Ken Holman

When purchasing a real estate investment, it’s difficult to overstate the importance of doing your due diligence. The degree of due diligence depends on the complexity of the property under consideration. For example, purchasing raw land may require less rigorous due diligence than purchasing a commercial building. Due diligence begins well before you purchase the property. In the real estate purchase and sale agreement, allow yourself sufficient time to do a thorough analysis of the property. Life’s too short to get stuck with a problem property for 20 years. Don’t be lured by the promise of big potential profits on…

As the owner of a company, one of the difficult decisions you will make is whether to lease or buy the space that your company needs. Ownership of the space your company occupies is always an important consideration, but sometimes owning is not always the wisest decision, especially if your business is experiencing change. Here’s some key points to consider when determining whether you should lease or buy the space your company occupies. Important considerations when purchasing commercial space:Does your company have the cash to meet the lender’s equity requirement? Most lenders require a minimum of 25% down to purchase…

All real estate appraisers use the Income Capitalization Approach when it comes to valuing commercial income-producing real estate. This approach determines the Net Operating Income (NOI) of an investment property and divides that number by the capitalization rate or “CAP Rate.” (NOI ÷ Rate = Value). That’s called the “IRV” formula where “I” means NOI, “R” means CAP Rate and “V” equals value. Think of the “CAP Rate” as the return an investor expects to achieve based on the risk they are willing to take. The higher the risk, the higher the CAP Rate. For example, Walgreens does not own…

High employment and improved consumer spending continues to drive new supply and record demand for U.S. industrial space. According to CoStar managing directors and senior economists Christine Cooper and Abby Corbett, industrial space leasing hit an all-time high of 139 million square feet in the second quarter, outpacing the first quarter by 46%. In some markets, industrial and retail are merging, placing increased demand on distribution networks. The line between industrial and retail are blurring as companies like Amazon try to position its same day delivery service in closer proximity to the consumer. This demand has reshaped the eCommerce industry….

Leverage is using borrowed capital (other people’s money) to increase the potential return on an investment. Leverage, if done properly, will significantly enhance your return on investment. This is easy to do if you invest in income-producing real estate but much more difficult, if not impossible, if you’re investing in stocks or mutual funds. In the stock market, it is difficult to leverage your investment. One dollar buys you a dollar’s worth of stock. Whereas, in real estate, one dollar can buy you four dollars’ worth of real estate because the bank will lend you three of the four dollars…

When it comes to real estate, apartments are considered one of the primary property types along with office, industrial and retail. Generally, apartments with fewer than five units are classified as residential property while apartments with five or more units are classified as commercial property. There are many reasons why apartments are considered a great investment. First, they offer the highest returns out of all the real estate asset classes. A recent study found that apartments dominate holding period returns and risk-adjusted returns for 3, 5, 7, 10 and 15-year holding periods. The study analyzed holding period returns during the…

The stock market races forward then lags behind while real estate just keeps moving along year-after year making money for investors. Real estate keeps plodding along yielding solid returns year-after-year while stocks lurch forward when the economy is roaring but get easily sidetracked by world conditions be its trade disputes, rising interest rates or a slowing global economy. Things you have no control over. It reminds me of the Aesop Fable, “The Tortoise and the Hare” by Jerry Pinkney. Once upon a time, there was a hare who, boasting how he could run faster than anyone else, was forever teasing…

I’m raising $5.9 million on an apartment project that costs $23.6 million. I still have a ways to go to get all the equity capital raised. Among the many projects I’ve developed, this is one of the best. The project appraised at $25 million when completed. The appraiser used a 6 Cap Rate to determine the value, which is higher than most apartment projects are achieving. While raising the equity capital, I was referred to a potential investor who had sold a restaurant building and was sitting on $1 million in cash. She was looking for a good investment. I…

There are Six Investor Personality Types: 1) Cautious; 2) Emotional; 3) Technical; 4) Busy; 5) Casual; and 6) Informed Knowing why you make certain investment decisions can help you become a more educated investor. There are several studies that determine investor personality type. The CFA Institute categorizes investor personality types into four main groups: Preservers, Accumulators, Followers and Independents. Barnwell Two-Way Model groups investors into “passive” and “active.” One of the best studies uses Psychonomic Investor Profiling which holds that a person’s propensity to risk is unlikely to change regardless of circumstances. Psychonomic refers to the laws of science as…