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4 Ways to Deliver Value in Real Estate

Alex Britton

1) Enhancing Value Through Management

There are a few people associated with ongoing management including property managers (day to day operations) and asset managers (physical structure managers). Additionally there are several functions that people in the real estate industry operate under. Including owners as managers (managing day-to-day operations and assets), property managers, leasing brokers, Etc. The property manager has a vast area of responsibilities. They oversee tenant reps, broker activities, leasing agents, and tenants. It is necessary to house qualified and moral family’s or individuals. When dealing with residential property, it is important to consider the history of the tenant. Long term occupants creates less turnover and in turn fewer resources are exhausted. Furthermore, placing tenants in a building with similar lifestyle habits is a concern. For example, you wouldn’t want to put a young rock star in an apartment that houses elderly folks. Also checking credit and contacting past landlords to pursue testimonials also is important to the health of the building upon lease signing knowing the different kinds of leases is both adventitious of the buyer and seller. A lease, gross lease, net lease are all rather different. These lease terms dictate how the property can be used and on the grounds in which permission to use the property can’t be terminated. As a building owner having strict policies and also complying with all policies of the law can enhance your position in the real estate business. Collecting rent from tenants in a timely and organized manner helps to not allow at tenants to get overly comfortable and take advantage. Lastly a well-maintained property will continue to help it grow and flourish in the future. Maintenance is essentially a form of investment. Although some of these fees are passed onto the tenants, a clear and can structurally sound building is important to the success of a real property. A level of professionalism transcends and pays dividends later. This is essentially how one maintains and enhances value through good management. (Provide more examples and fix flow – maybe provide more info)

2) Development Creating Value

The human race needs to see continual change, as a result developers are creates out of necessity. Adaptation to shelters and workspaces, explains why real estate development professionals are in serious need — its simply part of life. Developers hold much responsibility in terms of the main decisions made when planning to build residential or commercial property. Creating value as a developer starts with site control. This is the starting point for any development project. Gathering enough land to develop a structure is very difficult. Sometimes eminent domain is employed to acquire necessary land for buildings. Additionally there are several processes in which sites are acquired. A couple include build to suit and a ground lease. More particularly a ground lease occurs when land rent is paid before development begins. A real world example of this ground lease land acquisition proposition is Rockefeller Center.

After land is acquired, design, planning, and landscape architecture playing important role in the overall look and feel the building and property upon completion. Additionally, obtaining permits are extremely important. Without proper building permits, the project is at a standstill.

Financing the project can be an intense challenge; however, it is a necessary task when thinking about development. Borrowing funds from lenders like commercial banks or seeking private investment are both viable options. A couple different financing tactics would include taking loans from banks that will be paid back over the long-term. Mini perm loans– Permanent loans for a few years after the construction process.

This is usually something that is circumstantial — deciding the best way to raise funds to support land costs, construction, legal costs, etc. Construction financing include cost of land soft costs and hard costs–material, labor, subcontractors, etc.

After the structure is financed, Construction begins.  During this process many people are employed–a general contractor, architect, engineer’s, Etc. These people of value are all overlooked by the developer or development company. Lastly the development numbers are a calculation of costs. These costs could include land, developer fees, legal fees etc. Real estate development is a risky business; yet financial rewards are lucrative. This is what makes the business very appealing. Development professionals have a slew skills and the knowhow to build property that is worthy of a purchase. They fill a human need that to inhabit new and interesting space. This simple explanation only scratch the surface when discussing the dynamics of creating value in real estate through development.

3) Mortgage Calculations and Decisions

A mortgage is charging of real property by debit or to creditors as security for a debt. On the condition that the loan will be returned in a certain period of time. The most common mortgage consist of a 30 year plan in which 360 payments are made throughout the duration. Furthermore, mortgage calculations are used to help current or potential real estate owners to determine how much they can afford to bar on a piece of real estate. Calculating a mortgage is important to figure out terms for the mortgage that are feasible for you. Mortgage calculators can also be used to compare the costs, interest rates, payment schedules, or help determine the change in the length of the mortgage loan by making added principal payments. People everyday in the United States and abroad make use of mortgage calculators to get their finances in order. Knowing this information can start to help you make decisions regarding the purchase or real property.

Additionally, once the loan has been issued, there is a balance — the amount left to pay on your loan. Every loan you take out will have a loan balance until the loan is completely paid off. Your loan balance changes on a daily basis because interest is added. Next discount points are an advance interest paid which comes under the umbrella of lender’s yields. Following that, lender’s yields and effective borrowing costs are very much related — the terms are practically interchangeable. The effect of borrowing costs or the lender’s yield is simply the total interest expense divided by the outstanding debt. And application of the effect of borrowing cost is known as the annual percentage rate. The APR is computed under the assumption of no prepayment; that is, it is a yield to loan maturity. An example of lenders yields effective borrowing costs and the annual percentage rate is incorporating prepayment. Prepayment is a home mortgage loan that really survives maturity. Because homeowners may move or they may simply wish to take advantage of lower interest rates, This is the reasoning behind the low percentage of this mortgage type rarely surviving maturity. Another factor to consider during calculations are the upfront financing costs. In addition to discount points, home borrows mush usually pay a loan origination fee, which is usually equal to 1% of the loan amount.

Several different kinds of mortgages that a potential home owner can choose from. He fixed rate mortgage is a popular one which sloan interest is fixed. Additionally there our interest only mortgages, partial amortizing mortgages, early payment mortgages, adjustable-rate mortgages only to name a few. To expand on the side of fixed rate mortgages, level payment mortgage that is fully amortized it is most likely the most popular mortgage package for families. The term of amortized essentially means that mortgages are paid off completely by periodic payments. At maturity the loan balance is zero. As the loan is amortized, the owner’s equity in the property grows, so long as the property value does not decline.

Every day in the United States and abroad, families and individuals visit commercial banks to take out loans in order to purchase housing. Understanding how mortgage rates function is important for anyone to understand. When purchasing a house for the first time or and the subsequent times understanding organ traits and different forms of loans can help buyers become more informed in making decisions to take out loans from banks. For example the housing crisis in 2008, had extremely low mortgage opportunities for families and individuals. This example doesn’t exactly fall on the people of United States for taking loans outcome thinking professionals maybe could have understood more comprehensively that giving loans to everybody and anybody was very unwise. Thus explaining why mortgage calculations in decisions for families and individuals are very important.

4) Sources of Commercial Debit and Equity Capital

With the real estate market in United States is big as it is, debt and equity capital play large role. There are several forms of ownership for pooled equity investments. The choice of ownership form for a property for portfolio properties to be owned by an entity is your my trade-offs along multiple dimensions. These trade-offs include: Federal income tax issues, avoiding personal liability for debts and obligations of the entity, Management control issues, the ability to access debt and additional equity capital, the ability to share the risk of investment with other investors, and the ability of investors to dispose of their interests in the organization. With these risks in mind it is important to educate yourself as to what the proper entity to form is for your needs.

A general partnership is the simplest form of the pooled ownership. One large benefit for forming a general partnership is that taxable income and losses flow through to the individual partners to pay the tax. However, a major disadvantage of forming a general partnership is that all partners have unlimited liability. Next a limited partnership is very similar, because it is taxing the same way as a general partnership. Also one is that because of the limited personal liability the liability partners give up a certain amount of control. Next is a legal and taxable entity separate from the owners to are the shareholders in the corporation. An ass Corporation process is the same limited liability benefits for shareholders and see corporation. The only major difference in the S corporation is a separate legal entity is not a separate tax entity.

Ability or LLC is a hybrid ownership structure that combines the corporate characteristics of limited liability for owners with tax characteristics of a partnership. The limited liability company or LLC and limited partnerships are the two most dominant ownership structures in United States. All of these implications are important to way when forming A Company in the real estate business.

Few ways real estate investors invest money in the sector of commercial real estate one of them being direct investment. Direct investment individual and institutional investors purchase and hold title to properties. Purchasing individual properties directly in the private market gives investors complete control of the assets: who leases it who manages it how much debt financing is used and when it is sold. Next, life insurance policies and all the payment of premiums by the insured in exchange for benefits to be paid upon the death of the insured. Using mortality tables, life insurers are able to protect the mortality rates of policyholder groups with a high degree of accuracy. Lastly foreign investment is very active in the real estate markets. Foreign investors have poured more than $70 billion dollars into US real estate markets during the 80s. More recently Middle Eastern investors have been a source of equity capital thinking paying cash from the oil earnings. For example New York City has the ability to sustain property investment in times of recession. In the case of 2008, the real estate market was not hit as hard as other sectors of the economy, for the simple fact that foreign investment was strong.

That’s been through intermediaries is also a strong form of investment. A large amount of equity investment in commercial real estate takes place through intermediaries, making it important to consider a few different things. For example, scrutinize investments are a pool of money from multiple investors. Scrutinize investments are purchased and resold it in either public or private markets. Another alternative to direct ownership that still involve some degree of intermediation is the use of separate accounts which deal with real estate investment managers. Large firms will hold specific funds in want to count and other funds in a different accounts. In summary, commercial debt and equity are an important aspect to real estate.

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