want your business to be located
  • You want full ownership of your commercial real estate, such as making renovations and receiving tax benefits
  • You can handle expensive upfront costs

You should make the decision to rent commercial real estate property if:

  • You want to be in a desirable existing development or location that’s expensive to buy
  • You can’t afford upfront, pricey fees
  • You want flexibility with your location
  • You don’t want all the responsibilities of owning the property

Get Advice on Buying Vs. Renting Commercial Real Estate

Consulting an expert will get you the advice you need to choose the right option and navigate the whole process. Speed Commercial Real Estate’s team of experts is prepared to help you with buying and leasing commercial real estate. Contact us for more information!

What Is a Commercial Real Estate Broker?

What Is a Commercial Real Estate Broker?

Are you considering buying, selling or leasing commercial real estate? If so, you’ll need a commercial real estate broker. These professionals are distinct from real estate agents, although they often share responsibilities and are both licensed. Here’s the main difference:

  • Real estate agents come in many forms. Whether they are a listing agent, buyers agent, dual agent or transaction agent, they must operate under a broker. 
  • Real estate brokers are licensed to do everything a real estate agent does and then some. Depending on the state, brokers are required to have a minimum number of years of real estate experience, additional licensing and take continuing education courses throughout their career. Brokers are qualified to manage their own business and supervise a team of real estate agents.

A commercial real estate broker is an expert in non-residential properties. Commercial properties include retail space, office space, healthcare, apartments — anything where an investor either collects money for rent, or buys/sells the property for business purposes. The broker acts as an intermediary between the seller and buyer or landlord and tenant. 

What Does a Commercial Real Estate Broker Do?

As with any real estate professional, a commercial broker is responsible for acting in their client’s best interest. This could mean analyzing finances to secure the best deal when purchasing a property, soliciting potential tenants or buyers, or negotiating a lease to avoid any hidden fees or unwanted clauses.

Read on for more detailed explanations of the typical responsibilities of a commercial broker:

Acquisitions

A broker dealing with acquisitions helps their client find and purchase a property. This includes every step of the process: from researching the market and weighing the risks of each investment, to negotiating the best price and terms of purchase.

Dispositions

On the other side of acquisitions are dispositions. A broker working in dispositions helps their client sell a commercial property. In other words, a broker helps the investor liquidate their assets in order to have cash in hand. Disposition can occur in three ways: selling the property in a traditional sale, selling the property with owner financing or facilitating a 1031 exchange.

Leasing Transactions

More often than not, commercial brokers are involved in leasing transactions. They may either represent the landlord in finding a tenant for their commercial space or represent the tenant in securing the best deal for a rental space. The next section contains more information on the types of brokers involved in these transactions.

Types of Commercial Real Estate Brokers

Commercial real estate brokers come in four forms:

  • Listing brokers work on behalf of the landlord to find tenants, negotiate with tenants and set up lease terms. They earn a commission on rent during the lease — typically three to six percent.
  • Tenant reps work on behalf of the potential tenant in order to find them the best value and suitability in a commercial space. Their commission is also paid by the landlord. If there is both a listing broker and tenant rep involved in a leasing transaction, the brokers will typically split the commission. Most brokers represent landlords or tenants, depending on the situation. This doesn’t necessarily mean that they are trying to lease one specific property for a landlord or find a space for a specific tenant. An example client in this situation would be an investor seeking to add a commercial property to their portfolio. Even though they don’t work exclusively for one side or the other, this type of broker is still legally required to act in their client’s best interests. 
  • Dual agents represent the landlord and tenant simultaneously. This can be tricky when it comes to conflict of interest. As such, a broker acting as a dual agent will typically take on a more neutral role during negotiations, tending to focus more on the technical and legal side of the transaction rather than an advocate for a specific party. Dual agency is illegal in eight US states, although it is permitted in Mississippi.

When Do You Need a Commercial Real Estate Broker?

The short answer is: all the time.

If you are entering a commercial real estate transaction, it’s wise to have a broker on your side. The main reason for this? If you are a tenant, any potential landlords will most likely be working with a commercial broker. The same goes if you are a landlord, buyer or seller. Most people utilize a broker for commercial transactions, and you’ll definitely want a level playing field.

Commercial real estate is an entirely different level from residential real estate. In addition to the sheer amount of time it takes to research the market, browse through listings, schedule appointments, negotiate rates and contracts, commercial properties also involve extra zoning laws, tax requirements and other complications. A commercial broker has spent years becoming an expert on those areas so you don’t have to.

In addition, many commercial property listings are inaccessible to the general public. While you will be able to view some listings, a commercial broker will be able to access the best properties that are hidden behind a hefty paywall.

A broker will also work with you to understand the exact type of property you need for your business — or the type of profit you desire from selling a property. They’ll have an instrumental network of contacts in the real estate industry at their disposal. In the long run, working with a broker will save you time, money and a lot of headaches.

Work with Speed Commercial Real Estate on Your Next Commercial Transaction

Speed Commercial Real Estate has been serving the Jackson, Mississippi area for over 17 years. We are industry leaders specializing in property sales, management and leasing. Our team not only includes experts in the commercial real estate field, but experts in the Jackson area. At Speed Commercial Real Estate, we pride ourselves in using innovative strategies and unmatched commitment to service to achieve the greatest outcome possible for our clients. Contact us via our website or give us a call at 601-987-0202 today!

Top Mississippi Commercial Real Estate Trends in 2021

This article does not constitute financial or investment advice. For proper commercial real estate investment advice, send us a message or give us a call.

A new year means you have 365 days of opportunity ahead of you! As a commercial real estate investor, it’s important to stay on top of the latest trends, so you can take advantage of all the opportunities that are about to come your way. 

Life changed drastically in 2020 and we all spent 2021 recovering and adapting to that “new normal” everyone spoke so much about. We will definitely feel the effects of these last two years in 2022, but trends predict that we’re going to be inching toward our “old normal” again. 

Understanding the top Mississippi commercial real estate trends will help you make the best decisions so you can invest your time and money well and see the biggest return on your investment.

Top MS Commercial Real Estate Trends

1) Low Interest Rates

As recent as September 2021, the Federal Reserve predicted that interest rates will stay near zero throughout 2022 and for the rest of the foreseeable future. Unfortunately, the same can’t be said for mortgage rates because commercial real estate is selling for more than the asking price, in many cases, but it still means overall financial savings.

Lower interest rates mean more people will be able to take out investment loans, which typically have higher rates than other types of loans. With more people able to secure an investment loan, we may see a boom in the commercial real estate industry – especially for first-time investors. 

2) Changes in Retail Properties

We’ve seen drastic changes in retail real estate these past two years. Many brick-and-mortar stores shut their doors during the pandemic and transitioned to operate fully online. In 2022, we are going to see the effects of that massive shift:

  • Ecommerce

The recent surge in eCommerce has affected retailers, wholesalers, and third-party logistics companies. These players are now expected to keep up with low prices, fast shipping, and personalized customer service the way companies like Amazon have. 

As a result, projects that involve converting retail space to industrial space will accelerate in 2022. In addition, there will be a large demand for warehouses that can house inventory for eCommerce stores. 

  • Stockroom priority

Now that there are more online retailers than ever, the need for local warehouses is increasing. Not only will small, local businesses need a place to store and manufacture their products, but international companies are also opening warehouses in other countries to fulfill orders faster. Plus, Amazon warehouses are popping up all over the country (including Mississippi) to offer same-day shipping. 

This gives real estate investors a chance to jump on the trend early, secure a few warehouses, and rent them out at competitive prices. 

3) Office Versatility

When the pandemic forced people to transition out of their offices and into their homes, we saw 2021 call for an increase in flex spaces – rooms that could double as a home office, hobby room, etc. 

Now that vaccines have become widely available, and required by certain employers, we see that workers are starting to head back to the office. However, many companies are adopting a hybrid system while others only have necessary personnel in the office. 

As a result, many companies throughout Mississippi and the rest of the country have different office requirements. Companies that once rented out entire floors are only going to need a few rooms. Those who previously occupied entire buildings will only need a floor or two. Massive call centers will be transformed into collaboration centers.

In addition, companies will be looking for office space with versatility and touchless technology. Versatile spaces will allow organizations to customize their new office environment to be more conducive to their needs. This might look like extra space for a comfortable lounge area, a secure room with cameras for a daycare center, a room made specifically for video conferencing, doors that open automatically, and upgraded bathroom sinks and toilets.

4) More Renters

In 2021, we saw renters all over the country wrap up their leases and move in with their families. Now, they are getting ready to hunt for apartments again.

Remote work has made living arrangements more flexible for renters than ever. Now that many people are working from home, they have the freedom to move wherever they please. In addition, more job opportunities mean that renters can increase their salary and say goodbye to the roommate lifestyle. 

Investing in rental properties will only become more lucrative in 2022. However, it must be done right. With more time spent at home, renters are not going to put up with spotty internet, outdated fixtures, or absent landlords and property managers that don’t return calls promptly.

Instead, renters are going to be looking for apartments that implement upgraded technology, including high-speed Wi-Fi capabilities, office space, touchless technology, improved indoor air quality, and attentive personnel that can remedy issues as they arise.

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5) More Suburban Dwellers

When the pandemic hit major cities like New York and Los Angeles, we saw people move to the suburbs in droves. Not only was it safer in the suburbs where there are fewer people, but it’s more affordable. Plus, workers didn’t have to commute to their office buildings anymore, so they could move out of the city and keep their jobs. 

In 2022, buyers and renters are going to be more interested in living in small towns just outside of metropolitan areas. This will allow them to commute to work if and when they must and have a comfortable place to call home, away from the chaos of the big city.

This could have an interesting effect on urban housing prices, however. With people at the typical home-buying age (Millennials) moving to suburban areas, this could drive the real estate cost down in big cities. 

Taking Advantage of Mississippi Commercial Real Estate Trends

If you are interested in taking advantage of Mississippi Commercial Real Estate trends, it’s best to start planning now. The sooner you have your investment plan laid out with a budget and timeline, the sooner you can secure your next piece of property. 

The above trends depict a strong demand for suburban housing, eCommerce inventory storage, flexible office spaces, and upgraded rental accommodations. With this information, we can predict that some of the most profitable commercial real estate in Mississippi in 2022 will be:

  • Industrial spaces
  • Retail
  • Data centers
  • Multi-family apartment complexes in the suburbs
  • Self-storage

Getting a head start on your 2022 commercial real estate investment plan will position you to make the smartest choices with your money.

When you need help developing your investment plan, the advisors at Speed Commercial Real Estate will be right by your side. 

Commercial Real Estate Investing with Speed

Speed Commercial Real Estate is a top real estate firm in Mississippi. In addition to buying, selling, and managing properties, we offer consulting services to help you make the best investment decisions. Contact us today to get a jump start on your plans for 2022.

What is Facility Management? – Everything You Need to Know

It takes a lot of work to ensure a large residential property runs smoothly. If you have a multi-floor building with dozens of apartments, amenities, and grounds to take care of, they all must be properly managed to function properly and keep residents happy. 

Facility management is not a new concept. In fact, it’s not even exclusive to residential property management. Hospitals, manufacturing plants, hotels, and more also require facility management!

Before you decide to bring on a facility manager, you should have a complete understanding of their role and how they can impact the quality of your business. In this article, we are going to completely answer three questions:

  • What is facility management?
  • What does a facility manager do? 
  • How much does it cost to hire a facility manager?

This will give you a comprehensive understanding of facility management so you can go ahead and hire the best team for your facility.

What is Facility Management?

Before we define what is facility management, we should give you a clear understanding of what a facility is. The dictionary definition of a facility is “something designed, built, installed, etc., to serve a specific function affording a convenience or service.”

Facility management will look a little bit different across different industries, but there are general responsibilities that apply in all cases. 

According to the International Facility Management Association (IFMA), facility management is “A profession that encompasses multiple disciplines to ensure functionality, comfort, safety, and efficiency of the built environment by integrating people, place, process, and technology.”

Essentially, facility management refers to the management of everyday operations that are required for an environment to support a business’ needs. Facility management helps make a business more valuable by tending to short and long-term needs.

In the real estate industry, facility management is designed to help reduce maintenance costs, keep employees and residents safe and happy, protect the owner from liabilities, and increase business growth. 

Facility managers are helpful in a variety of ways, which we will discuss in-depth in the next section. For example, if you own a large apartment building a facility management team can keep eyes and ears on all the components that are necessary for a healthy living environment and successful business, including (but not limited to):

  • Plumbing, electrical, and HVAC
  • Leasing
  • Preventative maintenance
  • Planning, construction, and design
  • Security, mail management, groundskeeping, waste management
  • Janitorial services

The facility management industry is growing faster than ever. As technology advances and our living standards change, facility managers are taking on new responsibilities and learning innovative skills. We are living in a unique time when our living spaces operate as more than a place that we call home. In many cases, ‘home” is now synonymous with “work,” “school,” “office,” and “gym.”

As a result, facility management impacts, and is impacted by:

  • Emergence of the “Internet of Things”
  • Building Automation/Monitoring
  • Employee Engagement
  • Health, Wellness & Well-Being
  • Evolving IT Infrastructure
  • Evolving Real Estate Models
  • Sustainability & Environmental Impact
Apartment buildings with outdoor walkway and garden

What Does a Facility Manager Do?

A facility manager can go by a variety of different titles and have many responsibilities. At the core, facility managers are responsible for ensuring the different systems within a facility all work together harmoniously. As a result, the facility is a comfortable place to live and work. 

According to IFMA, there are 11 core competencies of facility management:

  • Occupancy and human factors
  • Operations and maintenance
  • Sustainability
  • Facility information and technology management
  • Risk management
  • Communication
  • Performance and quality
  • Leadership and strategy
  • Real estate
  • Project management
  • Finance and business

These core competencies can be divided into two types of services: hard and soft.

Hard Facilities Management Services

Hard facilities management services refer to the maintenance and management of the physical building. This includes assets, space, and infrastructure. Typically, hard facilities management services are required to be provided, by law, and are integral to workplace functionality.

  • Plumbing. Plumbing is a modern-day essential that can have serious impacts on safety when something goes wrong. A facility manager will make sure plumbing issues are tended to quickly and plumbing systems are well maintained
  • Lighting and HVAC systems. Facility managers are responsible for making sure lighting and heating/cooling fixtures throughout the property are in good working condition. This means checking the interior and exterior of the building and responding to tenant maintenance requests in a timely fashion
  • Fire safety compliance. Facility managers will schedule regular checks for fire extinguishers, sprinkler systems, carbon monoxide detectors, and smoke detectors.
  • Mechanical and electrical systems. This involves making sure everything from elevators and key fobs to water pumps and light switches are operating properly.
  • Structural maintenance. Even a building just a few years old requires regular maintenance and repairs. Wind, sun, extreme temperatures, snow, and rain can all affect the structural integrity of a building.

Soft Facilities Management Services

Soft facilities management services refer to services offered directly to employees and/or tenants. These are things that a facility provides to make the environment a comfortable and enjoyable place to live and work. 

  • Waste management. Waste management services ensure tenants’ trash and recyclables are collected on time, meaning the city comes to remove trash from the facility’s receptacles. This could include door-to-door trash collection, tenant drop-off in a specific location, or both.
  • Cleaning services. Most apartment facilities will not provide in-apartment cleaning services, but they will ensure that the grounds and common areas are tidy and sanitary.
  • Space planning. This could include interior design, room remodeling, amenities, and more – anything that will make a facility more comfortable and functional.
  • Pest control. A facility is responsible for removing pests on the property, whether that means regularly spraying pesticides, performing seasonal checks, or managing outbreaks in an apartment.
  • Landscaping. Mowing grass, weeding flower beds, planting flowers and trees, leaf removal, snow removal, etc. are all the responsibility of facility managers and their team.
  • Security. A facility manager will be responsible for things like installing and maintaining security cameras, hiring security guards, and managing restricted areas within the facility.

As you can see, a facility manager has many responsibilities that all come together to make a building run efficiently. A great facility manager can be the difference between an average apartment complex and a high-end apartment complex.

Facility management can be a very lucrative career because it typically requires a degree and a significant amount of experience. Property owners will be expected to pay a salary that matches a facility manager’s skills and experience. However, hiring a facility manager can save tens of thousands of dollars in other costs.

How Much Does It Cost to Hire a Facility Manager?

It’s difficult to give a straightforward answer to the question, “How much does it cost to hire a facility manager?” because many factors go into the final price. The cost of hiring a facility manager depends on the characteristics of a facility and the requirements set forth by the owner or property manager.  

When looking at how much it costs to hire a facility manager, it’s important to look at the life-cycle costs, rather than just up-front costs. Life-cycle costs take long-term goals and budget into account, which are important for the future of a business. 

There are three parts to the overall cost that need to be examined when comparing facility managers to hire:

  • Initial costs: These are the start-up costs that are required to bring a facility manager on. Training, salary, purchases, and installation costs are also included.
  • Future costs: Future costs are sometimes also recurring costs. They include maintenance, operations, financing, and capital replacement.
  • Resale: The resale place is your return on investment. 

When you’re looking to hire a facility manager, it’s important to interview a few different organizations, inquire about their processes, and define common goals. Once you find someone who provides what your facility needs and has plans for improving it, you can discuss tactics, salary, and monthly costs. 

Before Hiring a Facility Manager

There’s one very important thing you must do before you hire a facility manager: list your goals.

To find someone who will come in and take care of your facility exactly the way you want them to, you must be able to tell them exactly what you need.

A security team?

Someone for snow removal?

Someone to maintain the pool?

Someone to install a kitchen in the common area?

An interior designer?

You can really customize the final cost of hiring a facility manager based on your needs. If you start your search with a budget in mind, you will be more likely to find someone within that budget.

Hire Speed Commercial Real Estate for Your Property Management Needs

Speed Commercial Real Estate is the top property management company in Ridgeland Mississippi. We can help you find a facility manager that works well with our team of property managers to flawlessly run your facility. No matter if you are local, a few hours away, or on the other side of the world you can rest assured that your facility is in great hands.

Contact us today to set up a meeting. We look forward to speaking with you!

What Is Property Management? – Everything You Need To Know

If you have a rental property on your hands, or you’re thinking about becoming a landlord, you might consider hiring a property management company.

Before you decide to bring on a team of professionals to help you manage your business, it’s important to have a comprehensive understanding of three things:

  • What is property management?
  • What does a property manager do?
  • How much does a property manager cost?

In this guide, we’re going to answer these three questions and give you a few tips for hiring a property manager for the first time.

What is Property Management?

According to Investopedia, property management is “the daily oversight of residential, commercial, or industrial real estate by a third-party contractor.”

Property management companies can be incredibly helpful when it comes to running your business and managing day to day responsibilities that landlords have. Property management companies can take care of everything from collecting rent to repairs, maintenance, move-out cleaning, and more.

Most property management companies will also advertise your available properties, conduct credit and background checks, meet with prospective tenants, give tours of your properties, and draw up leases and other necessary contracts.

Property management companies come in handy in many cases. For example, if you own a handful of rental properties that you don’t have the time or resources to take care of on your own, a property management company can handle as much or as little as you need them to.

Or, if you live in another city or state, you can hire a local property management company to keep an eye on your properties, make sure your tenants are well taken care of, and make sure you receive your rent check on time.

Let’s take a deeper look into more scenarios in which property management can be helpful:

  • You want to be a hands-off landlord

Many landlords want to purchase and rent income properties because they are great investments. They create passive income and can generate generational wealth if done correctly. If you are more interested in the business and financial side of renting out properties, and less on the management side, hiring a property management company can help ensure you get the most out of your investment.

  • Being a landlord is your second job

Becoming a landlord is a great way to earn extra money on top of your 9-to-5. However, if you’re already working 8-hours a day, you might not have the time or energy to care for your properties and tenants. A property management company can do it for you!

  • You have the income

Hiring a property management company isn’t cheap. But if you can set aside 5%-10% of your rental income and still manage to afford your lifestyle, you should consider hiring a property management company. Once you are relieved of most of your landlord responsibilities, you can focus on growing your business, spending more time with your family, or just relaxing!

  • You aren’t interested in being an employer

As a landlord, you always have the option to hire one or two people to help you take care of your properties. Some people will also choose to hire one of their tenants because they are already on the property so often – it makes for a very convenient situation! However, you might not have any interest in dealing with the complexities of being an employer. A property management company can help you avoid the hassle.

  • You participate in an affordable housing program

Managing properties that are involved in affordable housing programs usually involve a lot of paperwork and stipulations. Most property management companies have plenty of experience in dealing with affordable housing programs, so they can easily help landlords get the financial assistance they’re entitled to, help with filing taxes, and getting tenants all set up with their new, affordable homes.

What Does a Property Manager Do?

There are many positions within a property management company, but the property manager is the one who is the most involved. A property manager essentially acts on the landlord’s behalf to make sure properties and tenants are taken care of while generating income.

Specific responsibilities of a property manager include:

  • Supervising and coordinating building maintenance and repairs
  • Performing light cleaning work
  • Resolving tenant concerns
  • Advertising
  • Showing vacant units
  • Collecting and depositing rent
  • Communicating with the property owner
  • Screening tenants (and pets)
  • Applications
  • Handling new leases and lease renewals
  • Lockout services
  • Emergency maintenance
  • Notices of entry
  • Evictions

A property manager is hired to be a landlord’s eyes and ears when they aren’t around. They will ensure that the property is handled professionally, and tenants are well cared for.

As with any great service, property managers don’t come cheap.

How Much Does a Property Manager Cost?

Property management companies charge for the service and convenience they provide landlords. Everything a property manager does helps ensure the success of a rental property and the happiness of the tenants. Although their services typically come at a steep price, providing top-notch service to tenants often means that a landlord can charge higher rent prices. This may be able to offset the cost of hiring a property manager.

Before you can decide if hiring a property manager is the best decision for your business, you must know what fees are associated with property management and why.

  • There are Two Main Property Management Fees

Property management fees are usually set up as a percentage-based fee (based on rent price), a flat fee, or calculated per project.

In addition, property managers charge a leasing fee and a monthly management fee.

Leasing fees are used to covers the costs associated with marketing, showing properties, reviewing applications, screening, processing paperwork, and getting a unit move-in ready. Leasing fees may cost 75%-100% of the first month’s rent.

Monthly management fees are used to cover costs associated with monthly recurring services such as collecting and processing rent checks, inspections, maintenance, and inspections. Monthly maintenance fees are typically 7%-10% of a unit’s rent.

Landlords can pick and choose what they want to use property management companies for. Some will only want leasing services, others will want help with monthly management, and some will want both.

  • Other Property Management Fees

Vacancy fees may be charged after your property is vacant for a certain amount of time. This is because property managers are responsible for the property whether it is vacant or not. So, they will charge a small fee to protect and maintain the property while it’s empty.

On-boarding fees can be charged when you first get set up with a property management company. The price will vary, depending on how many properties you have and the services you need.

Maintenance fees are collected to pay for repairs and property maintenance. The way maintenance fees work will usually be negotiated between a property management company and the landlord. Some companies will charge a little bit more to have a maintenance “bank” and automatically complete repairs that are below a certain threshold. Others will charge a markup for the repair services and keep the difference.

Lease renewal fees may be a flat fee, a portion of one month’s rent, or equivalent to one month’s rent.

Eviction fees are charged based on the amount of time and effort it takes to evict a tenant.

Tips for Hiring a Property Management Company

When looking around for property management companies to hire, make sure you ask about their fee structure and which services are included. Be sure to also look at their testimonials and get references from current tenants. You want to be 100% confident that the company you hire can be trusted with your money and income properties.

Here are a few more things to consider when hiring a property management company:

  • The number of properties they are currently managing. If they have a large portfolio, make sure they have the staff and resources to give proper care to the units you’ll be adding.
  • Their inspection process and how often they are conducted.
  • Their tenant and pet screening process.
  • What you will be paying up-front and monthly.
  • Any additional fees that you might run into.
  • Services they offer besides property management (can they help you buy/sell properties?)
  • How involved you will be in the management process (what kind of situations will require your attention? How easily can you gain access to information you need?)

Final Thoughts

The decision to hire a property management company should not be made quickly or lightly. Take your time and meet with as many property managers as you need before you feel comfortable handing over the keys to your business. If a property management company seems pushy or wants you to make a quick decision, they probably aren’t the best match for you.

Hire Speed Commercial Real Estate for Your Property Management Needs

Speed Commercial Real Estate is the top property management company in Ridgeland Mississippi. We will take care of your properties as if we owned them ourselves! No matter if you are local, a few hours away, or on the other side of the world you can rest assures that your properties are in great hands.

Contact us today to set up a meeting. We look forward to speaking with you!

How To Get A Commercial Real Estate Loan

Have you ever wondered, “How do commercial real estate loans work?”

Commercial real estate loans are very different from traditional real estate loans (like the one you would get to buy a home) and the process can be quite complex. Investing in commercial real estate can be an excellent way to start or grow your business. However, unless you have enough cash on hand to purchase the property outright, you’re going to need a commercial real estate loan.

We’re going to break down everything you need to know about how commercial real estate loans work, what the different types are, and how to qualify for a commercial real estate loan.

Please note that this guide is designed to help you navigate the commercial real estate loan process. It does not constitute as financial advice.

What are Commercial Real Estate Loans?

Commercial real estate loans (also called CRE loans) help business owners secure properties they can use to generate income. CRE loans are similar to residential real estate loans in that both are types of mortgages that are used to purchase real estate. But the two types of loans are more different than they are alike.

CRE loans are specifically designed to finance the purchase or remodel of property that will be used for business purposes. Therefore, to be approved for a CRE loan, the majority of the building you purchase is required to be used for business purposes.

That means you can lease out a portion of the property if you wish. But at least 51% of the property must be used for your business. If you want to lease out 50% or more of your commercial property, you will have to apply for a separate type of loan.

When to Apply for a Commercial Real Estate Loan?

Here are four situations in which a commercial real estate loan would be appropriate:

  1. Buying an office building or suite to operate your business out of
  2. Expanding or relocating a retail store
  3. Investing in a warehouse to store inventory
  4. Purchasing, building or modifying a hotel that you intend to operate

Benefits of Commercial Real Estate Loans

Although the process of obtaining a CRE loan can be complex and expensive, it’s almost always worth it in the end. After securing a CRE loan, you can benefit from:

  • Rental property income
  • Tax benefits
  • Depreciation
  • Sale proceeds
  • Operating expense recovery
  • Parking, vending, and services fees

How do Commercial Real Estate Loans Work?

Commercial real estate loans are funds that are used to purchase an existing property. They can also be used to develop, construct, or renovate land or a building. In most cases, CRE loan applicants will have to be owners of a legal business entity that is registered with the state and local governments.

Here are a few other stipulations and terms for how to qualify for a commercial real estate loan:

Interest rate~3.5%
Down payment15%-35% (certain loans back by the U.S. Small Business Administration may be secured with as little as 10% down)
Loan terms5-10 years, with up to 25-year payoff plans
Debt-to-income requirementMinimum of 1.25
Minimum credit score660
Eligible property typesOffice, retail, industrial, hotels, restaurants, medical, entertainment, and specialty

Loan-to Value Ratio

The Loan-to-Value (LTV) ratio is used by mortgage lenders to determine how much money they can lend to a business owner. The LTV is found by dividing the loan amount by the property’s value.

CRE lenders typically want to see an LTV of 75%-80%. This could mean that you will have to either purchase an undervalued property or a sufficient down payment (around 25%) before you begin the CRE loan application process.

That being said, not every CRE loan lender uses LTV to determine how much they will lend a business. Some use a debt service coverage ratio (DSCR), which is used to determine a business owner’s ability to pay off their current debt. DSCR is calculated by dividing your business’ annual net operating income by your total debt payments per year. The median DCSR is 1.25.

Personal Guarantee vs. Non-Recourse Loans

When you are approved for a CRE loan, you are allowing the lending company to use your new business property as collateral for the debt. In certain circumstances, lenders might also require a Personal Guarantee.

If your business has not been in operation for long, you may not have the financial track record to prove that you qualify for a CRE loan. If that’s the case, a lender may ask you to guarantee that youwill personally pay back the loan if your business cannot.

Instead of a personal guarantee, lenders may offer a Non-Recourse Loan. In this situation, the lender will require that the property covers the loan funds if your business cannot. Meaning that the lender will reclaim the property and default your loan.

How to Get a Commercial Real Estate Loan

Here is a quick, yet comprehensive, guide to applying for a securing a commercial real estate loan.

  1. Know Your Credit Score

Your credit score is one of the most important factors when it comes to borrowing money. As a registered business, you will have a business credit score that is completely separate from your personal credit score.

While personal credit scores range between 300-850, business credit scores are on a 100-point scale:

  • Very poor: 0-20
  • Poor: 21-40
  • Fair: 41-60
  • Good: 61-80
  • Excellent: 81-100

If you want to obtain a commercial real estate loan with as little money down as possible, you will have to have a nearly perfect business credit score. In addition, scores in the Excellent range will have lower interest rates and better payback terms.

  • Understand Other Requirements

You want to begin the CRE loan application process as prepared as possible. You should come prepared with the following information:

  • Years your business has been in operation*
  • Value of collateral assets
  • Debt-to-income ratio**
  • Annual revenues

*It’s recommended that your business has been operating for at least 2 full years before you apply for a CRE loan.

**Your gross income should exceed your total debts. This will make lenders confident that you have the means to repay your loan.

  • Determine the Type of Commercial Real Estate Loan You need

There are 5 types of CRE loans available to business owners:

  • Permanent Loan: Permanent loans are the most similar to traditional mortgage loans. Typically, business owners can obtain a permanent loan from any commercial lender, but they cannot be used for short-term financing – typical amortization schedules and repayment terms are 5-years or more.
  • SBA Loan: The U.S. Small Business Administration backs some commercial real estate loans for small businesses. These loans are not available for real estate investors.
  • Bridge Loan: Commercial bridge loans are short-term financing solutions that are designed to help “bridge the gap” between current and long-term financing. Finds for bridge loans can typically be secured quickly, but they come with high-interest rates.
  • Line of Credit: A line of credit can be issued to help a business pay for immediate needs. The amount available to a business is pre-approved by the lender and can be used how the business sees fit.
  • Hard Money Loan: A hard money loan is thought of as a “last resort” that can be used for real estate transactions. They rely on collateral, not the financial standing of the business.
  • Owner Financing: Owner financing loans are loans that come from the entity that is selling the piece of commercial real estate a business owner is interested in buying.
  • Choose a Commercial Real Estate Lender

There are thousands of commercial real estate lenders for you to choose from. The best lender for your business will depend on what type of loan you need, how much you need to borrow, and what your future financial plans are.

Here is a list of things to consider when choosing a commercial real estate lender:

  • Available loan options
  • Origination fees
  • Starting interest rates
  • Documentation requirements
  • Time-in-business requirements
  • Prepayment penalties
  • Personal-guarantee requirements
  • Fast-funding or bad-credit options (if you need them)
  • Better Business Bureau ratings and customer complaints

Commercial Real Estate Loan FAQ

Are commercial real estate loans different from mortgages?

Yes. Commercial real estate loans have different requirements, rates, terms, and characteristics than personal loans.

What is the minimum down payment for a commercial real estate loan?

Typically, commercial real estate lenders will ask for at least 25% down. However, you may not be required to put as much down if your business has an excellent credit score.

How long does it take to pay back a commercial real estate loan?

Commercial real estate loans typically have repayment plans that are 5-10 years long. However, amortization plans can last for up to 25-years.

Looking for Your Next Commercial Property to Buy?

Speed Real Estate specializes in property sales and management in Mississippi. Give us a call today to view our available properties and discuss property management options!

A Complete Guide to Commercial Real Estate Auctions

A commercial real estate auction can be an excellent way to obtain your next property. Contrary to popular belief, real estate auctions are not exclusively comprised of dilapidated or foreclosed buildings. While buildings of such nature certainly do go up for auction, most properties at Mississippi Real estate auctions are in good financial standing and are able to pass inspections.

“How do real estate auctions work?” is a question that Speed Commercial Real Estate gets asked often, as we offer auctioneer services to the people of Jackson, Mississippi and beyond.

The Mississippi commercial real estate marketplace is currently seeing excellent selling prices and mortgage rates that are at an all-time low. Now is an excellent time for sellers to capitalize on the current seller’s market and for buyers to capitalize on investment opportunities. And the process is made even easier when done through commercial real estate auctions.

Types of Properties at Real Estate Auctions

Some properties at real estate auctions are there because they have been foreclosed on or the previous owners declared bankruptcy. Auctions are a tool that banks use to turn real estate properties into fast cash, but that is not the only reason they exist.

The majority of commercial properties that go to auction are sold using this method because sellers are looking to take advantage of a system that works quickly and offers a way for buyers to fairly make competing offers. Each bidder knows exactly what kind of offers they are up against and when higher offers are made. This allows buyers to make fast and informed decisions.

Historically, real estate auctions were primarily used to sell agricultural and rural properties, estates, and senior transitions. Today, you will find all types of properties at real estate auctions including commercial, residential, luxury, and farmland.

Benefits of Real Estate Auctions

In addition to the question “how do real estate auctions work?” we are often asked why buyers and sellers opt for this method.

Commercial real estate auctions offer:

  • Transparency – When you put in an offer at a real estate auction, you know exactly where your offer stands in comparison to the others. When you go to put on offer on a property that has been listed, you will likely be told if you are up against other offers, but you won’t have any clue what those offers are.
  • Fair competition – When you participate in real estate auctions, you are on the same playing field as all other bidders. There are no ‘closed door negotiations,’ no one to ask where your financing is coming from, no way to obtain early possession, or any of the other situations that frequently cause prospective buyers to lose out on a property they’re interested in. Everyone that participates in real estate auctions are under the same terms and conditions.
  • More control – Because you know exactly where your bid stands in comparison to other bidders, you can raise your bid or pull out of the auction whenever you want. This can save buyers an extraordinary amount of time – and money.
  • Fair value – Tax assessments, appraisals, the building next door… these are all factors that go into determining the market value of a property when it’s listed on the market. However, the real market value is what people believe is fair and are willing to pay. Auctions allow buyers to essentially set their own prices and only bid as high as they’re willing to pay.

With learning all those benefits of real estate auctions, you’re probably excited to participate in one! Before you place your first bid, it’s important to understand how commercial real estate auctions work.

We are going to cover the terms and conditions of real estate auctions, the different types of auctions, and how the process plays out.

Real Estate Auction Terms and Conditions

Real estate auctioneers will set their own terms and conditions for an auction, and they are likely to be different depending on the auction you’re participating in. If you aren’t familiar with the real estate auction process, you might not understand some of the jargon that is used.

Here are some important terms to know:

  • CASH – If an auction is “CASH” this means that a buyer is not required to have financing in order to purchase a property. Purchases can be made 100% in cash or with financing that was obtained through a lender before the time of the auction.
  • AS-IS – Buyers are responsible for all necessary repairs to properties that are sold at auctions “AS-IS.” This doesn’t necessarily mean that the property in in poor condition, it just means there is no opportunity to negotiate repairs or modifications to the property. Most often, potential buyers will have the chance to preview a property and even have it inspected, so they know exactly what they are spending money on.

Sellers are obligated to let potential buyers know about all known property conditions, and many will provide a disclosure report for full transparency. Auctioneers will typically do everything they can do to make buyers feel confident that they are spending their time and money wisely.

  • 30-DAY CLOSING – Auctioned properties that have “30-DAY CLOSING” give buyers 30-days from the date of sale to the final closing date. If you need to get financing in order to pay for the purchase, you can do it during this time. Make sure you let your lending company know that you are on a schedule and need the funds in 30-days or less.
  • NON-REFUNDABLE EARNEST MONEY – Earnest money is kind of like a down payment. When you put earnest money toward a property at auction, you are saying that you will move forward with a contract, should you make a purchase. The amount of earnest money you put down will either be a flat rate determined by the auctioneer or a percentage of the purchase price. Your earnest money will go toward the final price you pay at the time of closing.

Real estate auctions can be tricky if you’ve never participated in one. Luckily, you don’t have to go at it alone. Most auction companies allow real estate agents to represent buyers and will write compensation and cooperation rules into their terms and conditions. Speed Commercial Real Estate has 17-years of experience in Mississippi real estate and auctions and will work hard to get your next property at the best possible price.

Types of Real Estate Auctions

While you’re searching for Mississippi real estate auctions, you’ll come across a few different types:

  • Absolute – These auctions don’t have any limiting conditions. The property will go to the highest bidder, no matter how low (or high) the bid is.
  • Reserve – Some sellers will put a bottom dollar amount on the property, which the bidding will start at. Some reserve auctions will also allow the seller to accept or reject the final bid.
  • Live – Live auctions happen in-person with an auctioneer calling out bids that audience members make. This is the type of auction that is typically shown in movies. The room is full of energy, the auctioneer talks quickly, and bids are placed at a rapid rate.
  • Online Only – Some auctions will only be held online, which means you will have to register and place bids through the auctioneer’s website. The website will tell you when you can place bids, when the bidding window stops, and the other bids that you’re up against.
  • Live Stream – Buyers have the option to attend live steam auctions in-person or watch them online and bid through the auctioneer’s website.
  • Sealed Bid – In sealed bid auctions buyers will be asked to place their bids online within a certain timeframe just like with online auctions but competing bids will not be disclosed until the auction ends.

It’s very important for buyers to pay attention to whether an auction is “Absolute” or “Reserve” so there aren’t any surprises when it comes to starting bids. In addition, if you are looking to buy investment property or expand your business in another state, keep an eye out for those “Online Only” and “Live Stream” auctions. You can place bets from anywhere in the world!

The Real Estate Auction Process

The most crucial point in the real estate auction process is when the reserve price is met (if there is one). There will usually be a few bids placed in the first day or two, but once that reserve price is met the property could go at any time. This is when the competition really begins, and strategy is required.

When a buyer wins an auction, the auctioneer will walk them through signing paperwork, the payment process, and the terms of the sale. If everything goes according to plan, the winner will have a new property in their possession in 30-days or less.

It can certainly be frustrating to go through a bidding war on a property that you are highly interested in only to lose out to another seller in the last few moments, but the entire process can often be exciting. Even if you can’t get the property that you had your eye on, you’ve likely to learn things that you can apply to the next commercial real estate auction you participate in.

Mississippi Real Estate Auctions with Speed Commercial Real Estate

You don’t have to go through the real estate auction process alone! Allow one of our professional and experienced real estate agents at Speed Commercial Real Estate to help you at your next Mississippi real estate auction. Let’s get you into your next commercial real estate property FAST!

Still have questions about commercial real estate auctions? Give us a call!