All lenders and their loan officers are now subject to HVCC (Home Valuation Code of Conduct) under a new requirement of RESPA that started on May 1, 2009. This new requirement has drawn many complaints in that appraisers assigned from a pool of appraisal management companies are coming from out of the area and thus not familiar with the local area and conditions.
It has been suggested that appraisal companies provide an “Appraiser Proximity Certification” on all appraisal orders. This proof would provide some creditability that the appraiser chosen for a particular assignment had local knowledge of the area and the expertise to complete the assignment. Bottom line, the appraiser needs to have a familiarity with the area, boundary lines and value differentiation between subdivisions as well as cities.
Monday, June 28, 2010
Wednesday, June 23, 2010
45 Cove Lane, Redwood Shores, CA *Offered at $569,000* JUST REDUCED!
Offered at $569,000 JUST REDUCED!
45 Cove Lane, Redwood Shores
Bright & Spacious Condominium Part of “Pelican Cove Association”
Stellar Location with Ground Floor Unit in Park-Like Setting
Modern floor plan blends a formal tile entry into living room and kitchen.
Living room highlighted by a wood-burning fireplace; transitions over to dining area and entertainment deck
Generous size Master Suite and Bath open onto a private patio; Spacious 2nd bedroom for guest.
Remodeled kitchen w/ new granite countertops, convection oven/cook-top range, microwave, and dishwasher.
Separate Laundry Area in Unit
Remodeled Master Bath and Hall Bath with Granite Countertops.
Freshly Painted Unit with approximately 1250 square feet living area with one covered carport (#175)
Common Area includes beautiful grounds with 2 pools and spas, Clubhouse, Boat Dock, Guest Parking, many water fountains, and walking areas.
Just a block away from the new Redwood Shores Library and a half mile from the Redwood Shores Shopping Center, Pacific Athletic Club, and Hwy 101.
Listing Broker:
John Donahue (DRE#00577514)
Carlmont Associates
Call (650) 533-7238
E-Mail: donahuejohn@msn.com
45 Cove Lane, Redwood Shores
Bright & Spacious Condominium Part of “Pelican Cove Association”
Stellar Location with Ground Floor Unit in Park-Like Setting
Modern floor plan blends a formal tile entry into living room and kitchen.
Living room highlighted by a wood-burning fireplace; transitions over to dining area and entertainment deck
Generous size Master Suite and Bath open onto a private patio; Spacious 2nd bedroom for guest.
Remodeled kitchen w/ new granite countertops, convection oven/cook-top range, microwave, and dishwasher.
Separate Laundry Area in Unit
Remodeled Master Bath and Hall Bath with Granite Countertops.
Freshly Painted Unit with approximately 1250 square feet living area with one covered carport (#175)
Common Area includes beautiful grounds with 2 pools and spas, Clubhouse, Boat Dock, Guest Parking, many water fountains, and walking areas.
Just a block away from the new Redwood Shores Library and a half mile from the Redwood Shores Shopping Center, Pacific Athletic Club, and Hwy 101.
Listing Broker:
John Donahue (DRE#00577514)
Carlmont Associates
Call (650) 533-7238
E-Mail: donahuejohn@msn.com
Monday, June 21, 2010
What is the Cap Rate of Capitalization?
Capitalization is the process of converting the estimated annual net operating income of a property into an estimate of market value.
The rate used in the capitalization of income is the annual rate of return from a property that an investor demands before he or she will purchase that property. Capitalization rate is a composite of the interest rate (return on an investment) and the recapture rate (return of an investment).
The formula used to compute present value is:
Net Income = Present Value
Capitalization Rate
Real estate compete with all other types of investment for available investment funds. When appraisers estimate the rate of return (capitalization rate) demanded by investors, they must consider many characteristics of the investment (which is individual property, in this case). The main items are described below.
1. Reliability of Net Income-The appraiser must evaluate certainty of future income and expenses. A property on a long-term net lease to a responsible lessee is more desirable and would probably attract capital funds at a lower rate than a similar property on a month to month tenancy.
2. Liquidity-An investment that can be readily sold, such as stocks and bonds, is usually preferable to an asset like real estate or machinery that may require weeks or months to sell. Similarly, an investment that can be acquired in relatively small denominations has much wider market of prospective purchasers than a larger investment.
3. Burden of Management-In this case, we mean general supervision and care of the investment, not management of the type that would be deducted from the income as an operating expense. Investment assets require different degrees of management. Bonds and mortgages require virtually none. A real property under a long-term net lease requires less management than a property under a month to month tenancy.
4. Probability of Increase or Decrease in Value-The probability of a change in value varies with the type of investment and individual asset. Bonds and mortgages are likely to remain stable in capital value. If the buyers and sellers anticipate an increase in the capital value of an asset, the present yield rate will be less than the rate for an asset of stable or decreasing value.
5. Taxation-The income tax treatment of anticipated future benefits from an investment can influence the capitalization rate. Tax-free municipal bonds are purchased at a lower yield rate than similar taxable bonds. Real estate may benefit from a depreciation allowance for improvements. Investments in real estate and corporate stocks may also be preferred because a gain at the time of sale will be treated as capital gain.
6. Hypothecation-Being able to use a capital asset as collateral for borrowing money is an advantage. Assets that fluctuate rapidly in value do not normally serve as good collateral.
Just as real estate competes with other investments for capital funds, each parcel of real estate competes with other parcels. Capitalization rates for real property vary with type, age, and condition of the property, location, and surrounding development, and existing economic conditions. The more secure the future net income, the lower the capitalization rate. A lower rate would be used in capitalizing the income from an apartment house in a well-maintained and stable neighborhood than in an area of declining socio-economic conditions. The difference in capitalization rates would reflect peoples judgment of the quality of the properties in relation to the features we listed for a good investment. In an undesirable neighborhood, the capitalization rate might be higher because the reliability of income is poorer, the probability of appreciation in value is less and the burden of management is greater.
The appropriate capitalization for the subject can be estimated after considering the preceding considerations. Capitalization rates for competing real estate investment are found by dividing the net operating income of the property into the sale price.
Net Income =Rate
Sales Price
The overall capitalization rate has been extracted from the comparable sales information that ranged from 6.8% to 9.5%. The subject contains an average location, being located on a street with average car and foot traffic. Although, the subject is 100% occupied, and has good space planning, as each tenant receives a storefront window. The subject is composed of average condition, and contains a good floor plan/ layout. The subject is surrounded by several buildings of the subject’s type. The subject’s rents are toward the bottom of the market levels and are competitive with the surrounding buildings. The subject’s estimating expenses are typical for a building of this type.
Since the subjects rents are toward the bottom of the range, and the subject is 100% occupied. It’s risk is felt to be toward the lower end of the range of the comparable sales. The appraiser analyzed the comparable sales and the subject, and felt that the subject contained a slightly lower risk due to its rents and being 100% occupied. Thus, a capitalization rate of 8.0% is felt to be appropriate for the subject property.
Thus,
Income =Value
Rate
$77,377 =$967,213
.08
Rounded: $970,000
The rate used in the capitalization of income is the annual rate of return from a property that an investor demands before he or she will purchase that property. Capitalization rate is a composite of the interest rate (return on an investment) and the recapture rate (return of an investment).
The formula used to compute present value is:
Net Income = Present Value
Capitalization Rate
Real estate compete with all other types of investment for available investment funds. When appraisers estimate the rate of return (capitalization rate) demanded by investors, they must consider many characteristics of the investment (which is individual property, in this case). The main items are described below.
1. Reliability of Net Income-The appraiser must evaluate certainty of future income and expenses. A property on a long-term net lease to a responsible lessee is more desirable and would probably attract capital funds at a lower rate than a similar property on a month to month tenancy.
2. Liquidity-An investment that can be readily sold, such as stocks and bonds, is usually preferable to an asset like real estate or machinery that may require weeks or months to sell. Similarly, an investment that can be acquired in relatively small denominations has much wider market of prospective purchasers than a larger investment.
3. Burden of Management-In this case, we mean general supervision and care of the investment, not management of the type that would be deducted from the income as an operating expense. Investment assets require different degrees of management. Bonds and mortgages require virtually none. A real property under a long-term net lease requires less management than a property under a month to month tenancy.
4. Probability of Increase or Decrease in Value-The probability of a change in value varies with the type of investment and individual asset. Bonds and mortgages are likely to remain stable in capital value. If the buyers and sellers anticipate an increase in the capital value of an asset, the present yield rate will be less than the rate for an asset of stable or decreasing value.
5. Taxation-The income tax treatment of anticipated future benefits from an investment can influence the capitalization rate. Tax-free municipal bonds are purchased at a lower yield rate than similar taxable bonds. Real estate may benefit from a depreciation allowance for improvements. Investments in real estate and corporate stocks may also be preferred because a gain at the time of sale will be treated as capital gain.
6. Hypothecation-Being able to use a capital asset as collateral for borrowing money is an advantage. Assets that fluctuate rapidly in value do not normally serve as good collateral.
Just as real estate competes with other investments for capital funds, each parcel of real estate competes with other parcels. Capitalization rates for real property vary with type, age, and condition of the property, location, and surrounding development, and existing economic conditions. The more secure the future net income, the lower the capitalization rate. A lower rate would be used in capitalizing the income from an apartment house in a well-maintained and stable neighborhood than in an area of declining socio-economic conditions. The difference in capitalization rates would reflect peoples judgment of the quality of the properties in relation to the features we listed for a good investment. In an undesirable neighborhood, the capitalization rate might be higher because the reliability of income is poorer, the probability of appreciation in value is less and the burden of management is greater.
The appropriate capitalization for the subject can be estimated after considering the preceding considerations. Capitalization rates for competing real estate investment are found by dividing the net operating income of the property into the sale price.
Net Income =Rate
Sales Price
The overall capitalization rate has been extracted from the comparable sales information that ranged from 6.8% to 9.5%. The subject contains an average location, being located on a street with average car and foot traffic. Although, the subject is 100% occupied, and has good space planning, as each tenant receives a storefront window. The subject is composed of average condition, and contains a good floor plan/ layout. The subject is surrounded by several buildings of the subject’s type. The subject’s rents are toward the bottom of the market levels and are competitive with the surrounding buildings. The subject’s estimating expenses are typical for a building of this type.
Since the subjects rents are toward the bottom of the range, and the subject is 100% occupied. It’s risk is felt to be toward the lower end of the range of the comparable sales. The appraiser analyzed the comparable sales and the subject, and felt that the subject contained a slightly lower risk due to its rents and being 100% occupied. Thus, a capitalization rate of 8.0% is felt to be appropriate for the subject property.
Thus,
Income =Value
Rate
$77,377 =$967,213
.08
Rounded: $970,000
Monday, June 14, 2010
Commercial Tenants Beware!
Under California law, the Deed of Trust securing your landlord’s mortgage on the premises is first in time and superior in right to the rights under your lease. The foreclosure of the lender’s loan will, in the lender’s sole discretion, terminate your lease. Given the current environment of increasing commercial foreclosures, the foregoing scenario is becoming more and more commonplace. In order for you (the tenant) to protect your interest under the lease from being terminated in a foreclosure, you must require your landlord, as part of your lease negotiations, to have his lender execute a SUBORDINATION, NON DISTURBANCE, AND ATTORNMENT (“SNDA”) with you as the tenant.
An SNDA is simple but vital to your lease agreement.
The continued right of the tenant’s possession of the property is essential. The SNDA requires the tenant to (1) confirm the subordination of the lease to the lender’s Deed of Trust and any extensions or modifications to the Deed of Trust and (2) agree to attorn (recognize) the lender or a third party purchaser of the building at the foreclosure sale as the tenant’s new landlord under the lease. The only exception to the above is if the tenant is in default of the lease beyond any applicable cure set forth in the lease. With an executed SNDA, you require the lender to continue your lease for the balance of the term including options to renew and not to disrupt your possession, absent a default on your part.
An SNDA is simple but vital to your lease agreement.
The continued right of the tenant’s possession of the property is essential. The SNDA requires the tenant to (1) confirm the subordination of the lease to the lender’s Deed of Trust and any extensions or modifications to the Deed of Trust and (2) agree to attorn (recognize) the lender or a third party purchaser of the building at the foreclosure sale as the tenant’s new landlord under the lease. The only exception to the above is if the tenant is in default of the lease beyond any applicable cure set forth in the lease. With an executed SNDA, you require the lender to continue your lease for the balance of the term including options to renew and not to disrupt your possession, absent a default on your part.
Triple Net (NNN) Investment Properties...Take a Look!!!
Please look at these investment properties!
ALL Absolute NNN (Triple Net) Leased Retail Properties For Sale:
I. Jack in the Box (Franchise Tenant)
25699 Baseline Street
Highland, CA
High-profile corner location
Built 2009/ Lot size 0.67 acres
Rentable area: 2806 s.f.
Cap rate: 6.75%/ 2012 increases to 6.81%
Annual income: $76,800
Monthly income: $6,400
18 years left on 20 year lease
4 (5-year) options at FMV
Minimum 10% rent increases
Personal guarantee on lease
Stock traded publicly: NASDAQ-(GS): JACK
Tenant responsible for ALL expenses including roof, structure, property, tax, insurance, and common area maintenance (CAM).
ASKING: $1,240,000.00
II. Burger King (Franchise Owner/Lessee)
14868 Bear Valley Road
Victorville, CA 92395
Free standing building in strip center
Built 2002/ Lot size: 0.63 acres
CAP RATE: 6.75%/ 3292 s.f. rentable area
Annual income: $99,000
Monthly income: $8,250
10 years left on 17 year lease
2 (10-year) options to renew
10% increases every 5 years
Tenant responsible for all expenses including roof, structure, property taxes, insurance, and common area maintenance (CAM).
ASKING: $1,466,000
III. Jiffy Lube (Lessee)
115 E. Van Buren Street
Phoenix, AZ 85323
High profile location on major retail thoroughfare by anchored shopping center
1947 s.f. rentable area
Built 2005/ Lot is 14,969 s.f.
CAP RATE: 8%-2012 to 9.2%
Annual income: $114,000
Monthly income: $9,5000
12.5 years left on 15 year lease
3 (5-year) options
15% rent increase every 5 years
Tenant responsible for all expenses including roof, structure, property tax, insurance, and common area maintenance (CAM)
ASKING: $1,425,000
IV. Del Taco (Corporate Store)
19701 Esperansa Road
Yorba Linda, CA 92886
Prime SoCal/ Orange County location
Built 1985/ Lot 0.46 acres
CAP RATE: 6%/ 1800 s.f. rentable area
Annual income: $81,500
Monthly income: $6,258
15 year lease from close of escrow
Rent increases every 5 years tied to CPI
1 (5-year) option
Corporate guarantee
Tenant responsible for all expenses including roof, structure, property tax, insurance, and common area maintenance (CAM).
ASKING: $1,358,000
Disclaimer: The information presented herein has been gathered from sources deemed to be reliable, however, Break Point Loans and Acquisitions makes no representation whatsoever as to its accuracy or completeness. Any projections, estimations, or assumptions made may or may not represent the current or future performance of the subject property. Break Point Loans and Acquisitions has made no investigation of the subject property with respect to the accuracy of the lot and building size, the environmental condition of the property or surrounding area, or the structural soundness of the improvements to the subject property. Any prospective purchaser is advised to make their own thorough investigation of the subject property and the facts related thereto.
ALL Absolute NNN (Triple Net) Leased Retail Properties For Sale:
I. Jack in the Box (Franchise Tenant)
25699 Baseline Street
Highland, CA
High-profile corner location
Built 2009/ Lot size 0.67 acres
Rentable area: 2806 s.f.
Cap rate: 6.75%/ 2012 increases to 6.81%
Annual income: $76,800
Monthly income: $6,400
18 years left on 20 year lease
4 (5-year) options at FMV
Minimum 10% rent increases
Personal guarantee on lease
Stock traded publicly: NASDAQ-(GS): JACK
Tenant responsible for ALL expenses including roof, structure, property, tax, insurance, and common area maintenance (CAM).
ASKING: $1,240,000.00
II. Burger King (Franchise Owner/Lessee)
14868 Bear Valley Road
Victorville, CA 92395
Free standing building in strip center
Built 2002/ Lot size: 0.63 acres
CAP RATE: 6.75%/ 3292 s.f. rentable area
Annual income: $99,000
Monthly income: $8,250
10 years left on 17 year lease
2 (10-year) options to renew
10% increases every 5 years
Tenant responsible for all expenses including roof, structure, property taxes, insurance, and common area maintenance (CAM).
ASKING: $1,466,000
III. Jiffy Lube (Lessee)
115 E. Van Buren Street
Phoenix, AZ 85323
High profile location on major retail thoroughfare by anchored shopping center
1947 s.f. rentable area
Built 2005/ Lot is 14,969 s.f.
CAP RATE: 8%-2012 to 9.2%
Annual income: $114,000
Monthly income: $9,5000
12.5 years left on 15 year lease
3 (5-year) options
15% rent increase every 5 years
Tenant responsible for all expenses including roof, structure, property tax, insurance, and common area maintenance (CAM)
ASKING: $1,425,000
IV. Del Taco (Corporate Store)
19701 Esperansa Road
Yorba Linda, CA 92886
Prime SoCal/ Orange County location
Built 1985/ Lot 0.46 acres
CAP RATE: 6%/ 1800 s.f. rentable area
Annual income: $81,500
Monthly income: $6,258
15 year lease from close of escrow
Rent increases every 5 years tied to CPI
1 (5-year) option
Corporate guarantee
Tenant responsible for all expenses including roof, structure, property tax, insurance, and common area maintenance (CAM).
ASKING: $1,358,000
Disclaimer: The information presented herein has been gathered from sources deemed to be reliable, however, Break Point Loans and Acquisitions makes no representation whatsoever as to its accuracy or completeness. Any projections, estimations, or assumptions made may or may not represent the current or future performance of the subject property. Break Point Loans and Acquisitions has made no investigation of the subject property with respect to the accuracy of the lot and building size, the environmental condition of the property or surrounding area, or the structural soundness of the improvements to the subject property. Any prospective purchaser is advised to make their own thorough investigation of the subject property and the facts related thereto.
Monday, June 7, 2010
To Buy Or Not To Buy...
To Buy or Not to Buy?
This is a very common question in today’s market, especially for first time buyers. I say definitely BUY! Rates are the lowest they have been in years and there are some great deals to be made. The inventory is packed with many short sales, REOs, foreclosures, and bankruptcies. There are so many that lenders are having a hard time keeping up with all of them. The lenders do not want them on their books. They are lenders…not property managers. They have no interest in keeping these in their portfolio. So like I said, buy now while prices are rates are low. This scenario will not last forever.
-John Donahue-Broker (DRE#00577514)
This is a very common question in today’s market, especially for first time buyers. I say definitely BUY! Rates are the lowest they have been in years and there are some great deals to be made. The inventory is packed with many short sales, REOs, foreclosures, and bankruptcies. There are so many that lenders are having a hard time keeping up with all of them. The lenders do not want them on their books. They are lenders…not property managers. They have no interest in keeping these in their portfolio. So like I said, buy now while prices are rates are low. This scenario will not last forever.
-John Donahue-Broker (DRE#00577514)
Custom Loans Available
If You Need A Lower Mortgage Payment
Or Fast Cash…
We Specialize in Custom Loan Programs to Fit Almost Any Situation!
• Very Competitive Rates
• Cash Out for any reason
• Debt Consolidation
• Hard to do Loan Programs
• Home Improvement Programs
Largest Variety of Loan Programs to Meet the Needs of Each Individual and Property Conditions
ACT NOW to take advantage of the lowest market rates possible!
Call John at 650-533-7238
Or Fast Cash…
We Specialize in Custom Loan Programs to Fit Almost Any Situation!
• Very Competitive Rates
• Cash Out for any reason
• Debt Consolidation
• Hard to do Loan Programs
• Home Improvement Programs
Largest Variety of Loan Programs to Meet the Needs of Each Individual and Property Conditions
ACT NOW to take advantage of the lowest market rates possible!
Call John at 650-533-7238
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