market Real Estate Jargon Investors Should Know

Homes For Rent - market Real Estate Jargon Investors Should Know

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Commercial real estate speculation is a new territory for many real estate investors. The following is the alphabetical list of most ordinarily used terms in this area.

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Anchored tenants: big brand-name national tenants, e.g. Albertsons, Longs Drug, Walmart that bring in lots of traffic to the shopping center.

Cam: tasteless Area Maintenance. connected with Cam is Cam fees. For Nnn leases, the term Cam fees refer to the money tenants pay landlord to cover property taxes, assurance and maintenance.

Cap rate: Return of speculation in the first year of ownership. Capitalization rate is the ratio of 1st year Net Operating earnings over the buy price. The higher the cap rate, the higher the rental income. For citizen who spend in the stock market, cap rate is the inverse of P/E ratio.

Cash on cash: each year division return of your down payment not along with appreciation. First year cash flow divided by your first down payment.

Conduit loan: also called industrial Mortgage Backed Securities (Cmbs) loan often with the lower rate than primary industrial loan but either has high pre-payment penalty (called defeasance or Yield Maintenance Penalty) or does not have payoff flexibility.

Cpd: Car Per Day or traffic volume on a road.

Cpi: consumer Price Index. It's often used to speculate each year rental growth to compensate for inflation.

Due Diligence Period: the duration after acceptance usually 15-30 days to allow buyer to explore about the property. Buyer can cancel the compact during this time for any reasons and get full reimbursement of the deposit.

Estoppel Certificate: a letter in case,granted and signed by tenant confirming the current rent and terms.

Full-service lease: lease in which tenant pays rent that covers everything along with utilities.

Gross income: total each year earnings before any expenses.

Gross lease: lease in which tenants just pay rent. Landlord pays tax, insurance, & maintenance.

Gla: Gross Leaseable Area or total rentable area. This is the space that can be leased and receive rental income. It does not contain spaces for utilities room, elevator, etc.

Grm: Gross Rent Multiplier for apartment. Ratio of buy price over each year income.

Llc: tiny Liabilities Company. A legal entity many investors formed to own industrial properties.

Loi: Letter of Intent/Interest or the usually non-binding offer letter used to make an offer to buy a industrial property.

Mai appraiser: Member estimation make industrial appraiser.

Master lease: lease signed by the distributor to rent the vacant space to contribute rent guarantee.

Mixed Use: industrial properties with retail on 1st floor and apartment on upper floors.

Triple Net (Nnn) lease: lease in which tenants pay base rent plus property tax, assurance & Cam fees. Absolute Nnn lease is Nnn lease that tenants also pay property supervision fee.

Noi: Net Operating Income. each year earnings after all expenses (property taxes, ins., & maintenance) except mortgage payment.

Pad: stand alone building in a prime location of a big shopping center.

Pass Thru: see reimbursement.

Percentage lease: lease in which tenant pays base rent plus a division of tenant's revenue.

Phase I Report: inspection record that provides an estimation for soil/environment contamination. It's usually required by the lender as part of loan approval process for a industrial property.

Phase Ii Report: inspection record for soil & groundwater subsurface investigation. This inspection is more overall which involves testing to see if there is any soil and water contamination.

Proforma income: potential, i.e. Higher, earnings when the property is 100% leased.

Proforma Cap rate: potential cap rate assuming property is 100% leased at store rent.

Reimbursement: the share of property tax, assurance & Cam fees that a tenant has to pay the landlord besides the base rent.

Rent guarantee: rent paid by the distributor to buyer for vacant spaces until they are leased.

Sba Loan: a government-guaranteed loan for owner-occupied properties.

Snda: Subordination, Non-disturbance, and Attornment. It's an trade required by lender, signed by the tenants agreeing: the new lien in 1st position; lender as landlord in case of foreclosure; lease as valid as long as tenant is not in default.

Tic: Tenants In Common. A way for small/self-directed Ira investors to own a fraction of high-valued properties as tenants in common.

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Due Diligence For Real Estate Investors

Homes For Rent - Due Diligence For Real Estate Investors

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Do your due diligence when investing in real estate. You've heard that before, but what is due diligence? A simple definition: "The investigation and verification of the details of a single investment." Start the process before the offer, but in the offer you also will want to contain clauses that allow you to have inspections done, look at positive documents, and impart the books.

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Due Diligence

Due diligence should always contain a look at the books. impart the last 24 month's earnings and charge statements, and watch for whatever unusual, like expenses that are too low or earnings that seems higher than usual. Look at the rent roll, and research whether rents are over or under the market rates for the area you are in. Check the payroll records if there are employees, and watch for surprises, like accrued vacation time that you'll have to pay as the new owner.

Always verify income. You want to see rental agreements signed by the tenants, as well as rental histories, which might show if there are any question tenants or late payments still due. Documents for rental deposits should show amounts and where the deposits are (which bank).

Look at the aid contracts and agreements. Ask if they transfer, or if you are free to change to best (possibly cheaper) services. Among others, you're looking for asset management, landscaping, snow plowing, pool cleaning service, and heating and cooling ideas maintenance agreements.

Do your first covering inspection. Walk nearby with pen and paper, and note whatever unusual or in need of repair. Dispose for professional inspections where needed. Be sure that the electrical and plumbing systems are up to date and meet current codes. Assessment of how many years of use the roofing has left, and look at driveways, landscaping, and the health of covering paint.

Your due diligence should contain an interior inspection. Meet some of the tenants if you can. Look for any problems you'll have to fix in the advent years. Watch for water damage or fire damage, pest problems, and positive "problem tenants," or "problem apartments." Are there empty units that are listed as occupied? Get the considerable pest inspections and security inspections. Some Fire Marshalls will do a free inspection to verify that the building meets current codes.

Call local authorities. Ask about any zoning or encroachment issues, or permit problems. Have there been any fire code violations, and were they fixed?

It is usually best to use professional help when doing your due diligence. Your accountant can decipher the books best than you, and consideration whatever that doesn't add up. A lawyer can impart your offer and other documents. She can also tell you what other things you should be doing.

Take notes. Do something about serious issues (have them fixed or adjust your offer). Most problems you'll run into when buying earnings properties are not entirely unforeseeable. They can be avoided or resolved if you use your due diligence checklist diligently.

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Starbucks Coffee - What industrial Real Estate Investors Should Know

Homes For Rent In Cincinnati Ohio - Starbucks Coffee - What industrial Real Estate Investors Should Know

Good morning. Today, I discovered Homes For Rent In Cincinnati Ohio - Starbucks Coffee - What industrial Real Estate Investors Should Know. Which is very helpful in my opinion and also you. Starbucks Coffee - What industrial Real Estate Investors Should Know

Company Summary

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Starbucks Coffee, sometimes referred to as Fourbucks Coffee is the largest coffeehouse chain in the world. It opened its first store in 1971 in Seattle's waterfront Pike Place store by three partners: Jerry Baldwin, Zev Siegel, and Gordon Bowker to sell high-quality coffee beans and equipment. In 1982, Howard Schultz, the current Chairman and Ceo joined the enterprise as the Director of Marketing. He was impressed by the popularity of the espresso bars in Italy after he traveled to Milan in 1983. Back to the Us, he convinced the founders of Starbucks to sell both coffee beans and espresso beverages. However, the idea was rejected so he left the enterprise and founded Il Giornale coffee bar chain in 1985. In 1987 Howard Schultz and Il Giornale bought Starbucks with .8M and renamed Il Giornale coffee bars to Starbucks and turned it into the Starbucks you know today. The enterprise went communal with the seal Sbux in June 26, 1992 at /share with 140 stores. Since then the stock has split 5 times. As of May 2008, Sbux is traded at about , down from the high of .43 in November 2006.

Starbucks opened the first overseas store in Tokyo, Japan in 1996. The enterprise currently has about 16,000 stores, employs 172,000 partners, Aka employees as of September 2007 in 44 countries. It has yearly sales of over B with most new quarterly earnings being .526B. About 85% of Starbucks earnings comes from company-operated stores.

Starbucks does not franchise its operations and has no plans to franchises in foreseeable future. In North America, most stores are company-operated. You may see some Starbucks stores inside Target, major supermarkets, University campuses, Hospitals, and Airports. These stores are operated under licensing agreements to supply access to real estate which would otherwise unavailable. Starbucks receives licensee fees and royalties from these licensed locations. At these licensed sell locations, the workers are thought about employees of that definite retailer, not Starbucks. As of 2008 it has 7087 company-operated stores and 4081 licensed stores in the Us. Internationally it has 1796 enterprise operated stores and 2792 joint-venture or licensed stores in 43 foreign countries. The pace of expansion is slowing down as the enterprise plans to open 1020 Us stores in 2008, less than 400 stores in 2009 down from 1800 stores in2007. In addition, it also plans to close 100 stores in 2008.

Risks to Real Estate Investors

Starbucks coffee buildings remain a beloved speculation for many investors. When you think investing in a property occupied by Starbucks, you need to understand the following risks of your investment:

Recession-sensitivity: a hungry man can survive with a Big Mac & fries but can live without a four-buck Frappuccino. This means Starbucks is very sensitive to cheaper downturn as seen in 2007 and 2008 compared to Burger Kings and McDonald's. This may be the main conjecture sales at stores in the Us open at least a year are imaginable a mid single-digit percentage decline, the first drop ever. It triggers Howard Schultz to return to the Ceo post. The enterprise plans to double its marketing spending to 0M in 2008 to drum up sales. It began an aggressive coupons campaign offering free drinks every Wednesday straight through May 28, 2008. This may be a sign of desperation. On April 22, 2008 Starbucks cut its outlook for the year citing weak economy. Calorie & Sugar: Starbucks drinks have more sugar and calorie in which consumers are more and more implicated due to explosion of obesity and diabetes epidemic in the Us. For example, its Strawberries & Crème Frappuccino® Blended Crème - whip has 120 grams (over 1/4 lb) of sugar, and 750 calorie on its Venti 24 oz size. If it becomes a trend that consumers rule to cut down on the sugar drinks, or stick to low-carb diets then it will have impact on Starbucks revenue. Competition: McDonald's, Wendy's and Dunkin Donuts now also offer espresso at lower prices to compete with Starbucks. They will capture some earnings from Starbucks, especially from cost-conscious customers. The current Starbucks prices are already pretty high; it's very hard for Starbucks to growth the prices in the near hereafter without affecting the traffic to its stores. High-expenses enterprise model: while Starbucks profit margin is high as it pays an midpoint .42 per pound for the unroasted coffee, its enterprise is very labor intensive just like any other foods businesses. It takes in the middle of 10-20 employees to run one store. All eligible part-time and full-time partners in the Us and Canada receive benefit package consisting of stock selection plan, 401k with enterprise matching, medical, dental & vision coverage. Starbucks is voted as the 7-th best enterprise to work for in the Us in 2008 by the Fortune magazine employee's survey. What is good for employees may not be good for the employers. These benefits are usually only available to key employees or managers in the cafeteria industry. Historically, the costs of these condition benefits rise faster than the rate of inflation. In the long run, they may have negative impact on Starbucks bottom line. Should Starbucks not achieve well, it may be under pressure as a communal enterprise to close more stores. Special-purpose building: Starbucks freestanding construction is a special-purpose construction designed specifically for Starbucks. Should Starbucks rule not to close or not to renew the lease, it's hard to re-lease the property. There are few tenants out there willing to pay the high rent like Starbucks. It's hard to use it as a fast food cafeteria due to a relative small square footage. Besides, it does not have a market kitchen. Once vacated by Starbucks, the property value will most likely go down.
Starbucks Real Estate Operation

Starbucks divides the Us & Canada into 17 real estate territories, each has its own store amelioration office to establish the store in its territory. The developers constructed freestanding buildings about 1800 Sf with drive straight through in a location with high visibility, heavy traffic. Once the location is stylish by the territory office, Starbucks typically signs a 10 year Nnn lease with 2 five year options in which landlords are responsible for roof and structure. All the leases usually have corporate guarantee which means Starbucks will continue paying rent in the event it has to close the store. The lease often has 10% rent growth every 5 years. The rent is in the middle of .65/Sf in a store in Utah to .84/Sf in New York. This rent discover is based on the rents at just 30 Starbucks properties, 18 of them are free standing, on the store for sale straight through out the Us as of April 2008.

Starbucks Location with Minimal Store Closure Possibilities

During tough times, e.g. In 2008 when sales are declining Starbucks will effort to cut costs and close underperforming stores. As a real estate investor considers investing in a Starbucks building, you don't want to invest in a property that will be fulfilled, in the future.

Location------ 1mile------3miles-------Ahi/yr-----Size (Sf)----Base rent /yr---Rent/Sf/mo --Price-----Cap(%)
Ohio...............296........2609.........375....1613.........,590........... .03..........8K.......6.75
Florida...........9186......55270......595.....1816.........,000............44...........2M.........6.10
Georgia.........5717......57201.....3936....1750.........,000............52...........091........6.75
Mississippi....188........4923........372.....1816.........2,184..........15...........558M.....7.2
Texas.............5944.....40970.......043.....1752.........,914............42..........,327M....7.00

Table 1: Rent Comparables for Free-standing Starbucks Buildings

Location------Sbux rent/yr---Sbux Size---Sbux rent/Sf/mo---Other tenant Size---Rent/Sf/mo---Difference
California.......096........1248 Sf......01........................1245 Sf..................50.............-19%
Kansas..........200........1600 Sf.....25.........................1600 Sf...................33.............68%
Utah...............568........1950 Sf......65.........................1200 Sf..................86............-11%
New Mexico..004.........2000 Sf.....83.........................2500 Sf..................92............100%
New York.......5004......1785 Sf.....84.........................2819 Sf...................75............112%

Table 2: Rent variation in Multi-tenant Starbucks sell Centers

Since Starbucks does not issue sales earnings for a single location, you just need to make an educated guess. Based on yearly earnings and numbers of stored operated by Starbucks, the midpoint yearly earnings per store is about M. In addition, if the yearly rent to earnings ratio is less than 10% there is a good opportunity the location is profitable. For example if the base rent for the Starbucks in Ohio is ,590 then the yearly earnings should be more than 5,590. Besides picking a store at a good location (refer to the article titled "What 'Location' Means in market Real Estate" by this author), and the cap rate you should think the following:

Densely-populated area: more habitancy mean more customers size and thus more revenue. The Starbucks in Fl, Ga and Tx on Table 1 are more promising. Note: the author tries to be sensitive by not disclosing the exact locations. Low-rent: the Starbucks in Ms pays 2,184 for base rent. To be reasonably profitable it needs to have yearly earnings of .12M. However, since there are only 188 habitancy within 1 mile and 4923 residents within 3 miles radius from the store, it's less likely the store ever achieves that revenue. Besides Starbucks pays .15/Sf which is very high compared to just .52/Sf in a fast growing, high income, densely-populated in Ga where there are 57,201 residents within 3 miles radius and midpoint Household earnings (Ahi) of over 3K/year. It's hard to understand how the Starbucks in Ms could be an irreplaceable location in an area with just 188 habitancy within 1 mile radius from the property! While offering the highest 7.2% cap, this property appears to be a good speculation but it de facto has the highest risk of underperforming and could be fulfilled, down in the future. Alternatively, Starbucks could effort to renegotiate the lease with lower rent during tough times. While Starbucks has not asked for rent reductions yet, it is not surprised if Starbucks will do so to heighten its bottom line in the future. In either case, the property value will go down. Rent premium: while most Starbucks properties are freestanding in which it occupies 100%, you may see a Starbucks in a small multi-unit strip center with a few other tenants. It usually occupies the end unit with drive straight through and thus is imaginable to pay a excellent compared to the adjacent unit. However, most of the time Starbucks pays substantially higher rent. For example, in Table 2 it pays .84/Sf compared to just .75/Sf by a tenant in the unit next door in a center in New York or 112% higher. In this strip center should the rent for the unit occupied by Starbucks be reduced (due to closure or lease renegotiation) the value of the center will be reduced substantially. You de facto don't want to invest in this property.

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