Real Estate Jargon/EDU

The main reason and focus of Mogul Launcher is to benefit and educate investors of all types in purchasing real estate. Commercial Real Estate Investment is a new area for many real estate investors. In an effort to assist those who are not familiar with real estate jargon, this article is meant for you. Below is an alphabetical list of terms used in this field.

Anchored tenants: large national brand tenants such as Albertsons, Longs Drug, Walmart, who bring a lot of traffic in the middle of the shopping cart.
CAM: Maintenance Area. Common fees associated with CAM CAM. For NNN leases, see CAM-term rates, tenants pay rent money to cover propertyTaxes, insurance and maintenance.
Cap Rate: The return of investment in the first year after purchase. Capitalization rate is the ratio of 1 Years operating income for the purchase price. The higher the cap, the higher the rental income. For people who invest in the stock market, the maximum rate is the reciprocal of P E.
Cash On Cash: APR return of your deposit without detection. First year cash flow from your original down dividedPayment.
Conduit loan: as Commercial Mortgage Backed Securities (CMBS) loans, often at lower cost than traditional commercial loans, but in a high prepayment penalty (the so-called sale of a penalty or yield maintenance) or no flexibility in payment.
CPD: car per day or volume of traffic on a road.
CPI. Consumer Price Index is often used to compensate for inflation to calculate the annual rent increase.
Due Diligence Period:the period after the decline of 15-30 days for buyers to verify ownership. The buyer may cancel the contract at that time and for any reason and receive a full refund of the deposit.
estoppel certificate: a letter signed by the lessee provided and confirms the terms and conditions of the current lease.
Full-service leasing: leasing, in which tenants pay rent, utilities, includes all-inclusive.
Gross Income: annual income firstCosts.
Gross lease: the tenant lease to pay rent. The owner pays, insurance fees and maintenance.
Total: Gross Lease able area or gross lettable area. This is the space that can be hired and receive rental income. Not included are facilities for services, elevator, etc.
GRM: Gross Rent Multiplier for apartment. Ratio between purchase price and annual income.
LLC: limited liability company. A legal person established in many investors toown commercial real estate.
LOI: Letter of intent / interest or commitment letter is not normally the property, an offer to buy a business.
May reviewer: Member Appraisal Institute accountants.
Master Lease: Lease signed by the seller to rent space to ensure clear offer for rent.
Mixed Use: retail commercial real estate with the first floor and apartments upstairs.
Triple Net (NNN) Lease: Lease intenants to pay the basic fee plus tax on rental property, insurance and CAM. Absolute NNN NNN lease rental agreement that tenants also pay for property management.
NOI: net operating income. annual income, after all costs (taxes, ins., & Maintenance) other than the payment of the loan.
Hall: Stand-alone building in a strategic position in a large shopping center.
Pass Through: see refund.
Percentage lease: Leasing, in which tenant pays rent based moreShare of income of the tenant.
Phase I Report on the inspection report is an assessment that the contamination of the soil / environment. It is usually required by the lender as part of the process of loan approval for a commercial property.
Phase II report: Report of inspection to soil, groundwater, surface surveys. This control is more complete, including testing to see if there is a pollution of soil and water.
Pro-forma net income: potential, iehigher income when the property is 100% leased.
Proforma Cap Rate: maximum potential rate of adoption is 100% leased property for rent to the market.
Repayment: The amount of the fee for insurance and property taxes CAM, the tenant must pay a basic fee, the owner of the next.
Guaranteed rent: rooms for rent paid by the seller to the buyer for the vacant until it rented.
SBA loans: the government guaranteed loans for home ownership.
SNDA:Subordination, non-interference Attornment. This is an agreement pursuant to the agreement signed by the tenants banks: the lender of a new bond in the position, as landlord in the case of exclusion, tenant rent as valid as long as it is not in default.
TIC: Tenants in common. One way for small / self-directed IRA investors own a share of ownership of high quality as tenants in common.

Making An Investment In California Real Estate

If you are thinking about making a real estate investment, you should consider California real estate. The real estate scenario in California is in a real boost now, with so many people willing to buy properties in the region. California homes for sale are one of the most in demand properties – these properties are demanded by not only the local residents but by those people also who are looking forward to rent these properties during their stay in California.

Thus, as a real estate investor one of the wisest decisions would be to buy any property and rent it out to tourists or other people and then sell it off later on. If you rent it out to tourists you will have a steady income while if you choose to sell if off, you will be able to make some good money, because these properties are going to have a boost in their values soon.

Here are some more reasons why making an investment in California real estate is considered to be a wise decision now.

Property values on the rise: Recent statistics have revealed that property values in California are appreciating. You might choose any kind of property; you will find that its value is on the rise. Thus, suppose you make an investment now and you sell if off in a few years, you are sure to make some quick profits. Moreover, if you wish to ensure that you make profits, you should make an investment in Southern California realty. The property values in this place are on a high like never before.

Rent out California real estate: Suppose you choose to buy a property now but at present you do wish to stay there. In such a case, you just need to rent out such a property to students, professionals and tourists. In such a case, you will be able to get a steady income every month. Thus, this is said to be a great idea for those who are looking for an increase in their monthly income.

Use it as your holiday home: If you do not stay in California but love to stay there during your holidays, you can purchase a California real estate and use it as your holiday home. You will be staying there during your holidays – you do not have to rent any additional place and pay hefty amount as bills. Moreover, your friends and relatives will also be able to enjoy the place anytime they wish. If you wish to buy any property as your holiday home, it is best to choose San Clemente real estate. This is the best place in terms of location, entertainment, convenience and comfort.

Prices of property affordable: Southern California realty is considered to be one of the most affordable properties of the region. You can choose between luxury homes, condos, apartments, cottages and villas – you will find that all properties are affordable and are the true value for the money you choose to spend on them.

Alarming California Real Estate Numbers From Appraiser’s Conference

posted by cehwiedel on August 16, 2010 @ 5:14 am

The Appraisal Institute’s Southern California Chapter-the largest of its chapters in the country-hosted its 16th Annual Summer conference on Thursday, July 29, 2010. The chapter presented an excellent program of continuing education that was well attended by both residential and commercial appraisers.

During the session, Norris-who is considered to be a top authority on the Southern California real estate market-shared some intriguing insights. He believes the region is in an artificial market and is concerned about the shadow inventory that could flood the market, forcing prices even lower. However, this isn’t the shadow inventory of bank-owned homes you may have heard about; he refers to all the houses that may yet go into foreclosure. The problem will vary by region, but referring to Riverside County in Southern California, Norris presented some pretty alarming statistics:

• 23% of prime borrowers are not making payments
• 47% of non-prime borrowers are not making payments
• 90% of properties are upside down on value-to-loan (60% owe more than 150% of value)

Many borrowers haven’t made a payment in more than two years and have yet to receive a Notice of Default.

These numbers are frightening when considering the inventory that may come into the market in the next few years. Norris added that lenders and the federal government have slowed the foreclosure process to prevent a further deterioration of housing prices. But this artificial slowing of foreclosures belies the fact that there are still major waves of residential mortgage defaults on the horizon. It will be interesting to see if this policy plays out for the best or backfires and causes another flood of foreclosure properties into the market . . .

A postscript or comment on this from a reader of The Big Picture:

Southern California: 23% of prime borrowers / 47% of non-prime borrowers not making mortgage payments is alarming…to me anyway.

I think that the banks are technically insolvent. If they did their accounting according to the rules, they would have to write down the value of non-performing loans. Given that this many loans are in the non-performing category, if the banks followed the rules, they would not have enough capital to remain in business and the FDIC would have to close them as they have closed 108 banks so far this year. The higher level problem is that the FDIC might have to close many / most banks, which would really upset the economy.

So, the banks are extending (Letting people stay in houses without making payments) and pretending (bending / breaking the accounting rules to hide the extent of their (and our) problems)…

Assuming that Riverside County numbers are typical of the entire state of California is not a valid assumption.

Perched here in coastal Orange County, inland California real estate generally looks at least as bad as Riverside County numbers suggest. However, coastal California real estate looks more buoyant.

The two real estate markets split like the poopy economy as a whole: if you’re out-of-work, it sucks to be you right now. If you have a job, things aren’t so bad. The anxiety then rests in keeping your job and paying down your debts just as fast as you can.

Real Estate Recovery

It’s been three years since the sub-prime mortgage crisis began, triggering a global recession. Richard K. Green, director of the USC Lusk Center for Real Estate, takes stock of the housing market in California and other states. How close are we to real estate recovery, and will we ever see pre-2007 prices again?

“The main answer is things have stopped getting worse, and they stopped getting worse a year ago,” Green says.

“California is doing a little better than the rest of the country — particularly places like Arizona, Nevada, Florida, Michigan and Ohio,” he notes. “California was among the hardest-hit states, and we’re starting to come out of it; those other places aren’t.”

However, even in California, housing prices and home sales are far from realizing 2006 peaks. “In Los Angeles, prices are about where they were in 2002. In San Bernardino, Riverside, Fresno and Kern Counties, they’re lower,” Green says. “We’re seeing small increases, but it’s hard to know how to interpret that, because what’s being sold is changing.” He explains that rising prices may simply be due to shifts in the type of housing stock involved; for example, foreclosures made up half of home sales in the region a year ago, but in 2010 dropped to a third.

“Overall, we’re just bumping along flat,” Green says.

Looking to the future, Green believes that cities like Riverside and Bakersfield may never return to 2006 prices in our lifetime (discounting possible inflation). However, the prospects for other parts of Southern California are rosier. On L.A.’s Westside, prices have the potential to reach their old highs within a year or two.

As with all real estate, demand is key. “Places in Malibu are like buying a piece of art, not a home,” Green says. “Rich people value trophies, and a house in Malibu is a trophy.”

Discounting these isolated gems, many places may not rebound to 2006 levels. Before the crash, prices had really gotten out of hand in certain areas, Green says. The mortgage crisis, dire as it was, had a corrective effect.

Worst May Be Over For Commercial Real Estate

By Roger Vincent-L.A. Times
After nearly three years of declines there are signs that Southern California's beaten-down commercial real estate market has struck bottom — setting up the possibility of a rebound later this year.

In a sign of the easing, heavyweight investors armed with buckets of cash are on the prowl, looking to snap up office buildings, warehouses, shopping centers and apartments at the market's low, industry observers say. The buyers are choosy, but the most desirable buildings elicit bidding wars when they come up for sale.

The auction earlier this year of Wilshire-Bundy Plaza, a prominent Brentwood office building, drew 40 bidders. The 14-story building will sell for $111 million to Santa Monica landlord Douglas Emmett Inc. if a Bankruptcy Court approves the deal, said real estate broker Bob Safai of Madison Partners.

"That's an incredible price in today's marketplace," Safai said. Now he is trying to sell 801 S. Figueroa St., a 25-story tower in downtown Los Angeles that he hopes will garner $180 million.

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Although commercial building landlords in many markets are still struggling with high vacancy rates and weak rents, the erosion in some sectors has slowed, piquing the interest of buyers. In addition, reinvigorated banks have been able to postpone or avoid liquidating billions of dollars' worth of distressed real estate loans sitting on their books, helping to solidify prices.

In a similar fashion, Southern California's housing market hit bottom more than a year ago and prices have been trudging higher ever since, partly because a feared wave of fresh foreclosures hasn't materialized.

If the commercial real estate market continues to gain strength it would represent a significant shift in economic risk because many experts had feared that mass defaults by landlords on their loans could cripple banks and drive the country deeper into recession.

"It's true that thousands of commercial loans must be worked out and some of these properties will enter the market in 2010," investment banker David Rifkind said. But "federal policy has been accommodating to banks and they are not being forced to realize losses."

With rents falling and the economy trembling, commercial real estate transactions had been rare during the downturn. Owners were holding on in hopes that prices would stop falling and buyers were holding back, waiting for the low point.

But a philosophical change has become apparent among investors, Rifkind said.

"There is so much money sitting on the sidelines that when distressed assets or even small pools of loans come to market, there is a flood" of interest, said Rifkind, managing partner of George Smith Partners.

"That became palpable to us in the first quarter," he said. "Money can't stay on the sidelines for long periods of time. It has to retool and be put to use."

That's not to say property values are leaping up across the board, however. Researchers at the Massachusetts Institute of Technology said that prices of commercial property sold by major institutional investors nationwide fell slightly in the first quarter compared with the last quarter of 2009, according to its index.

Prices were 41% below their mid-2007 peak, MIT said, but not down significantly from the temporary bottom reached at the end of the second quarter last year.

"Overall, the behavior of the index since mid-2009 is not inconsistent with a pattern of bouncing along the bottom, essentially moving sideways," said David Geltner, director of research at MIT's Center for Real Estate.

Similar conclusions emerged in another popular index tracked by Moody's and Real Estate Analytics. Prices were down overall in the last quarter from a year ago, including a 3% dip in office prices. Apartment and industrial buildings, however, both increased in value for the second consecutive quarter.

"The past four or five months have shown us the market is establishing a base," said Neal Elkin, president of Real Estate Analytics. "Whether it's a bottom or not remains to he seen."

Healthy properties — buildings in good locations that are nearly fully leased — have lost about 35% of their value from the peak, while distressed properties are down about 60%, Elkin said.

Investors naturally want to snatch up bottom-of-the-cycle bargains, but so far there haven't been a lot of big bargains to be had. The expected wave of bank-owned foreclosed properties hasn't materialized because lenders have been extending loans to building owners instead of calling them in as many investors expected.

A huge amount of capital for acquisition was assembled over the last year on the expectation that as much as $1 trillion worth of real estate loans were in distress and banks would be forced to dump properties to clean up their balance sheets.

"The debt hasn't gone anywhere, but how it's going to play out is proving to be much different" from what investors hoped for, Elkin said. Banks won't have to take losses until they complete the process of healing their balance sheets and build up their capital reserves, he said.

"It's not going to be another RTC."

The federally owned RTC — Resolution Trust Corp. — liquidated billions of dollars' worth of real estate assets including bad loans that came from institutions that failed during the savings and loan crisis of the 1980s. Many of the assets sold at deep discounts from their previous prices.

Among those looking to pounce on deals is BH Properties, a Los Angeles investment firm that obtained an eight-figure revolving line of credit from Wells Fargo Bank last month for the purpose of commercial real estate acquisitions.

Such credit lines have been virtually unheard of for the last year and a half, said Steve Jaffe, executive vice president of BH Properties. "We are cautiously bullish on today's market," he said.

The firm is targeting the Inland Empire, Phoenix and Las Vegas, markets where the recession hit real estate hard. They haven't done any deals yet but they are hardly alone among investors. With most banks now stable and property owners desperately hanging on, there has been no tidal wave of cheap real estate coming up for sale.

"This is going to be a slow trickle," Rifkind said, "not a rush."

Signs of Commercial Real Estate Recovery

by David Reinholtz
While the housing and real estate crisis has gained national attention with regard to homeowners and private property foreclosures, one major facet of this economic downturn has been with commercial real estate, and it hasn't had the attention of its private counterpart. Commercial properties have seen a drastic increase in vacancies and this, in turn, has caused lease rates to plummet. This snowball effect put the brakes on many new commercial development projects as well.

Yet, finally, at the start of the new year, there are signs that the commercial real estate market has reached the bottom and is beginning to show some signs of life developing. A recent survey conducted by the Allen Matkins/UCLA Anderson School, indicates that investors and developers are beginning to see the earliest signs of recovery, though these researchers warn that the strongest effects may not be seen until 2012.

The recovery will be geographically specific, depending on the city and the number of new construction projects that had been completed within the past two years. These new construction projects in certain cities have, for the most part, remained vacant or at reduced vacancies, awaiting the full economic recovery. In these instances, these new construction projects may very well stall or delay recovery in these regions. San Diego is a prime example of a city in which recovery may be slower than the national average.

The Allen Matkins/UCLA survey has been conducted on a regular, monthly basis during the most recent economic recession and it has been several months since the survey noted any measurable optimism about future forecasts in the commercial real estate market. Developers and investors generally make their decisions about projects approximately two years before the projects are completed.

The significance of this survey then indicates that since investors and developers are beginning to feel some optimism, then they are beginning to see hope for business recovery and subsequent new projects having businesses willing to lease or purchase space within this time frame. Six months ago, these same investors and developers had a pessimistic view about the future, which meant that unless something changed, the market would continue to remain stagnant or worse, continue to fall.

This new survey certainly indicates that there is a level of interest in future commercial real estate ventures and bodes well for a long-term recovery process. While this survey was conducted throughout Southern California, its effects can be related to other regions throughout the country. The key factor, as previously mentioned, will be the level of new construction that was completed in a region during the past two years.

For example, this survey indicates that Los Angeles will experience a recovery in the commercial real estate market first in Southern California. Its new construction paled in comparison to San Diego or Orange County in recent years. Another aspect to consider is that Los Angeles wasn't a victim of the collapse of as many finance companies as other regions around it, which meant that there are fewer commercial vacancies.

The survey also takes into consideration the recovery of lease rates as well as vacancies. While Los Angeles should recover on all three fronts faster then its southern counterpart, vacancies are expected to improve throughout San Diego and Orange counties. What is still troubling for this region, however, is that while the economic recovery begins, lease rates are not expected to recover until well beyond 2012.

In fact, commercial lease rates should expect to fall further this year before leveling out at approximately 20 percent below their mid-2008 peak. However, according to survey specialist Richard Ellis, vacancy and net absorption should improve in the year 2011. The major factor that much of this improvement relies upon, of course, is overall employment and job growth.

While the nation continues to wait on signs of true recovery, commercial real estate investors and developers are finally seeing signs of a brighter future for the commercial real estate market.

THE INDUSTRIAL REAL ESTATE MARKET IN L.A. IS GROWING STRONGER

In FASCINATING INFORMATION, Trends, Uncategorized, all, statistics |
By Jodi Summers
“This particular cycle has caught us with something we have never seen before. We have been left with a significant amount of industrial space,” observed Ken Jackson, director of sales and acquisitions at Dynamic Builders. “Nonetheless, the demand for industrial space is still strong, he said.”When you are Downtown, and look to the southeast and see the one-story and two-story buildings out there, there are thousands of apparel and general merchandise companies that started there. It shows the huge strength of L.A.”

In 2009, the industrial market had one of the worst years in decades, purchase prices and lease rates reached 10-year lows. The U.S. vacancy rate for industrial properties hit 10.3% at the end of last year, according to the Urban Land Institute. Other firms, such as Grubb & Ellis, peg it slightly higher at 10.7%. Locally, we have always been blessed, as Los Angeles, peaked at 3.3% in the fourth quarter of last year, according to the Los Angeles Economic Development Corporation – up from 2.2% a year earlier.
Now, the industrial property market is slowly returning. “The worst has passed,” confirmed Craig Meyer, a managing director for Jones Lang LaSalle. “We’re clearly at the bottom looking up.”

Major cargo hubs like Los Angeles, Seattle, Kansas City, Houston and Dallas are expected to bounce out of the slump faster than other markets. While Phoenix, Chicago and Detroit are among the cities projected to lag.
Exports are up and manufacturing activity jumped last month to the fastest pace in more than five years. Around the ports of Los Angeles and Long Beach, which together handle about 40% of the nation’s cargo container shipments, sales and leasing activity for industrial properties began rising last summer. Cargo volume posted a 28% annual increase in February, reinforcing the continued strengthening of the industrial real estate market.