Agreement For The Sale Of Commercial Real Estate: Fill & Download for Free

The Commercial real estate agents receive compensation, which is also known as commission, that directory connects with the sale of property. The commission is specified in the agreement b/w the buyers and the real estate agents when the property is placed.The Estate agents invest their time, money in the marketing the property in the hope to get the best property deal and a succeeding commission.

Before answering your question, it’s important to ask ourselves a few other questions first:What are the options available?What are the pros and cons of each option?How to choose the right one?In another question I talked about the different types of return a Real Estate Investor might be focusing on. I mentioned Capital Gain, Cashflow, or steady growth through a mix of the two. Now let’s drill a little deeper into that concept and discuss in general the different ways someone might invest in real estate.The Best WayThe first thing is I am not going to tell you what the best way is. Simply because the best way for me and the best way for you will be different, based on the markets we’re exposed to, our individual equity levels, and expertise.Instead we will talk about the different types of investment and what the pros and cons are for each. Hopefully then you will be equipped to make a decision around what’s best for you. It will be a shallow dive into each topic, and you can investigate each in more detail by yourself and keep an eye on my future answers here on Quora.Rental PropertiesWe’ll start with the straight-forward stuff, and gradually get more complicated.The fundamental unit of property investment is buying rental properties. But even that can be opened up into a number of different categories for the different types of properties you can purchase – residential, commercial, industrial etc. We will try to break them down and keep it simple.Residential Properties – The loans for these properties tend to be at reasonable rates, which makes the investment affordable. Also, the asset is recognizable. You don’t need to be a property valuer to understand whether it’s a good purchase or not. It’s familiar. They also represent a solid long term investment due to the general trend for residential property to appreciate in value.The leases tend to be short term, however which is a threat to cashflow, and in general these investments are not cashflow positive. It’s great if you can get it there, but generally these are long term, high touch investments. Tenants are high maintenance. They break things, and expect you to fix them, and if they lose their job, there are material legal challenges in evicting them, not to mention the risk of malicious damage if you do. The real payout comes at the end of the investment when you sell the asset and realise the capital gain.Commercial Properties: Commercial property loans are more expensive, both in rates and fees. The general investor is not going to be as familiar with the property, so they may need some expert advice to determine if it is a good investment or not. Also, most Banks will require a larger down payment to facilitate the loan.However, the leases are generally long term, 5-10 years with options usually, with rental adjustments (either by fixed amount or by market assessment) scheduled into the agreement and agreed to be both parties at the beginning. And despite the higher cost, commercial property investments are generally cashflow positive. The additional revenue allows you to comfortably engage a property manager to mitigate tenancy risk. Overall from a cashflow perspective, if you have the additional capital, an investment in a commercial property is a good choice.Mixed Use Properties: You will have seen these around. They consist of a shop on the ground floor and a unit on the top floor, or in the back. The shop owner lives and operates their business from the premises.Most Banks will consider this to be a commercial property, and will want to charge accordingly, but if you have a good mortgage broker they may be able to find an exception to that rule. The rental return is slightly better than a pure residential property, but not as good on a per square foot basis as a commercial property.The leases will be shorter as well, usually matching a residential lease, but a business owner is going to be reluctant to move so continuity is built in if the business thrives. If the business fails you can shuffle the tenant off at the end of the lease and find another one - maybe.While this seems like a solid compromise between the other two types, these properties have a limited resale market, so capital appreciation is not as good as either of the others on their own. Also, there is limited rental appeal for them as well, so vacancy risk is slightly higher.This is a reasonably specialized investment, and you would want to research the local market comprehensively before entering into a purchase like this.Unit DevelopmentAnother foundation method of property investment is unit development, and there are a number of characteristics involved in this option as well.This generally involves construction of either residential, commercial or mixed used units from a block of vacant land. The land was either vacant because you knocked down what was there previously (this is sometimes referred to as Infill Unit Development), or because a land developer has prepared it for you.The risks associated with these types of investment are mostly around timeframes, and therefore costs. You start with the vacant land and potentially a builder, but no firm timeframe around when rental income is going to become available, or when the sales will be finalised if that’s the methodology you are using. You have estimates, but it is very important you factor in cost and time contingencies when planning these projects. What happens when the builder takes too long and spends too much to complete the units?Some Banks will want pre-sales in order to provide finance, which can impact on your potential return, particularly when the market is growing. Pre-sales requires you to sell a portion of the development (for example 2 of the 4 units) before you commence construction. This way the Bank will be confident their funds will be returned. A pre-sale however is always sought at a discount.These two elements combined mean when it comes time to realize the capital gain at the end of the construction, the margins you anticipated at the outset might be compressed.Additionally if market conditions move during the course of the construction project, you can potentially be exposed to resale risk as well. You might have conservatively anticipated sales of $400,000 per unit, but due to a poor election result end up struggling to sell the units at $350,000. Your $80,000 return per unit has become $30,000 in a heartbeat and there is little you can do to mitigate this.One of the benefits of this type of investment however is the potential to mix the return method out of it. Build 4 units, sell 2 to reduce debt and rent 2 out.Land DevelopmentThis type of property investment involves taking a large parcel of land and turning it into residential or commercial lots. There is a high level of civil engineering and planning expertise required with this method. Approvals through local government can be time-consuming and will often involve unreasonable conditions (such as improving roads leading to and away from the developed area, or large areas of Public Open Space which deliver nil revenue in the long run).There are large sums of capital required to entertain this style of investment, and it is best handled in a syndicated manner, where a number of investors come together to pool their resources in support of the venture. This has the effect of spreading the risk, but also dilutes your individual return.Once again, resale risk is material, and the timeframes around when the returns become available are fluid, making it difficult to forecast project returns accurately. There can be good news stories out of this however, with a conservative plan laden with contingencies turns out to be too conservative and everyone makes more than they anticipated, but I would suggest these are rare overall.Land BankingThis is an even more basic form of property development. It involves purchasing large parcels of land and holding onto them for long periods of time. At the end of this indefinitely long period the land becomes something a Land Developer may want to purchase from you, or potentially partner with you in developing.Banks in general have a severe dislike of this type of investment. They are extremely risky and the timeframes around realization of the asset are rubbery at best, and fanciful at worst.This makes the investment highly capital intensive. With Banks being reluctant to lend against these types of assets, the down payment required is usually 60-70% of the purchase price. There is generally no revenue from the site to cover the interest repayments, so the investor will need to have another income source to manage that, or a substantial amount of additional capital that can be injected when needed.Land Banked properties can be difficult to sell if the market is not ready, and the investment needs to be considered to have a lifespan of multiple years.That being said the returns can be phenomenal if you can manage the risks. I have heard stories of a land banker who purchased a large parcel of coastal land for $10,000, and 30 years later realized it for $10,000,000.So Seriously, What’s the Best One?Like most investment strategies, being able to spread your risk is highly important, which means the best way of investing in property might well be a mix of two, three, or all of these options. Maybe buy a rental property, and a commercial property. Then some vacant land for a 4 unit development. Throw some of the return from this investment into a syndicate that is developing more land, or maybe a Land Banker waiting for an opportunity to develop in 3, 4, or 5 years.But everyone needs to start somewhere. And everyone needs something to aspire to. Maybe if you consider the different types of property investment options available you will have found something at both ends of that spectrum.

Real Estate Regulatory Authority (RERA) bill was passed on 2013 by Indian National Congress and got approved in March 2016 for 13 states and union territories.Image source(ATIREM)Here are the list of states and union territories where RERA act have been notified.Andhra PradeshBiharGujaratKeralaMaharashtraOdishaUttar PradeshChhattisgarhAndaman & Nicobar IslandsChandigarhDadra & Nager HaveliDaman & DiuDelhiLakshadweepTamilnadu and few other states have also framed their draft rules of RERAWhy RERA:There is a great need for homes in India. Most of the people face great loss in real estate due to fake promises made by few real estate builders. It is the one of the greatest revenue for the Indian government. As government failed to observe these many people has become victims. To eradicate this problem government has passed RERA to protect homebuyers.Some of the problems faced by people are:Delay in giving the house to the buyers due to some reasons like delayed funding etc.Selling of same flat/house to multiple buyersContracts made in favor of builders alone.Benefits of buyers from RERA :The buyers will pay only for the carpet area (area within the walls), not for the built up area.For years buyers have to pay 20% of the total amount for booking. But with RERA buyers can pay only 10% of the amount that too paid only after the agreement for sale is made by the builder. Builders have to maintain a separate bank account for each project.The builder should rectify the structural defects if any for 5 years (earlier it was 2 years) after the possession is handed to the buyer. The defect must be corrected within 30 days of the complaint. We, at Cityrene builders, use GFRG to prevent the damages like cracks, water seepage in the building.Buyer has the rights to know the project plan in detail and also to know each stage of completion.Developers have to deposit 70% of the money in a separate bank account to meet the cost requirement of the project. Also, the buyers will give cost for the project at each stage of construction instead of getting total money of the project.RERA is mandatory for all commercial and residential projects, which are more than 500 sq.m. or 8 apartments must be registered before starting the project.Developers can sell the project only after the clearances.Website owned by the builders is registered to ensure correct information about details of the development plans, financial details, plan details, registered agents and consultants etc.Builders have to pay a penalty of 10% or even imprisonment in-case of not honouring the commitment made by them.Builders have to register each project with the local housing regulatory body. The builders or the developers have to submit building plans, approvals.During the process of construction if there is any change in the plan, should be informed and approval before making the changes.How builders can be benefited by RERA:Builders can impose penalty to the buyers for not paying dues on time.Builders can approach the authority in-case of any issues with the buyers.Conclusion:Establishment of RERA act will enhance the real estate market in India; will bring the buyers confident back on the builders. This act will also reduce the fake real estate buyers. While buying a property builders should ask the builders for their approvals and certifications of RERA and can confidently approach the builder. If anything goes wrong in the future buyers can approach the authority.Check our other blogs here.