While we know that the real estate business is ever-changing, the terminology will most likely always stay the same. As an investor, you should be able to use and explain the common language used in the industry for both educational purposes and to ensure your investment is successful.
Common Real Estate Terms
This terminology is used in almost every real estate transaction.
Here is a brief summary of each definition.
- Loss Factor
- Cap Rate
- The Right of First Refusal
- Cash-on-Cash Return
- Net Operating Income
KPI stands for Key Performance Indicators. KPIs help measure the success rate in profits and where some areas may need improvement. In the real estate business, examples of KPIs are calculating commission margin, net profit, average amount of commission per sale, or the effectiveness of advertising and promotion of available properties. Tracking and measuring KPIs will help increase profit when effective strategies are implemented based on those measurements.
2) Loss Factor
The areas of your property that service more than one tenant may include the restrooms, lobby, custodial closets or elevators. This space is considered usable, not rentable space, and is otherwise known as your loss factor.
ProTip: To calculate the loss factor, find the percentage difference between rentable square feet (RSF) and usable square feet (USF). This is the percentage you will be responsible for paying.
3) Cap Rate
The cap rate is a common and useful ratio in the commercial real estate industry and it’s helpful in several scenarios. Essentially, the cap rate represents the percentage ROI an investor would receive on an all cash purchase. It takes the net operating income (NOI) divided by the property asset value.
4) The Right of First Refusal
The right of first refusal means that the seller gives the first potential buyer or interested party the right to buy the property before the seller considers any other interested buyers. There can be other interested buyers for the seller to consider, but they must first notify the original potential buyer, and that buyer can accept or refuse before the seller can accept an offer from someone else.
Escrow means that when someone puts a down payment on a home, there is a third party like a loan office or bank that holds onto that money in a separate bank account until final closing paperwork has been signed. Once the buyer and seller confirm all agreements are final, the money is released to the seller.
6) Cash-on-Cash Return
This term refers to the yearly return overall in relation to the amount of money you put down when buying a home. This number analyzes the investment you’re putting into the property. In other words, the cash that you have left over after one year divided by the cash you’ve invested will be the cash-on-cash return.
7) Net Operating Income
Net Operating Income measures a real estate company’s potential to be profitable. If you estimate the property’s revenue and subtract expenses like maintenance, repairs, property taxes, and HOA fees, you will get your net operating income.
Why Are These Terms Important to Know?
You want to educate yourself on these terms and more when investing in a property. This will help avoid any complications in the buying or selling process and help promote success in your investments.
Contact us to learn more about brokerage services and what you need to know to be successful in real estate investing.
Real estate can be a complex business with a lot of ins and outs that can be tricky to navigate if you lack the experience. For example, many investors struggle when deciding whether to invest in commercial or multifamily properties. Which is easier? Which provides the best ROI? Considering investing in real estate? Find out more about commercial vs multi-family properties.
Commercial vs Multifamily Properties
Investing in real estate can generate attractive returns from multiple income streams, providing real-time financial security and future appreciation. Here is a look at the most lucrative forms of property investment, commercial and multifamily:
Investing in commercial properties typically offer more reward than residential properties, but there can also be more risks. Understand the pros and cons of investing in commercial properties so that you make the decision that’s right for you.
- Commercial properties earn money through Income and appreciation. Income is produced through the operation of the building, while appreciation is an increase in the property’s value over time.
- Commercial real estate leases are usually longer than residential leases, which makes predicting cash flow year after year easier.
- With the right location, commercial properties can see an annual return between 6 and 12 percent of the purchase price,
More and more investors are buying multifamily properties to add to their portfolio and greatly increase their cash flow. If you are considering making the jump into this lucrative market there are several factors you should keep in mind.
- You must maintain your property so it retains its value over time (both to potential tenants and investors).
- You have the power to change lives by investing in affordable housing for families.
- You’ll enjoy many tax incentives (tax breaks) and may even get government grants to offset upfront costs.
Many real estate investors do not enjoy the actual management of their properties and bypass that by hiring a property management company to handle the daily operations of their investment. Your property manager is paid a percentage of the monthly income generates, and their duties include procuring tenants, collecting rent payments, handling evictions and property maintenance. Both multifamily and commercial properties afford investors such a high ROI that hiring a property management company does not significantly affect their bottom line.
Pro Tip: You must have an experienced property management firm ready to ensure the profitability of your investment.
Ready to Invest?
Real estate investments are a great alternative for those who may be uncomfortable or disillusioned with the volatility of the stock market. It is also a better investment for those who wish to take an active role in growing their wealth, rather than passively putting their money into a fund to be managed by someone else. Are you ready to grow your wealth?
Contact Us to learn more about finding a profitable property for your portfolio.
Senior living communities face unique challenges compared to other multifamily properties. Marketing, leasing and managing these facilities takes expert care, a compassionate approach and an understanding of the nuances of elder care.
Reinvigorate Your Senior Care Facility
Keeping the rooms in your senior community full is an ongoing challenge. So how can your facility reach potential residents, maintain the tenancy, and maximize occupancy?
- Prioritize Hiring
- Provide Entertainment
- Budget With Care
1) Prioritize Hiring
All the latest technology in the world cannot make up for a lack of friendly, professional employees. Friendliness is a trait that residents and their loved ones value, almost above all others. From the executive director to the person at the front desk, genuine, unpretentious friendliness should be the norm. Residents are more likely to stay when staff develops strong bonds with them. Residents struggle to connect with staff when turnover is high, so hiring practices should be standardized and rigorous.
Pro Tip: Many senior living managers find that keeping staff happy results in better resident retention.
2) Provide Entertainment
Part of the reason traditional nursing homes have such a bad reputation is the cold, sterile environment many had. Offering a warm setting with plenty of activities for residents will ensure that your facility is differentiated from your competition. The entertainment that’s right for your community will vary based on your resident population, so providers are wise to identify the types of entertainment that their residents will enjoy most, from visiting musicians and lecturers to fitness classes or gardening.
3) Budget With Care
Elaborate landscaping surrounding your community may look beautiful — but they may not provide the best return on investment that you would expect. Ask yourself if your residents really value the thousands of dollars routinely going towards exterior aesthetics, when that money could instead be spent on wellness, fitness or rehab services to keep residents healthy and in the community. Senior living communities that prioritize their expenses unwisely often end up spending money that won’t allow them to address the future needs of their residents.
Retention vs. New Residents
Remember that a resident who does not move out is just as important as the one who moves in. It benefits you to focus on resident retention just as much as you focus on attracting new residents.
Contact Us to learn more about managing your senior living facility to ensure high retention and profitability.
If you do it right, investing in commercial properties can yield significant benefits. Common types of commercial properties include office buildings, retail spaces, warehouses, and industrial buildings. Some properties may be multi-use. Investing in such properties can potentially result in a high return if you know what you’re doing.
Benefits of Investing in Commercial Property
By choosing the location and asset wisely, investors can benefit from the security of knowing that their property has the potential to grow in value without any massive overhauls or significant work. With a team of property managers marketing and managing the asset, there’s little work for the investors.
Investing in property is far more complicated than just sitting back and accepting the rent. However, generally speaking, commercial tenants tend to be easier to work with than those renting in residential properties. Drafting a commercial lease allows for more flexibility, letting you choose the type of lease and specific terms.In addition, your leasee is a business, not an individual. Businesses have more at stake when it comes to choosing a location, which gives them more incentive to make it work long-term.
Higher Earning Potential
Rental income depends on various factors such as the location, property type, and the business that rents from you, but in general, returns on commercial properties usually exceed those on residential rentals by a significant percentage. You may also be able to use a triple-net lease to shifts most of the property’s expenses to the tenant, saving you even more money.
Pro Tip: Because commercial properties are occupied by businesses, they have more incentive to stay in the same location.
Objective Price Evaluations
It’s often easier to evaluate the property prices of commercial property because you can request the current owner’s income statement and determine what the price should be based on that. If the seller is using a knowledgeable broker, the asking price should be set at a price where an investor can earn the area’s prevailing cap rate for the commercial property type they are looking at. Residential properties are often valued based on fairly subjective perceptions, which can be hard to translate into dollar amounts.
Add to Your Portfolio
Do you currently have commercial real estate assets in your investment portfolio? Commercial real estate continues to provide an excellent ROI profile to investors.
The Edge You Need
Investing in commercial property can provide many benefits, but without a professional, experienced property management team behind you, those benefits can turn into risks. A commercial property manager will market, manage and ensure the profitability of your investment.
Contact Us to learn more about investing, or browse our available commercial properties for sale.
Property managers wear a great number of different hats. In the simplest terms, a property manager oversees the daily maintenance and operations of a building, property or community. However, the evolution of the industry means that modern managers perform a variety of services to enhance property values and quality of life for an increasingly savvy client base.
Consider a Career in Property Management
Property management covers a wide variety of roles, providing positions that are extremely varied. That ultimately means that there are more opportunities for qualified, motivated candidates. Here are the top perks of life as a property manager:
Never A Dull Moment
If you get bored when every day of work is essentially the same, work as a property manager might be for you. Managing a commercial or multifamily property is a fast paced environment that requires you to be up-to-date in so many areas, including budgets, sales, insurance, compliance, and customer service. While property management does include administrative duties, a key component of the job requires property visits and fieldwork. You will never be bored!
Great if You’re a People Person
Are you outgoing and personable? As a property manager you’ll thrive if you love teamwork, collaboration and working closely with a diverse mix of people You’ll frequently interact with tenants, residents, guests, maintenance staff, coworkers and investors. If you’re a natural people person this will mean you’ll be working in your element, and will likely thrive.
Property managers are in high demand, which means that opportunities are available in almost every city in the world. More investors are branching out into real estate, and as their assets grow, so does their need for qualified managers. In smaller companies, property managers might have trouble advancing up the corporate ladder, but in a larger firm, there will be no shortage of room for advancement.
Pro Tip: Property management covers a variety of job titles, from accountant to marketing specialists.
Are You a Good Candidate?
If you’re intelligent, motivated and have a commitment to customer service, you’re a great candidate for property management. A good property management company will invest in your success and support you with ongoing training and development. In fact, many property management firms hire a lot of other professionals for their teams, including accountants, brokers, and consultants.
Join the Tarantino Team
If you want a career that pushes you to develop your team, communication and problem-solving skills and ability to adapt to different situations, then property management is for you. The skills you learn as a property manager will serve you well, making the experience extremely valuable now and in the years to come.
Contact Us to learn about commercial or multifamily property management services, or browse our career opportunities to see if you’re a good fit for the Tarantino Team.
All property managers wish for respectful, easy-to-manage tenants. It can be hard to find tenants that are courteous, respectful, and who want to stay in the property long-term. By making a few small changes in the way that you manage the property, or your tenant-landlord relationship, you can help to ensure that your tenants are happy and comfortable in your property.
Retain Good Tenants
A property that sits vacant eats up time, effort and money that goes into advertising for new tenants, screening, turning the property, etc. It makes more sense to put that effort into retaining the good tenants, who are already renting from you.
- Be Proactive
- Fix It Quick
- Show Gratitude
- Make it Personal
1) Be Proactive
It is much easier to get your tenant to renew their lease if they like you and are happy to deal with you. If you never answer their calls, do not call back or show up for the important things, don’t be surprised if they decide to go elsewhere when their lease is up.
Pro Tip: When it comes to keeping good tenants happy, you have to be proactive and responsive.
2) Fix It Quick
Respond to your tenant’s maintenance requests promptly and efficiently. If you need more time to resolve the issue, communicate that to the tenant. Never ignore the request, even if you feel that the problem is something beyond your control. Instead, discuss the issue with them and offer support or resources to help them solve it on their own.
If you have a tenant that has always paid rent on time, never caused any trouble and has been the pinnacle of courtesy, try to accommodate their requests (within reason).
4) Show Gratitude
Tenants who go above and beyond to help their neighbors or you should be recognized. Even if it’s just a card or small rental discount, it pays to make tenants feel seen and appreciated.
5) Make it Personal
No matter what kind of property you own (student housing, apartments, etc.) you should involve your tenants in the community. Consider organizing casual events where they can interact with each other and with the property management team. Throw seasonal parties. Send out weekly or monthly community newsletters detailing local programs. Make tenants feel like part of a family.
Making Tenants Feel Valued
One of the most important factors in retaining tenants is partnering with a property management company that is highly trained in customer service, understands the landlord-tenant relationship, and makes each tenant feel valued.
Contact Us to learn more about our professional multifamily property management services.