Structural Integrity:

A durable building generates greater profits.

• If you discover defects, walk away from the deal, ask the seller to repair them, renegotiate the price, or have the seller set aside money for repairs.
• When neglected, minor repairs become major repairs.
• A preventative maintenance program will help you avoid capital improvements that come as a surprise.
• Back up your own visual research by asking hard questions of the owner, manager, and lessees.
• Hire professionals to evaluate the building and site.
• If your building isn’t attractive and in good shape, it won’t be competitive, and you’ll lose money.
• Landscaping is an excellent long-term investment that enhances real estate value.

Amenities:

Amenities are support facilities that attract and keep the profile of clients you seek.

• The features and amenities that go into a building are of major importance.
• Know the type of clients you seek and provide amenities that satisfy their functional needs.
• You can select the type of clients you want by the amenities you choose to provide.
• Make sure you have the space and zoning to add extra amenities in the future.
• Certain amenities enable you to raise rents and to sell for a larger profit in the future.
• The more the amenities in an apartment building that resemble those of a private home, the easier it is for you to attract and keep clients.
• In commercial space, a good amenities package means stronger leases, better lessees, and increased value in the real estate.

Capitalization Rate:

Use the capitalization rate to determine the value of real estate at the following times: before buying, during the holding period, and before selling.

• Recognize the significance and impact of seemingly small changes in the capitalization rate.
• You must have accurate figures on today’s income and expenses before you can estimate future earnings and expenses.
• Don’t expect to accomplish miracles at first; assume that your expenses will be the same or higher than those of the present owner.
• If owners of commercial property manage inefficiently, even though their tenants pay for certain expenses, the bottom line will be impacted adversely.
• Don’t be deterred by new vogues or fashions that are used to determine value. Yield analysis using the capitalization rate is a proven survivor.

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