Byline Secondment Agreement Made Easy

Air commercial real estate association form

so you're ready to make your offer on a commercial property what are you going to base your offer on what information if you're going to use the broker brochure is glossy as beautiful it has the price it has all the information needed are you going to use this no way are you going to use the sellers financials I have three years of it are you gonna solely base your offer on this no way if you use their broker brochure to base your offers guess what you're going to overpay if you solely base your offer on the sellers three years of financials guess what you're going to experience lower cash flow and lower returns on investment so the question is what do you use to base your offer on well that's what today's videos are I am Peter house of commercial property advisors I am author of this book commercial real estate investing for dummies and I've also author of my new book commercial real estate for beginners I'm also a coach and mentor to many commercial estate investors all across this great nation of ours today you're going to learn how to make offers on commercial property and also you're going to learn things that no classroom will teach what making offers on commercial property I guarantee you secondly I'm going to give you the absolute essentials in hand to make the best offers to make smart offers and this does not apply to single-family it only applies to commercial did you know that there are four faces four perspectives that you'd have to go through before you can make an offer I'll share with you what those four phases are and number four if you follow steps one two and three you're going to avoid overpaying on your commercial property and avoiding day one negative cash flow guaranteed and lastly number five I'm going to give you a download link at the end of the video that you can download it's going to walk you through step by step one two ABC how to come up with your offer price alright alright let's get started here are the four phases of making an offer on the commercial property these are the very things that we walk through our students each and every way okay so these four phases of make an offer are four different perspectives of looking at the deal and you must do this or you're gonna overpay you're going to under cash flow or you won't be happy with investment that simple so you have to go through this process let's go through it through it alright so the broker brochure I showed you before it's a pretty brochure said it's a multi pages there's beautiful pictures there's numbers in there there's a price in there just demographic information in there that's phase one okay that is phase one next is the seller financials usually we get three years of cellular financials showing what the income and expense has been for the last three years with an noi at the bottom right that's phase two phase three is a performer and performer is a best-case scenario most times a broker the broker brochure won't have to perform it in it however in this case this is your performance this is based upon your research basically where the rents can go in your opinion based upon where the expenses can be reduced to in your opinion this is this is your portfolio not their brokers per follow you can start with the broken performer to calculate this but this is your based upon your research okay and this is phase three phase four is your offer is based upon your numbers is based upon your goals okay so phase wants to broker phase two is information from the seller phase three is your performer and phase four is the numbers based upon your information your goals alright so that that is the the four phases of making and offering the commercial property the next thing I want to do is lay out for you the essential things you must have in hand before you make an offer let's go there next there are eight essential things you need in hand to have before you make an offer on commercial estate let's go over those number one is income you need to know what the income is on that on the last twelve months the last three years in including the current month absolutely essential number two is expensive you need to know what the expenses are this this category here is the one that most new investors really mess up on right so you really have to learn how to zero in on the expenses net operating income or Noi from all my videos everyone out there you you all know I preach how important this number is as the noi goes up for a certain commercial property the value goes up as the in the white goes down property value goes down so this is the driver of your commercial property value this is how you force depreciation right next this mortgage why does the mortgage important at this point it's because of this watch income on his expenses equals in Hawaii no.1 - mortgage is your cash flow right so you have to have your cash flow here I mean you have to have your mortgage here to determine what your cash flow so what I recommend you do here is you take your deal and you send it to a couple of lenders and have them give you what the down payment would be what the interest rate would be things like that so you can calculate what the mortgage payments would be for the year got it okay next is cash flow that's a given we all know that's important next is cash in cash return this is the term that determines how fast the money is moving a high cash and cash return means your money is moving fast and low cash on cash return is not so exciting your money stays in the best a long time right we'd like to say in our investments we'd like to target a double-digit cash and cash return it is possible don't let anyone else say that next is cap rate cap rate is defined as if you were to pay all cash for your property what would that return investment will look like what percentage would that be that's what cap rate is so it's a it's an industry-wide widely used term to help you value your deals right well before I get the capital expenses here all these seven terms here if you need to review what's this video here it's called these seven commercial estate terms you should know so the link from this video is going to appear go ahead and watch it right if you need to review on all these things all right so the last category they need to have before you make an offer is an idea of what your cap export capital expense is going to be do you need a new roof do you need to repair the stairs do you need all new appliances do you need to repair the sidewalks in a parking lot have an idea of what these are before you make your offer all right okay so the next thing I'm gonna do is I'm going to break down the four different phases using all of these eight terms all right I see you there next let's start here right so on one side we have all these all of the essentials to make an offer and on this side we have the four phases to be need to go through and evaluate before you make the offer how do you blend all that both of these together that's where you discuss right now so number one I like to start from phase one the broker brochure right it is an introduction to the deal it is a beautiful and pretty sales tool and the purpose of this document is to invoke emotion to to make you take action and we all know from just life experience that as emotion goes up intelligent intelligence goes down therefore we do not make offers based upon your broker brochure got it all right now in terms of let's just you an essential here income do you believe what you believe more is the more accurate income their broker brochure or the seller of course would be the seller right which one to believe more to be the more accurate income the sellers income or the income that you that you decide to income is of course will be based upon your research right so you can see from here to here we get more and more believable right so again we're gonna make offers based upon the broker brochure Nexus the sellers financials right this is from the sellers perspective how accurate are the sellers financials right so they're going to give you a pretty good looking Excel spreadsheet three years of financials how much of that can you can you use to to to make your offer you could use quite a bit of it right so it's a it's a great document to use to see how the seller has been performing on the property not necessarily how you're gonna perform but how the sellers been performing for the last three years right let's look at the sellers motive his motive in his financials is to make the numbers good enough for the property to sell that's his motive right so would you rather use the sellers financials or what you come up with of course would you come up with okay alright follow me so far okay now the Performa okay now again the Performa you're probably going to begin using the performer from the broker it's a good guide it's a good guide you get started but this performing I'm preferring to this produced projected numbers you know what the risks could be in the future right if you just raise them or if you do renovations to raise them this research comes from you you have to do this research right this is it this is an integral part of doing before you make an offer the reason why is you need to target you can't just buy the property and just just cashflow you want to have a target something to reach for right and also if you can do this performer well it will help you decide on precise extra strategy okay and lastly your offer this is what I call the truth right now when to determine this you gonna have to determine what you think can you believe based upon your research what the income with the income is what the expenses are what their actual in a way that you think you can achieve on their property right you can do your research of the mortgage you're gonna calculate your own cash flow that works for you you're gonna have come up with a cash or cash return that you're happy with you're gonna come up with a cap rate right cap rate that you know you can live with and then you're gonna calculate your own capital expenses not believing what the broker did or broker produces what the seller has done but you're gonna calculate cop expenses that works for you if you need a new roof you're gonna throw those numbers in there if you need to redo the parking lot you're gonna throw those numbers in there okay all right so again these your this phase four is the truth is based upon your goals is from your perspective and lastly I want you to be conservative here okay don't don't rely too much on these here well I'm mainly on being conservative and come up coming up with your numbers all right okay that's what I want to show you here now in the last part let's move forward and let's make an offer based upon these last three videos alright here we are the last part let me quickly show you how to make your offer okay based upon the four different perspectives in all of those essential elements alright so first of all we need goals right so what are your goals when making offers I'm gonna give them to you here are your goals number one is I want your cash flow to be positive right that's important right number two I want your cash on cash return your cash or cash return to be at least double digits okay number three I want your deal to have upside potential what do I mean by that upside potential means that you have the ability to raise rents over time you have the to maybe reduce expenses perhaps you have the ability to charge back to tenants for all the utilities right all three of those are going to increase your Noi and remember when the Noy goes up so does the property that okay really important to understand that fact so upside potential is important well how do you know if you deal has upside potential how do you know it's because of this this perspective okay phase three Performa you've done your performing valuation and that will tell you how much upside potential is there got it okay that's why this is important and lastly you want to be in a stable and growing neighborhood you don't want to invest in anybody that's struggling or contracting or people are leaving that's never good for a commercial real estate okay alright next let's talk about the the essentials what you want to be on each of these eight essentials number one of the income your concern is not what the broker says not what the seller gives you not what the Performa but what's been actually collected okay that's what your base our offer on what's been collected not the other stuff what's been collected show me the money expenses you want to use expenses in your offer that are interested industry standards right you want to get help from your advisors on the sounds and expenses perhaps have a property manager help you determine what expenses are again I'll say this is the part that most newbies mess up they they tend to underestimate the expenses you do that and you're gonna have less cash flow and a lower cash on cash return okay so this can be a tough one here so you need some help for that what that one Noy right so you know why should be based on the above okay should be based upon the income collected and the industry standard expenses or expenses that your advisor or your prop manager help you come up with okay all right mortgage get to lender reviews to look at your deal and then give you just just you know they're their mortgage terms just a just a projection so you can figure out what the cash level be now cash flow doesn't excite you right when you do your evaluation based upon your offer does it excite you if it doesn't need to you to make a better offer or don't do the deal cash on cash return double-digit return you will have people broker someone else will tell you it's not possible it is possible our students are doing it every single month double-digit returns cap rate now cap rates are market dependent for example on the west coast for example in the Bay Area we're talking four five percent cap rates Midwest maybe you get six seven eight percent cap rates on the Far East Coast maybe you're down to four or five percent cap return so their market dependent your goal will make in your offer right your offer cap rate needs to be higher than the market cap rate okay all right now again if you want to get further understanding of how this works you need to watch the video that topper earlier called the seven commercial estate terms you should know watch that bit and review it alright capital expense it's really important when you make your offer you need to have a contractor give you quotes on what's needed on their property don't believe that don't believe that only believe what the contract that gives you and then after you get the quotes for from the contractor and what's on what the properties needs are the question is is this still if the deal still worth doing okay answer that question alright so if you do all the above hairs end result the end result is you're going to avoid overpaying number one number two you're going to avoid day one negative cash flow most likely and number three you're going to get credibility you ain't your credibility is going to increase because this is what all the professionals do right all the big boys all they're really good investors that's what they do dust this is what we teach in our company here right so it's going to increase your credibility and that's a good thing the last thing I'm going to do with you today is I want to give you a bonus it's a download of just a PDF that's gonna break down for you how to come up with the actual numerical offer okay what number is that 1.2 million is it is it 700,000 is it 250,000 so this document that you're gonna download it's going to show you how to come up with that number all right okay hope you enjoyed how to make an offer on commercial property if you want more videos like this please go into our website commercial property advisors calm thank you so much for your time today I'll see you at the next video