10 Reasons Why You Need a Commercial Real Estate Broker in Closing That Deal

by Phill Tomlinson | Aug 27, 2021 | Blog

In the field of commercial real estate, selling and buying can be touch-and-go. Much of the risk in commercial transactions lies in the selling and buying aspect versus holding the property. Therefore, it is common for clients and landlords alike to struggle when dealing with commercial transactions. Without good representation and legal framework, you could potentially deprive yourself of finding the right commercial property or losing valuable profits on the sale of your commercial property. That is why having a commercial real estate broker involved is essential in securing and closing the deal.nn nnThere is a need to have someone who is equipped to deliver professional services in terms of buying and selling commercial real estate. Here are ten (10) reasons why you need a commercial real estate broker in closing a deal. nn n

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1. Marketing expertise. Commercial real estate brokers are knowledgeable in marketing structures and are good at attracting customers until closing a deal. Due to the fluctuating marketing conditions, a commercial real estate broker can create market opportunities for you and sift out the best-targeted customers. Working with professional brokers prevents you from being at the mercy of marketing pitfalls brought by interest fluctuations and rate hikes. Not having someone who possesses marketing expertise may be detrimental to your commercial property deal. 

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2. Efficient negotiation. In closing a deal, there needs to be a vigor of negotiation. Commercial real estate brokers are efficient negotiators who can secure you a deal. They are bound to negotiate while also taking into excellent account your best interests. This means that they can establish better terms by maximizing the best options at your advantage. 

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3. Truthful information. Commercial real estate brokers are duty-bound to disclosure. This is important, especially if you want to have enough information about the transaction history of your commercial property. Knowing the transaction history of an estate determines buyer credibility and property value. In addition, part of the information provided by commercial estate brokers is the inspection history of your property as well as its interest rates. These are information that a commercial real estate broker can fully disclose and is legally bound to provide their clients with. 

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4. Access to financing connections. Most commercial real estate brokers have substantial social capital. They can give you access to direct links that can assist you financially to arrive at competitive rates and better deals. Not having the connection, a commercial real estate broker entails might ruin your deal before even closing one. Financing connections can also be of great help, especially if you want to give a safety net in the process of your commercial property transactions. This lessens your risk in the deal and might even elevate your interests. 

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5. Extensive buyer connections. In addition to financing connections, commercial real estate brokers have extensive relationships with multiple qualified buyers that will help you close a deal. Small businesses and business owners can streamline your commercial real estate transaction to more opportunities. Access to more potential business owners may help you obtain better search criteria and listings that one commercial real estate broker can assist you with.

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6. Real estate license holders. Commercial real estate brokers are also credible with licenses. This means that they are legally permitted to manage real estate transactions and help you with the necessary legal documents in the process. As a result, you don’t have to stress too much on the legal work and aspects of commercial real estate dealings. 

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7. Better time management. Having the expertise of a commercial real estate broker, you can manage your business thoroughly and tend to other obligations. You wouldn’t have to stress over the tedious task of facilitating and closing a deal in a commercial real estate transaction. Commercial estate brokers are highly qualified to organize and plan each step of the commercial transaction process and the legal documents involved. 

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8. Saving money in the long run. More often than not, the value of your commercial property lies in working with a professional. Potential buyers are more likely to engage with commercial property transactions that professional commercial real estate brokers handle. This translates to saving more money in the long run as you do not have to worry about paying more commissions to generate more leads. In addition, commercial real estate brokers offer more cost-efficient services, especially in terms of business profits and cost-saving opportunities that can attract buyers. 

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9. Commercial listing access. Listing platforms for commercial properties are very different and extremely more expensive from their residential counterpart. Commercial listings provide a higher level of significant search criteria that generate more leads to eventually closing a deal. The majority of Commercial listings are not accessible to the public, and commercial real estate brokers receive multiple inquires providing a list of potential buyers and tenants. Commercial real estate brokers are usually well-versed in managing and building these listings, which will significantly help you sell your property. 

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10. Years of experience. There is a risk in engaging the services of brokers with little experience. In closing a deal, having a commercial real estate broker ensures valuable expertise. This translates to constituting good terms and leases that can get you secured in the long run. Experience in the industry is also essential, especially as leverage to potential buyers. Buyers would opt to secure a deal with commercial real estate brokers who are credible in facilitating the ins and outs of commercial real estate transactions. 

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n nn nnFor the foregoing reasons, closing a deal entails the need for commercial real estate brokers. They have the necessary skill set, expertise, and qualifications that can generate success in profitability. While other reasons are worth taking excellent account of, the ones included in this article are sufficient to have your commercial property sold like a pro. Hiring a commercial real estate broker in your future commercial transactions will feel like less work. You will be glad that you did! nn nnExperience less hassle and a smoother transaction by putting your trust in an experienced commercial real estate broker. Do not subject your commercial property to marketing risks and pitfalls. Instead, hire a commercial real estate broker today. Then, you’ll have no regrets in the long run. nn

nnEven after outlining all the information above, investing in CRE can still seem daunting. That’s why the Leveraged CRE Investment Team at Commercial Properties, Inc. is here to help you achieve your investment goals. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.nn nnNeed help on how to get started investing in commercial real estate? We got you covered! We prepared a free e-book that will serve as your guide to achieve your long-term business goals or obtain that property you’ve always been dreaming of!nnn nnPhill Tomlinson is a commercial real estate broker with Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, and owner of the Leveraged CRE Investment Team specializing in investment sales and tenant/landlord representation in the Phoenix and Scottsdale submarkets. Phill applies over 21 years of experience in the Real Estate industry helping investors and owners maximize their returns. nn nnBookmark www.leveragedcre.com to learn more about the Commercial Real Estate market and keep informed of relevant real estate strategies designed to maximize your income property investment results. Connect and follow Phill on Social Media at sm.leveragedcre.com/smplatform. #LeveragedCREnn nn nn 

What Is a CAM in Commercial Real Estate?

by Phill Tomlinson | Aug 20, 2021 | Blog

What does CAM in CRE mean?nnCAM stands for Common Area Maintenance, which are fees paid by the tenants to landlords every month to cover the costs of various maintenance needs for the building. The maintenance costs are solely for managing and maintaining the property. That being said, the landlord does not profit from any of the fees claimed by him/her. The costs that are included in CAM fees vary from one property type to another, and even locally from one landlord to another.nnIn Commercial Real Estate (CRE), the term CAM’s is often used simultaneously with the term Triple Nets (NNN). Interesting enough the CAM’s are just one (1) of the three (3) main components that make up the ‘nets’ or operating expenses. However, if you hear someone asking “what are the CAM’s?”, they’re probably referring to the total nets. The three (3) components are insurance, property taxes, and CAM charges. Hence, this article will focus just on the CAM charges. These CAM charges are an important part of a commercial real estate lease as it directly impacts the net operating income (NOI) of the commercial property.nn nnWhen you lease a commercial building, typically you are paying for two (2) separate areas. These are the usable area and the common area.n

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• Usable area is the space you are occupying. That means the actual square footage in a building that is specific for your use—personal or business use. Areas included are restrooms within the leased space, storage or closets, rooms, individual offices, or other facilities you need in order to do business.

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• Common area is the space that is available to you but shared with other tenants. It is outside of your leased space and it includes all areas of the building that you benefit from and shares with other tenants. The commercial property’s common areas include the lobby, common restrooms, elevator, public corridors, gyms, shared boardrooms, electrical rooms, stairwells, walkways, parking lot, etc.

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Where can CAM fees be found? What is included in CAM?

nThere is a lot of information that is included and specified in a commercial lease contract and verifying through all of it is a good practice to avoid any misunderstandings and problems after you have signed it.nnCAM charges are usually indicated in your lease contract. If it does not, clarify with your landlord as the CAM fees may be already included in your monthly rent. As I said, it is in your best interest to know the CAM charges before signing the lease contract.nnThe exact costs included in the CAM charges are completely dependent on the specific lease that a tenant and landlord agree on. It also varies from one market to another and the specific items that the CAM charges cover on the property.nnHere are some common CAM charges:n

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• Property maintenance

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• Roof & Exterior Building Repairs

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• Insurance, permits, taxes, or any legal fees

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• Administrative fees

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• Pest control services

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• Security systems and services

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• Other operating expenses – landscaping, parking lot cleaning, lighting, advertising, signage, snow removal, etc.

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• Any other expense a landlord may need to include

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nPlease take note that the CAM charges mentioned above may vary from one property to another as these are not set in stone. CAM fees are typically common to retail, industrial, and office property types. Thus, always refer to what is indicated in your lease terms to know about the CAM expenses that you should be expecting.nn nn n

How are CAM charges calculated?

nCAM charges are calculated on a per square footage (PSF) pro-rata basis. This means that your CAM expenses will depend on the square footage you lease in a property—the more space you take up, the more CAM charges you will be paying. The charges correspond with the percentage of the total property size your space takes up.nnHere is a sample of how you may calculate CAM charges:nnFirst, gather all the necessary information—the gross leasable area of the building (total square footage of the property) and the tenant’s leased space (square footage of the rented area). Once you determine all the necessary information, take the tenant’s leased space and divide it by the gross leasable area. Then, multiply it by 100 to get the percentage.nnFor example:n

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• 15,000 SF – tenant’s leased space

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• 60,000 SF – gross leasable area of the building

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n nn15,000 / 60,000 = 0.25 nn0.25 x 100 = 25%nn nnThis means that if you are leasing 15,000 SF of the building that has a total leasable area of 60,000 SF, you are responsible for 25% of the CAM charges for the property. If the monthly expenses for the upkeep of the property cost $2,000, you are responsible to pay 25% or ¼ of the total amount. Therefore, you will be paying $500 per month in CAM fees. Also, typically the Triple Nets, including the CAM charges are reevaluated on an annual basis, so these fees will be locked for a year and not fluctuate monthly.nn n

Summary

nCAM’s is just one term you may have heard when dealing with investing in or leasing commercial real estate. CAM charges cover a lot of areas in a commercial property and it is a must that you review and verify it on your lease terms before signing.nnHaving a clear understanding of what CAM charges are and how to calculate them will help you assess your monthly expenses.nn

nnEven after outlining all the information above, investing in CRE can still seem daunting. That’s why the Leveraged CRE Investment Team at Commercial Properties, Inc. is here to help you achieve your investment goals. Contact us at (480) 330-8897 or send us an email at request@leveragedcre.com.nn nnNeed help on how to get started investing in commercial real estate? We got you covered! We prepared a free e-book that will serve as your guide to achieve your long-term business goals or obtain that property you’ve always been dreaming of!nnn nnPhill Tomlinson is a commercial real estate broker with Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, and owner of the Leveraged CRE Investment Team specializing in investment sales and tenant/landlord representation in the Phoenix and Scottsdale submarkets. Phill applies over 21 years of experience in the Real Estate industry helping investors and owners maximize their returns. nn nnBookmark www.leveragedcre.com to learn more about the Commercial Real Estate market and keep informed of relevant real estate strategies designed to maximize your income property investment results. Connect and follow Phill on Social Media at sm.leveragedcre.com/smplatform. #LeveragedCREnn nn nn nn 

Negotiating the Security Deposit in Your Commercial Lease

by Phill Tomlinson | Aug 13, 2021 | Blog

Having to rent a new office suite, retail space, or commercial property in general, requires a lot of research to make sure that the space and location fit your business operations and potentially attract your target consumers. Usually, when you find the perfect commercial property, you immediately sign the lease contract. However, it also requires a bit more than that – a hefty security deposit. That means you’re going to have to fork over quite a bit of money every time you lease a commercial property.nnFor starters, a Security Deposit is a payment that a tenant makes to the landlord when signing a commercial lease. It isn’t just some random fee that the landlord charges you every time you rent their commercial space, it serves as a hedge in case you don’t hold up your end of the deal or against any future unknown occurrences that may happen to their property.nnTypically, these funds are referred to as “damage deposits”. These funds serve as extra cash that a landlord can, and have the right to use in case the unit gets damaged or you are unable to pay your rent.nn nnIn commercial leases, a security deposit is typically equal to one (1) month of rent – can be higher depending on the landlord and is paid upfront when a tenant signs the lease. This will then be kept by the landlord for the whole term of your lease and eventually returns it when your lease expires as long as you keep the property in good condition while adhering to all lease obligations.nn nnSo what will be your options and how will you negotiate for the lowest possible security deposit?nn n

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• With a Reasonable Request

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nPaying the rent itself can be a costly expense in your monthly budget, let alone paying twice the said amount – in the form of a security deposit after you have signed the commercial lease. However, this can be sometimes be negotiated.nnSome landlords do not accept this type of request and would make you pay a security deposit equal to one (1) month of rent. You can’t blame them as they are letting you, a complete stranger, use their space hoping that your business is successful and that you are, as promised, a good tenant who will not damage their property. It is completely understandable as they are protecting their investment. However, there are some landlords who may be willing to meet you halfway.nnTry to settle on a reasonable amount in which you think your landlord could accept your offer. Some landlords would meet you in the middle if you request a security deposit equal to 80% of your monthly rent. This number can still be lowered depending on how you negotiate his terms.nn n

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• Consider a Set of Conditions

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nIf you are a tenant with good credit standing and financial history, then your landlord may be able to give you some leniency on the security deposit amount. This gives them some sort of confidence that you will be able to pay your monthly rent in due time.nnRule out the market’s supply and demand, too. Some landlords may not be aware that the competition in the area for attracting good tenants is high, and that you chose their property even though you were presented with a lot of viable options.nnConsider also the history of the commercial property. If the property you are planning to lease has been vacant for a long time, it means it’s not attractive to consumers. You can try to negotiate with the landlord and cite this fact, they may give you some room for negotiation.nn n

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• Through a Letter of Credit

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nAs mentioned above, security deposits can be higher than a one-month rent. Unlike residential leases, there aren’t any laws that govern how much a landlord can charge for a security deposit in a commercial lease. Thus, your landlord may ask for a very large deposit.nnIf you are unable to pay the amount of security deposit your landlord asks you to, another option is through a letter of credit. A letter of credit, or “credit letter” is a document issued by the bank to serve as a guarantee for payment. However, this does not apply to all scenarios. A letter of credit is only eligible if you have built a strong relationship and good credit history with your bank. But if you have met all the requirements for the bank to issue a letter of credit, this can be a good strategy and solves the challenge of having to pay the large deposit upfront.nn nn n

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• Personal Guaranty Agreement

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nIf the landlord asks you for a very large security deposit and you are not able to meet that amount after exhausting all your options, then you can negotiate for a personal guaranty agreement. This is a very risky option in negotiating a security deposit in your commercial lease as you are agreeing to seize your personal assets in case you are not able to adhere to your lease obligations. Personal Guaranty’s are very common and most tenants will have to sign one in order to lease commercial space.nnTo reduce your risk, an option is to find a strong business partner who could help you in the negotiation process. That means you don’t have to gamble most of your personal assets as he is willing to take half of the obligation.nnIf in such a case that you and your business partner would go for a personal guaranty agreement, do not take this lightly as you are putting your personal assets on the line. Hence, make sure to keep your end of the bargain.nn

nnEven after outlining all this information above, you may still have questions on leasing and security deposits. Please feel free to contact us anytime with your questions and concerns. The Leveraged CRE Investment Team at Commercial Properties, Inc. is here to help you achieve your investment and business goals.nn nnNeed help on how to get started investing in commercial real estate? We got you covered! We prepared a free e-book that will serve as your guide to achieve your long-term business goals or obtain that property you’ve always been dreaming of!nnn nnPhill Tomlinson is a commercial real estate broker with Commercial Properties, Inc. (CPI) in Scottsdale, Arizona, and owner of the Leveraged CRE Investment Team specializing in investment sales and tenant/landlord representation in the Phoenix and Scottsdale submarkets. Phill applies over 21 years of experience in the Real Estate industry helping investors and owners maximize their returns. nn nnBookmark www.leveragedcre.com to learn more about the Commercial Real Estate market and keep informed of relevant real estate strategies designed to maximize your income property investment results. Connect and follow Phill on Social Media at sm.leveragedcre.com/smplatform. #LeveragedCREnn nn nn nn nn