Commercial Real Estate Investing

Dolf de Roos is a New York Times and Wall Street Journal bestselling author and prolific real estate investor. He is the Chairman of Property Ventures Ltd, an innovative publicly-held property investment company with holdings ranging from office towers to vineyards, and a founding director of Best Choice Properties. His other real estate titles include Real Estate Riches, The Insider's Guide to Real Estate Investing Loopholes, The Insider's Guide to Making Money in Real Estate, The Insider's Guide to Tax-Free Real Estate Investments (all from Wiley), and 101 Ways to Massively Increase the Value of Your Real Estate without Spending Much Money, from Timelife Direct. For more information, visit www.dolfderoos.com

• Preface xiAcknowledgments xiiiNotes on Reading This Book xvIntroduction xviiCHAPTER 1 Just What Is Commercial Real Estate? 1CHAPTER 2 People versus Contracts 5CHAPTER 3 Why Invest in Commercial Real Estate? 11Lease Duration 11Assignment of Lease 15The Tenants Pay the Outgoings 17Tenants Earn Their Income on Your Premises 18Landlord Pays for Improvements to Commercial Premises 21Certainty of Collecting Rent 22Upward-Only Rent Reviews 24Government Interference 25Management Overhead 27CHAPTER 4 The Downside of Commercial Real Estate 29Much More Difficult to Acquire Commercial Tenants 29Banks Will Lend a Smaller Proportion of aCommercial Property 30CHAPTER 5 The True Value of Real Estate 33CHAPTER 6 How to Overcome the Disadvantages of Commercial Real Estate 41CHAPTER 7 How to Attract a Tenant 45Who Wants to Run a Funeral Business? 45Finding a Tenant for a Warehouse in anOversupplied Market 50The Power of the Internet 55Many Prospective Tenants Know Your Building 56Engage a Real Estate Firm or Property ManagementCompany to Find a Tenant 59Wait for (or Cause) a Zone Change 60Split a Single Tenancy into Multiple Tenancies 62Consolidate Multiple Tenancies into One 64The Ultimate Way to Attract a Tenant 66CHAPTER 8 How to Increase Rental Income (and hence the Capital Value) 71Helipads 72Cell Phone Towers 73More Rooftop Antics 74Naming Rights 76Air Space 77Parking 81The Humble Webcam 89Interior Remodel 93The Triple Win of Alarm Systems 100Rent Reviews to Market 101CHAPTER 9 What Were the Disadvantages of Commercial Real Estate? 103CHAPTER 10 Finding Commercial Real Estate 107Newspaper Advertisements 107Real Estate Firms 112The Internet 114Keeping Your Eyes Peeled 116Networking 118Word of Mouth 118Helping Other People 124The 100:10:3:1 Rule 126Summary 130CHAPTER 11 Analyzing Deals 131Due Diligence 132Four Questions to Ask about Any Commercial Property 142Return on Investment 144CHAPTER 12 Negotiating Commercial Real Estate Deals 155The Uncooperative Seller 156Other Negotiations 159CHAPTER 13 Financing Commercial Real Estate 163Proposal for Finance 166Summary Paragraph 171General Description of Property Offered as Collateral 174Property Portfolio Statistics and Cash Flows 176Statement of Assets and Liabilities 177What to Include in the Appendix 178How to Use the Proposal for Finance 179Umbrella Loans 182CHAPTER 14 Structuring Commercial Real Estate Ownership 183CHAPTER 15 Managing Commercial Real Estate 187Tenant Selection 188Rule Enforcement 189Rent Reviews 190How to Get a Tradesman to Do Your Work First 190Accounting 193Summary 193CHAPTER 16 How to Beat the Average 195Geography 196Zone Changes 199Proximity to Views 200The Center of Town 200High Technology 201Leasing and Management Tactics to Beat the Average 202Combining All Methods of Beating the Average 202CHAPTER 17 Raw Land 205Best Choice Properties 208Spring Mountain Ski Ranch 211The Benefit of Having Great Partners 214Getting Back to Commercial Real Estate Investing 216CHAPTER 18 Extraordinarily Odd Commercial Deals 217Oil in Them Thar Hills 219Marine Farms 222CHAPTER 19 Property Ventures Limited 225Five Mile 230CHAPTER 20 Never Sell 233CHAPTER 21 Thirteen Golden Rules of Commercial Real Estate Investment 239Golden Rule 1: Risk Is Equal to Yield 239Golden Rule 2: Ensure Safety of Principal 240Golden Rule 3: Control Your Liabilities 240Golden Rule 4: Add Value to a Deal 241Golden Rule 5: A Broker or Agent Must Bring Something to the Deal 242Golden Rule 6: Real Estate Is a Long-Term Investment 243Golden Rule 7: The Number of Voting Partners Is Directly Proportional to the Failure of the Project 244Golden Rule 8: You Are Going to Be in a Lawsuit 244Golden Rule 9: It Only Takes One Deal to Go Broke 245Golden Rule 10: It Only Takes One Deal to Make a Million Dollars 245Golden Rule 11: The Value of a Property Is Limited by the Tenant’s Ability to Pay Rent 246Golden Rule 12: Appreciation and Inflation Are Compounded Annually 246Golden Rule 13: You Cannot Give Kindness Away—It Is Always Returned 247CHAPTER 22 Investing Abroad 249CHAPTER 23 Live Life to the Fullest 261About the Author 269Appendix: Resources 271Index 281