The Future of Commercial Real Estate

Although serious supply-demand imbalances have continued to plague real estate markets into the 2000s in many areas, the mobility of capital in current sophisticated financial markets is encouraging to real estate developers. The loss of tax-shelter markets drained a significant amount of capital from real estate and, in the short run, had a devastating effect on segments of the industry. However, most experts agree that many of those driven from real estate development and the real estate finance business were unprepared and ill-suited as investors. In the long run, a return to real estate development that is grounded in the basics of economics, real demand, and real profits will benefit the industry.

Syndicated ownership of real estate was introduced in the early 2000s. Because many early investors were hurt by collapsed markets or by tax-law changes, the concept of syndication is currently being applied to more economically sound cash flow-return real estate. This return to sound economic practices will help ensure the continued growth of syndication. Real estate investment trusts (REITs), which suffered heavily in the real estate recession of the mid-1980s, have recently reappeared as an efficient vehicle for public ownership of real estate. REITs can own and operate real estate efficiently and raise equity for its purchase. The shares are more easily traded than are shares of other syndication partnerships. Thus, the REIT is likely to provide a good vehicle to satisfy the public’s desire to own real estate.

A final review of the factors that led to the problems of the 2000s is essential to understanding the opportunities that will arise in the 2000s. Real estate cycles are fundamental forces in the industry. The oversupply that exists in most product types tends to constrain development of new products, but it creates opportunities for the commercial banker.

The decade of the 2000s witnessed a boom cycle in real estate. The natural flow of the real estate cycle wherein demand exceeded supply prevailed during the 1980s and early 2000s. At that time office vacancy rates in most major markets were below 5 percent. Faced with real demand for office space and other types of income property, the development community simultaneously experienced an explosion of available capital. During the early years of the Reagan administration, deregulation of financial institutions increased the supply availability of funds, and thrifts added their funds to an already growing cadre of lenders. At the same time, the Economic Recovery and Tax Act of 1981 (ERTA) gave investors increased tax “write-off” through accelerated depreciation, reduced capital gains taxes to 20 percent, and allowed other income to be sheltered with real estate “losses.” In short, more equity and debt funding was available for real estate investment than ever before.

Even after tax reform eliminated many tax incentives in 1986 and the subsequent loss of some equity funds for real estate, two factors maintained real estate development. The trend in the 2000s was toward the development of the significant, or “trophy,” real estate projects. Office buildings in excess of one million square feet and hotels costing hundreds of millions of dollars became popular. Conceived and begun before the passage of tax reform, these huge projects were completed in the late 1990s. The second factor was the continued availability of funding for construction and development. Even with the debacle in Texas, lenders in New England continued to fund new projects. After the collapse in New England and the continued downward spiral in Texas, lenders in the mid-Atlantic region continued to lend for new construction. After regulation allowed out-of-state banking consolidations, the mergers and acquisitions of commercial banks created pressure in targeted regions. These growth surges contributed to the continuation of large-scale commercial mortgage lenders [] going beyond the time when an examination of the real estate cycle would have suggested a slowdown. The capital explosion of the 2000s for real estate is a capital implosion for the 2000s. The thrift industry no longer has funds available for commercial real estate. The major life insurance company lenders are struggling with mounting real estate. In related losses, while most commercial banks attempt to reduce their real estate exposure after two years of building loss reserves and taking write-downs and charge-offs. Therefore the excessive allocation of debt available in the 2000s is unlikely to create oversupply in the 2000s.

No new tax legislation that will affect real estate investment is predicted, and, for the most part, foreign investors have their own problems or opportunities outside of the United States. Therefore excessive equity capital is not expected to fuel recovery real estate excessively.

Looking back at the real estate cycle wave, it seems safe to suggest that the supply of new development will not occur in the 2000s unless warranted by real demand. Already in some markets the demand for apartments has exceeded supply and new construction has begun at a reasonable pace.

Opportunities for existing real estate that has been written to current value de-capitalized to produce current acceptable return will benefit from increased demand and restricted new supply. New development that is warranted by measurable, existing product demand can be financed with a reasonable equity contribution by the borrower. The lack of ruinous competition from lenders too eager to make real estate loans will allow reasonable loan structuring. Financing the purchase of de-capitalized existing real estate for new owners can be an excellent source of real estate loans for commercial banks.

As real estate is stabilized by a balance of demand and supply, the speed and strength of the recovery will be determined by economic factors and their effect on demand in the 2000s. Banks with the capacity and willingness to take on new real estate loans should experience some of the safest and most productive lending done in the last quarter century. Remembering the lessons of the past and returning to the basics of good real estate and good real estate lending will be the key to real estate banking in the future.

Real Estate Property Values – Ranked High

Rob Norquist, a real estate agent admits that Newport Beach is as active as it used to be, with some good record sales. He also agrees with the fact that a property, should never be considered deprecated, and as a seller, you should never give up and use the low end price. It is true that, during a certain period of time, depending on the real estate market, client’s desire, real estate auctions, there may be moments when a property’s price drops, but not forever.

Other cities such as, Huntington Beach, Costa Mesa, Irvine or Mission Viejo – are considered among other 25 cities as being the ones with the best real estate property values, with average values of $680,000 and more. The national average value in 2007 was $194,300.

However, some property values are based on subjective answers from residents living in a certain home, so the given numbers , and real estate evaluation may be hanging on a wishful thinking instead of a real appreciation . This is where real estate auctions come in picture, to inform potential clients about the property, and the investment possibilities, giving them a clear image of the real estate’s worth.

Even though some buildings such as Orange County properties , dropped their values in 2007, but they recovered extremely well after. So this is another reason why as a seller, you should never fear if you observe a temporally value drop, because it is normal from time to time.

For instance, about 81% owners, sellers, agents, trusted in 2007 that their estate property values were over $1 million, against 75% in 2006. So things are for the best and it would appear that most of estate agents have finally understood what this business is really about. It takes a lot of patience and ability to maintain your property’s value among top ones on real estate market.
But Norquist, trusts that many Newport Beach arguments are near the mark, sustaining that this city has survived the “housing slump” better than other locations. However, the unexpected surprise attacked more on sales, which he admits that they are on a falling edge right now, but there is still hope for better times.

Newport Beach is very well known for its highest-valued real estate properties in the U.S., being a perfect place for real estate business . It’s location and proximity to the water, and the beach front view increase it’s real estate value considerably. Auctions in this area are very interesting and those who are interested in real estate business domain should never miss them. You can learn a lot on such events.

Experienced real estate agents or even friends will surely advise you that as a buyer you are very likely to come across many real estate properties in foreclosure having perhaps no equity,being over priced . In such moments, lenders sometimes choose to accept a smaller amount than the initial.So you get in the negotiations process. As a hint, when you realize the over pricing phenomenon, you have to understand that this happens when the real estate agent , or seller is aware of the real estate property’s value, and he tries his luck in a raising price. So watch out! The negotiation can become a difficult process especially when reasonable terms are not agreed by both sides: owner and buyer. Negotiations can occur privately or in public, where real estate auctions come in the picture. Of course, a real estate auction is safer and more trustful than a private one. Private negotiations occur especially when the agent is a close friend or relative to buyer’s, and because of the friendly environment some details regarding even the real estate transaction may be skipped. So in situations like this be careful.

Even as a friend, for a real estate agent , money comes first, and friendship after. Of course, during such a negotiation, there can be all sort of problems, such as mortgage value, real estate market, all sort of official formalities, conflict of interests in a particular area etc. Moreover, time a very important issue when real estate auctions are involved. As a general rule, and as an advise for a potential buyer, negotiation process should not be extended on a long period of time, because, as I said before, in time, real estate properties drop their values, and the client’s interest together with it. In this case, not only does the buyer loose, but the real estate agency as well. Why?Because if a property’s value drops, the price must drop as well, if you ever want to sell it again. In this case the under priced phenomenon appears. This is why short sales are preferred. Many Realtors, and clients started using this strategy, because they faced the problem regarding their property’s value.So they decided the selling process should not take too long.

Another important issue refers to the well known “acceleration clause” , which is an official word met in any mortgage document, meaning that the lender, after the real estate property is sold, can demand the payment of the remaining balance for the loan. Realtors can provide more information about this contractual right. If this clause is good or bad for a real estate transaction, it is hard to say, because it has its advantages and disadvantages. Buying a real estate property which has already a mortgage loan represents a pretty raised risk. Why? Because first of all, if the mortgage loan was contracted for many years, depending on the interest’s rate, and marketplace evolution, you may come to pay the house’s price 3 times more. However, if you have experience in monitoring the market place, and find a right moment when every interest’s value drops, you could go for it. It’s kind of a gambling in this business, and Realtors, or individual real estate agents know it best.

Realtors and real estate agents are here on the real estate market, to help clients understand how they can value their houses, what should they look for when trying to sell or buy a house, how to negotiate, and how to win a real estate transaction. Some may say that buying or selling a real estate property is easy, but the fact is that pricing a house is a very difficult process. Many real estate agents, brokers, have suffered many defeats before their first good business, so do not expect their job to be an easy one.

Unfortunately, a concerning price and sales gains of these past years have determined in many cases quitting the real estate business. Many real estate agents who have seen the future preferred to do something else than real estate business. The credit market is also in a critical position, as many Realtors have observed. Mortgage values are also a result of real estate market position right now. Real estate investors have diminished their participation number to real estate auctions, as a sign they have seen it too.

Real Estate Software – An Agent’s Guide to Software

Each, day thousands of real estate professionals go online to research real estate software. But what is real estate software, and how can it help you improve your real estate business? These are the questions we will address here.

What is Real Estate Software?

When we talk about real estate software, we’re actually covering a wide spectrum of software products. In general terms, real estate software is any software that helps you manage some aspect of your real estate business.

The “some aspect” part of that definition is important, because to date there is no real estate software that will help you manage all aspects of your business. Instead, most types of real estate software are designed to help you manage a certain element of your business, like contract preparation for example.

Various Types of Real Estate Software

Below, we look at some of the most popular types of real estate software. As you will see, each type of software is designed to help you perform a certain part of your real estate business. Please note that this list is not all-inclusive. There are more types of real estate software than I could possibly cover in this one resource. So at the end of this guide, I’ve listed some additional resources where you can find any type of real estate-related software imaginable.

Content Management Systems

Some types of real estate software are designed to help you manage property listings on your website. Basically, these are content management systems (CMS) that have been adapted for real estate purposes. A good example of such a program would be Realty Manager by Interactive Tools.

Such programs allow you to add, edit or remove property listings (including house photos) within your real estate website — without any knowledge of web coding. If you have listings on your website that require constant management, you can see the convenience of this kind of real estate software.

Real Estate Contract Software

As the name implies, this type of real estate software helps agents prepare real estate contracts. As you well know, contracts are a big (and often time-consuming) part of the real estate business. So anything that can streamline and simplify the process would be welcomed by real estate agents. That’s what contract-management software strives to do.

One of the best features of real estate contract software — a feature you should look for when purchasing this type of software — is the ability to create contract templates by pulling in required disclosures and other commonly used items from your city and state. This way, once you have the real estate contract software set up how you want, you would simply enter new client details and listing prices to generate contracts.

Real Estate CMA Software

Once again, the name tells you what this type of real estate software does. CMA software helps you prepare comparable listings / sales reports that you can show to clients. The biggest benefits of this type of software are time savings, professional appearance, and basic mathematical functions. CMA software will help you produce an attractive and informative CMA report in less time than doing it without software assistance.

Contact Management Software

Contact management software is not to be confused with contract management software. Though they only differ by one letter, these two types of software have nothing in common. Contact management software helps you manage your contacts, or client communications.

Most of these applications are built around databases. You enter client information into the database (with details such as name, phone number, neighborhood of interest, etc.), and then you can easily search the data later.

When choosing a contact management solution, look for one that allows customization of the data fields. You want the ability to create whatever info fields for each contact that’s important to you. All of these programs will let you enter the basics, like name, phone number, address and the like. But what if you wanted to also label people with buyer vs. seller? Or by price range? Or by the neighborhoods they’re interested in? You’ll need this kind of flexibility, and any good contact managements solution should offer it.

Real Estate Educational Software

This is another popular type of real estate software. As the name implies, this kind of software helps you advance your professional education. The most common types of real estate educational software are the test preparation programs. These programs help you prepare for state licensing exams and other real estate-related professional exams. For just about every real estate exam you can imagine, there’s a piece of software that can help you prepare for it.

Virtual Tour Software

Virtual tours are extremely popular among real estate professionals these days. Home buyers love virtual tours, so when you add them to your real estate website, you’ve increased your website’s value for your key audience. The only problem is, virtual tours are not an easy thing to put together. That’s where this type of real estate software comes in.

One way to create virtual tours is to have a virtual tour company do it for you. With this option, you shoot the photos or film footage yourself, and send it to a virtual tour company who creates the finished product. But for the more adventurous agents, there is also the virtual tour software path. Using this software, the agent creates his or her own virtual tours, using photos taken by the agents themselves.

Real Estate Website Software

This software covers a pretty broad spectrum. Real estate website software can help you with many aspects of your website, from creating graphics to capturing leads. But one product rarely does it all. Most types of real estate website software are highly specialized, performing a certain aspect of website enhancement.


So we’ve seen that for every type of real estate business function, there’s a piece of software to help you do it more efficiently and (ideally) more effectively. Does that mean you need all of the real estate software on this list? Obviously not. My advice is to look at the business functions where you spend the most time, and shop for a software product that can simplify that process for you.

It’s also a good idea to play around with different types of real estate software before buying. Most software vendors have either a free trial or an online demo through which you can judge the product for yourself. If you come across a software vendor who offers neither of these trial options, then keep shopping. When purchasing real estate software, always follow the rule of “try before you buy.”

* You may republish this article online if you retain the author’s byline and the active hyperlinks below. Copyright 2007, Brandon Cornett.

Real Estate Investing Financing Truths – Part 2

No Money Down and other ‘Creative’ Real Estate
Investment Methods

For many years, investors have seen the traditional
real estate investment methods described in Part 1
of this article as a lot less than desirable!

They began looking at the prices of houses and
finding methods of bringing the price more in line
with making more money in a faster way.

These savvy investors developed ways to get loans
on properties that allowed them to pull money out
whenever they buy a real estate investment (cash
back at closing) and lower their payments to build up
their cash flow (‘creative’ investing).

They even developed methods of determining a
Sellers motivation for selling – and bought the
property at a discount price.

These creative investors also saw that some Sellers
were not able (for whatever reason) to sell the
property at a discount price, however, they still
needed to get rid of the property, as they didnt
know how to manage it as a landlord, or make
money from it – not that it couldnt be done, they
simply lacked the knowledge of how to do it.

The Seller just never learned how to profit from a
real estate investment.

These investors understood how to make money
from such properties, and did.

They bought the property on discount terms, and
made money from the spread by selling it at retail
price and/or terms (certainly one of my favorite
methods of real estate investing).

Buy Every Real Estate Investment via Discount Price
or Discount Terms.

Several years ago (actually, it really took off in the
1980s), Real Estate Investment Experts began
seeing the potential for making money in bringing
this treasured knowledge to the public in the form of
home-study courses, seminars and Boot Camps.

They found that it wouldn’t create competition for
themselves, as many people, even though they
purchase real estate courses and attend seminars
and Boot Camps, will not actually take the
information and utilize it to make the hundreds and
even thousands of dollars possible for anyone
serious about Real Estate Investing.

These Real Estate Investment Experts (being
dubbed ‘guru’) found that this side of the business
was lucrative often making more income from
teaching about real estate investing than the actual
real estate investments themselves.

It is important to understand that these real estate
investment gurus learned early that they can only
teach others what to do, not be responsible for the
other persons success.

Providing the information to those that choose not
to use it is very similar to the old adage “You can
lead a horse to water, but you cant make it drink”.

Yes, these real estate investment gurus got wealthy
from selling this information, but their theories,
principles and techniques taught thousands of
others (those that take action on what they learn)
how to realize their dreams utilizing their tried and
true methods of real estate investing.

From home-study courses and seminars, to boot
camps and one-on-one training, these methods
have been proven to be not only interesting to
millions of people, but capable of bringing massive
wealth to those that take action on what is taught –
those that go on and actually make real estate
investments themselves.

Knowledge changes things…

This knowledge of no money down real estate
investing techniques being known by thousands of
Sellers has made changes in the industry.

By bringing the Seller into the knowledgeable realm
of Real Estate investing, Sellers now know many of
the methods that the gurus teach.

This is both a blessing and a curse.

To the talented investor, these knowledgeable
people are more likely to work to create a WIN-WIN

Investors that avoid the tricks and stick to the basic
real estate investment techniques and terms that
have been proven to work over and over again,
have proven these powerful real estate investment
strategies work even with these informed Sellers.

Oh, yes, many of these real estate investment
techniques work today, as they have for many
years. So much so that it is almost possible to say
they have become principles; things that work, over
and over, the same way no matter what happens –
like gravity.

However, sadly, they are not really principles, as
several of the real estate investment methods and
techniques that worked in the 1980s and even
through the 1990s are today not as powerful, nor do
they work as often as they did before (although
some ‘gurus’ are still teaching the same methods –
even after 20 years…).

Some of this decline is due to a more educated
society (due to the flood of real estate investment
information available via books, tapes, home-study
courses and the Internet), while some of it is due to
simple changes in policies and laws.

It seems like a wave started late in 2003, the FHA
announced that flips (transactions where investors
buy houses cheaply and sell them at or near market
rates) are “illegal”. (Note that illegal in this context is
not a legal term, but one that has been adopted
from “you are not allowed to do that and do
business with us”.)

The FHAs announcement started a wave of concern
(if not panic) throughout the Real Estate investing

Title and Mortgage companies began to tighten up
their reigns. Many of these companies, in lieu of
direct information, began simply not completing any
transactions that did not follow the traditional real
estate investment system. This made it hard for
investors to complete transactions that involved
simple buy-then-resell agreements (as they are not
really real estate investments, but a rather nice way
to make some fast CA$H!).

In rapid appreciation areas (California and Nevada,
for example), the ability to flip a property all but
stopped (became ‘illegal’). All the ‘traditional’
creative real estate investing methods were virtually
put on hold.

Ingenuity to the rescue, other methods of real
estate investing always seem to pop up. After all,
“Necessity is the Mother of Invention”, and “Where
there is a Will, there is a Way” are absolute

Investors have to make a way to get things done – a
way to keep their real estate investments profitable,
and even more creative real estate investing
methods were developed – to keep real estate
investors, and the love of real estate investment,
alive forever.