Ray Alcorn
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What’s it Worth?- Deriving YOUR Capitalization Rate
How do you know what an income property is worth? How do you know that if you pay X amount for a property that you can get the return you desire on your investment? Is there some way to calculate the maximum you can pay for an investment and still achieve your investment goals? Do you know how to get the answers to these questions? This article is written to give you a valuable tool to use in answering the critical questions regarding the value of an income property.Among the many tools used by investors to gauge the worth of…
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Upside Deals: Building a Money Pump
The quickest way I know to make significant profits with commercial real estate is to do deals with substantial upside potential.But first let’s define “upside”. I’m not talking about a paper increase in value due to scheduled rental increases, or replacing “below-market” leases, as many for-sale brochures define the term.My definition of upside is to unlock hidden potential in a property that creates triple digit percentage gains on investment, provides positive cash flow along the way, and avoids major risks of loss. The upside may come from expansion, redevelopment, or by changing the market position of the property with major…
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Redevelopment and Change of Use Deals – Making Silk From a Sow’s Ear
Redevelopment and change-of-use is one of my favorite deal strategies. Many properties are functionally obsolescent, or the market has passed them by for that property type. These properties are often producing income, but not at the level of the highest and best use of the land.A reader sent me a good example recently. The property is a six unit apartment building, about thirty years old in rough condition, with a low-end rent roll and loads of deferred maintenance. It’s located on a main thoroughfare that had developed as a commercial strip with a traffic count of 30,000 vehicles per day,…
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Real Estate Investing in a Rising-Rate Environment
(This article was written by Ray Alcorn in 2000)With interest rates headed upward yet again with the latest round of belt tightening by the Federal Reserve, and the stock market falling with no bottom in sight, many people are crying doom and gloom. I hear talk of watching for a rise in foreclosures due to stock market losses. Builder friends are convinced they are about to be ruined. In my opinion, this is no time to rush for the exits. The fundamentals of real estate investments are sound. A short history lesson may prove worthwhile.My experience goes back to 1980-82,…
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Outlook for Mobile Home Parks:2007 and Beyond
Question: How Will The Housing Downturn Affect Mobile Home Parks (MHPs)?In my view the worst that can happen for MHPs has already occurred. Low rates and easy money for traditional housing; an industry-wide meltdown of chattel lenders for single and multi-section homes without land; and a resulting decrease of production levels to fifty year lows (<100,000 per year), with a decline in single-wides to 10% of total units produced. To survive, MH producers and retailers were forced to focus on the land/home finance model, using multi-section homes, and completely abandon sales of single-wides in land-lease parks.And all of the above…
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New Regulations Effecting Commercial Real Estate
New ADA (Americans with Disabilities Act) regulations went into effect on March 15, 2012. Most (close to 100%) of the commercial real estate owners I mention this to are completely unaware that the new regs are in effect. The complete copy of the act and supplemental material can be found at Revised ADA Regulations Implementing Title II and Title III.The new regulations affect virtually every commercial building open to the public, including establishments that were exempted in the original 1991 act, and facilities such as office buildings, factories and warehouses that do not provide goods or services directly to the…
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100% Financing: Feeding the Desire to Acquire
At least once a week, someone posts to the commercial newsgroup seeking a way to finance 100% of the acquisition cost for an income property. I suppose it is fueled by the late night infomercials touting no money down deals and using pictures of Class A apartment buildings, never saying the one describes the other, but leaving a strong impression that that is the case. The way it comes across, one would believe that all you have to do to become a millionaire in real estate is to acquire the properties with “OPM”, meaning Other People’s Money, and then just…
