What has happened since my last posting? Where to start?

Let’s see…. The one thing effecting the investment market in single family homes in the last month is the fall out of the sub-prime mortgage market. Lenders have closed thier doors! Others hanging in there have severly tightened their underwriting policies. Investors are screaming for tighter controls and accusations of fraud are everwhere.

This fall out is also effecting loans that are not in the sub-prime market. Underwriting of all loans is becoming tighter which is effecting the entire market. With the housing market not rebounding as economists predicted earlier, and the changes in lending which are here now and are comming, it will be harder to get money, especially 100% financing, but there will be more to choose from.

My suggestion for the investor looking to be successful in the comming year or two would be to bolster your credit in any way you can. Be careful not to damage your credit with your investing strategies and to use your investments wisely to make your credit stronger. I know that this is sometimes difficult to do. So make sure to find your money people who are concerned about your credit as well. Have them assist you in finding you money as well as keeping you credit strong.

There are many many ways to strengthen your credit position but you have to be very involved in this process and continually monitor what is happening and what could happen as you proceede in your investing.

More and more, partners in the credit an cash side of your acquisitions will be needed by some investors. Go out and find these people. Keep them close and make sure they are happy to be investing with you.

Let me know what you are seeing and send me some personal examples of how this situation is effecting you.

MIXED USE DEVELOPMENT TRENDS
An article in the March 2007 issue of “RETAIL TRAFFIC�,  magazine dealing with the retail real estate industry describes some recent trends in mixed use developments.

I points out that only a couple of years ago missing office, retail, residential and hotel uses was considered “cutting edge� but today developers are experimenting with mixing more unconventional uses such as performing arts centers, libraries, city halls, zoos, auto racetracks and sports stadiums to name just a few.

Developers, especially those outside the United States, have sometimes been more adventurous than U.S REITs in combining different uses.  In Durban, South Africa visitors can not only buy an automobile at the Expo Xplore project but can take a test drive on an off-road track with water traps and sand pits.

The article contains many examples of mixing different uses by developers who are definitely “pushing the envelope�.

Readers can find the article at the “RETAIL TRAFFIC� webs site: http://retailtrafficmag.com and can also subscribe to this excellent publication on that site.

Anemic Job Growth Could Stall Commercial Real Estate’s Momentum

By Matt Hudgins

Mar 15, 2007 2:53 PM
The slowing job market chiefly reflects the housing downturn but will

likely throw a damper on demand for commercial space as well, according

to some of the nation’s leading economists and real estate forecasters.

U.S. non-farm payrolls rose by 97,000 in February. That’s the lowest

employment growth in more than two years. “The bad news is that slower

job growth means slower absorption of space, particularly for office and

apartments,� says Hessam Nadji, managing director of research services at

Marcus & Millichap. “The good news is that if indeed job growth slows but

doesn’t stop, that will be the soft landing the Fed has wanted and we’ve

all hoped for all along.�

Market observers find plenty of positive indicators in the Labor

Department’s February numbers, because net job creation belies impressive

employment gains in the services sector. Service providers added 168,000

jobs in February, including 29,000 in professional and business services,

39,000 government positions, 31,000 hospitality workers and another

31,000 in education and health care. That’s important for commercial real

estate because the services sector is a heavy user of office space.

Dragging down the monthly job figures were huge losses in construction

and manufacturing. The nation lost 62,000 construction jobs in February.

Inclement weather halted a number of construction projects around the

nation, compounding the problem. Meanwhile, the manufacturing sector shed

14,000 positions.

“The truth of the matter is we have an uneven economy,� says Craig

Thomas, director of research at Boston-based Torto Wheaton Research.

“Everything related to housing is now contracting, and everything related

to services is doing fine. And the economy can’t really handle faster

growth, due to (low) unemployment.�

Thomas is referring to the February jobless rate of 4.5%, which is

considered near full employment. Unfortunately, many of the workers

displaced from the housing industry won’t be able to fill many service

provider jobs without additional training. “The folks unemployed aren’t

immediately available to the strong areas of the economy,� he says.

“That, coupled with low unemployment, means the economy can’t grow

rapidly.�

Some experts say the economy may do more than slow, and will in fact slip

into recession soon, which will halt corporate expansion plans and

strangle demand for commercial space of all types. “It will get much

worse before it gets better,� says James Smith, director of business

forecasting at the University of North Carolina. “In a few months, it’s

going to be negative (job) numbers. It’s obvious to me that we’re heading

for a recession.�

History shows that each time the yield curve was inverted for at least

four months during the 20th century, a recession followed in nine to 19

months, Smith says. Applying that theory to the start of the current

inverted curve — which began last July — the next recession could begin

anytime from May this year through March 2008, according to Smith.

Because real estate is a lagging economic indicator, Smith doesn’t expect

trouble for commercial real estate owners until late next year, when the

economy will already be rebounding. In 2009, he expects real estate to

regain its footing and begin to benefit from the next economic expansion.

The Federal Reserve will act to stave off recession by again lowering the

fed funds rate, predicts Dr. Rajeev Dhawan, director of economic

forecasting at Georgia State University. Dhawan is concerned about weak

job creation, and says the economy needs to create about 150,000 jobs

each month to be healthy.

Fallout in the sub-prime mortgage market will also feed into the overall

economic climate, resulting in excessive slowing that will stir the Fed

to action. “What can the Fed do? They can at least cut rates, either in

May or June,� Dhawan predicts. “They will start with a quarter point and

do it a minimum of three times.�

Diane Swonk, chief economist at Mesirow Financial in Chicago, has a more

optimistic view about the near-term outlook. Once the economy adjusts to

declines in housing and Detroit-based automotive manufacturing, the

strength of the service industries will fuel continued economic growth.

“We’re in a soft landing,� Swonk emphasizes. “We’ve got continued

strength in commercial real estate, and some comeback in non-automotive

manufacturing, so it’s a slam dunk — you get a re-acceleration in

growth.�

Based on previous real estate cycles, Swonk does expect new construction

to exert downward pressure on rents at existing properties. Just as

tenants in the 1990s favored offices pre-wired for elaborate

communications, today’s tenants will gravitate to modern,

energy-efficient space. Hotels are also in a building boom that will lead

to flattened room rates within a few years.

A real estate researcher echoes Swonk’s belief that commercial real

estate will suffer some non-crippling effects from the slowed job market,

but will benefit from continued moderate economic growth. “Certainly, the

slowdown will impact the demand for commercial real estate, which is why

we’re calling for absorption to decline 20% to 40% this year among the

major property types,� says Josh Scoville, director of strategic research

at Boston-based Property & Portfolio Research.

“The good news is that unemployment remains quite low,� Scoville adds,

“and that is spurring renewed wage growth, which should prevent the

economy from dipping into an outright recession.�
THIS ARTICLE WAS PUBLISHED BY NATIONAL REAL ESTATE INVESTOR

The article below discusses the differences between triple net (NNN) leases and other types of leases.  There are a few points in this article where I disagree with the authors. 
 1. Under many full service gross leases the landlord pays for everything including taxes,  insurance, maintenance, utilities, janitorial service and management fees and the tenant pays a gross rent to reimbures the landlord for all those expenses.  This lease form is still used in many leases to government tenants. 
 2. The other points about rapid increases in net operating income (NOI) and value may not  always be accurate since many smart tenants will negotiate for a reduction in their net  rental to compensate for the increased expenses that they will be responsible for paying. It is possible in many cases that the landlord’s net income will increase with NNN leases but the increases may not be dramatic.
The Lease Structure That Generates the Most Cash for Your Commercial Property

By Yolanda Bishop and Tony and Yolanda Segura

Commercial properties are characterized through income generated by rents paid by tenants. These commercial properties can be apartment complexes, office buildings, strip malls, retail centers and medical buildings.
The more income a commercial property can produce, the more valuable it is. The true qualifying factor is the net operating income, or NOI, which is income minus operating expenses. Operating expenses include any expense that relates to the actual operations of the property. These can include taxes, utilities, maintenance, and management costs.
It used to be common for the owner to pay the property’s taxes, insurance, and utilities under a full service lease. The tenant would simply pay the rent every month, and the owner would pay the bills. This greatly cut into overall profits, as the owner was using rent income to pay the additional bills.
Savvy commercial property owners and investors soon came to realize that if the tenants are using the property, then they should have to pay for the expenses of keeping it in operation. After all, who is using the water, electricity, trash services and common areas? Not the owner, but the tenant.
Net leases became popular, instead of the full service lease, which required the lessee to pay only the taxes and insurance. The lessor would be responsible for utilities and other related operating expenses. This change in lease structure allowed more profit to stay in the hands of the owner.
Even still, owners took the lease structure one step further. In recent years, and even recent months, both young and old properties are being changed to net-net-net leases, or the triple net lease, where the lessee (tenant) is responsible for paying three of the most important operating expenses: taxes, insurance, and utilities. A true triple net lease is one in which the lessee pays all of the operating expenses, and the lessor simply receives a rent check every month.
This structure of leasing has become very popular, and many commercial properties are making the switch because it greatly decreases the overall expenses, net operating income, and makes the property higher performing and extremely more valuable. The lessors may not be happy, as they are now required to pay for the entire property, as opposed to just their living space.
So how does the lessor know how much each lessee must pay? Besides separating the utilities and having each unit’s tenant be responsible for that which he or she uses, the common expenses are divided among all the units according to the total square footage of living space. The larger the unit leased, the more they pay.
In order to put this triple net lease structure into place, and see your income drastically increase, simply put a clause in the contract that the lessee is to pay the operating expenses which will be divided on a pro-rata share, based on square footage usage. Under this lease, the tenant literally pays all common area maintenance which may include parking lot cleaning, parking lot’s electric, the lawn care, pool maintenance, and all other utilities used by the project.
If you feel that your property could better perform by implementing a triple net lease structure, then speak to your lawyer or advisor about rewriting the contracts to include the triple net lease clause. Watch your expenses drastically decrease, and your income rise quickly.

Tony Seruga, Yolanda Seruga and Yolanda Bishop of http://www.maverickrei.com specialize in commercial and investment real estate. As of May, 2006, they and their partners are managing over $600 million dollars worth of new projects.
Article Source: http://EzineArticles.com/?expert=Yolanda_Bishop