Commercial Real Estate Purchase Contract: Fill & Download for Free

I started at 19, forty years ago, when my wife and I bought our first townhouse. It cost around $48K if I recall. We lived in it for seven months and sold it for a $7K net profit.We moved and built a house. We sold that and built another house. In the mean time, we had invested in five acres on a major Austin highway, but way out of town. (We held that property a little over thirty years before we decided to sell it. By then, the town had grown out to where our land was. The property was worth approximately sixty-eight times what we had paid for it).We sold the house that we were living in, had raised our children in, and loved dearly. It was the perfect house for us, but we sold it, took the profits, put the minimum down on another home to live in, and started buying investment properties.Before long we were buying commercial properties to add to our rent houses. Then we started selling off our residential units to acquire more commercial properties.Now we pretty much just invest in commercial units. We bought a small shopping center in San Antonio, about 75 miles away, a few months ago. That was our most recent purchase.We are currently trying to buy out the last remaining tenant’s lease on one of the other properties that we own. That should cost us somewhere between $270K to $400K, I hope. Once that is accomplished, and that tenant has moved, we can begin construction on a fifty-million-dollar 253-unit luxury apartment community with 5,000’ of high-end retail.It all started with a thousand-dollar down payment… forty years ago.---------Update: I ended up offering my last remaining tenant (a public company) $750,000 just to move out of the space they were in. They refused. It looks like I'm stuck with them for another six and a half years. I was really hoping to build that larger project in their space. I may end up just building above them and around them. It won't be as beautiful a building as I had hoped, but it also will feel alright to not have to pay them $750K just to move out. We used a standard Texas Commercial lease instead of my regular lease contracts and now I'm regretting that decision. Things can change so fast when you are working with real estate deals, but it's all good. They will end up paying me a little under another million dollars in rent during that time and the property will likely double in value during the next six years.

This question was first asked in August 2013, almost three years ago - more time for bubbles to grow. We haven’t yet had positive confirmation of a bubble bursting.I was knee deep in the commercial mortgage backed securities industry in 2007 and there were a number of indicators that something was amiss:Prices paid for real estate started to not make any sense. I recall a London office building that was sold around 2006–7 at a yield that was 1–1.5% below interest rates (to be clear, typically there is a interest rate-property yield spread. By borrowing, levered equity returns are higher than if property was bought with 100% equity. But when the spread between property yields and interest rates reverse, it implies that the real estate is not the best application of capital.)Buyers of commercial real estate were selling their properties for more than they paid within 12 months of purchasing them. No change had happened with the properties except that there was one less year on the leases (shorter remaining lease lengths, to be clear, would normally mean the property was less valuable).Over a 3 year period, buyers of commercial real estate evolved from experienced active asset managers to less experienced, financial engineers who were making money on the interest rate-property yield spread and flipping commercial real estate.New lenders entered the property finance market (to be clear, new lenders without experience in the property finance market).Pricing on real estate loans started to contract (I should clarify, I mean the spreads the lenders were making. Underlying interest rates were starting to rise, but the increases weren’t always passed onto borrowers. Borrowers maintained the pressure on pricing and squeezed lenders).Increased movement of people - whole teams were starting to move.Increased M&A activity as institutions started to struggle, their share prices started to fall, and they became acquisition targets.There are some behaviours in at least two markets that would indicate bubbles building.US Technology Venture CapitalSome people have been attempting to predict which “unicorn” startups will die. In June 2015, Andreesen Horowitz published a presentation arguing there is no bubble (in my opinion, that is reminiscent of management saying there will not be any layoffs after a merger). Although venture capital funds raised record amounts at the start of 2016 (WSJ paywall), startup investment in leading US cities is slowing. This could be interpreted as a sign of VCs stocking up their war chests and preparing for slower paced capital deployment. In February 2016, Fidelity Investments marked down the valuations of a number of its private investments in technology companies.Tech company valuations started to not make sense in recent years.New investor entrants to the US tech market including non-accredited investors (new crowdfunding legislation in Canada and US) and investors from Asia.A number of tech startups have announced the cessation of their operations.Chinese EconomyThere has been a rapid flight of capital from China into businesses in North America. It is also pouring into real estate, causing property prices to no longer make any sense relative to traditional analysis of fundamentals.Prices of residential real estate in San Francisco and Vancouver, cities on the west coast of North America that are easily accessible from China, have sky-rocketed. In Vancouver, prices have decoupled from average earnings and rents. (Detached residential real estate in Vancouver, and I’m sure in other markets as well, is now a store of value, making it very difficult for the average person to buy a detached, single family home. But this answer isn’t commentary on the Vancouver real estate market. Instead I mention unrealistic real estate prices as an indicator of a potential bubble in the Chinese economy).There are likely other bubbles building, such as consumer credit and country level economic growth, but the above two have the most obvious indicators in my opinion and are happening right on my doorstep.

I assume with “real estate” you mean: buy or rent out condo’s, homes, commercial buildings, etc.First mistake: not to have a tolerance for mistakes… and therefore not start buying real estate. Making a mistake is common for us humans. However, repairing, recovering and overcoming your mistakes is the real entrepreneurial spirit you need if you start in this business!There are many things can wrong with real estate purchases, for example:They buyer didn’t do a proper inspection yourself, or trust a person that was not capable enough. After purchase issues come up, such as: problems with foundation, roof, chimney, wiring, plumbing, positive tests for lead-based paint, asbestos or another major component of the real estate (check this template: Buyer's Property Inspection Report).After inspection is performed, and the inspector finds a significant problem which requires an expert for a second opinion. And no expert could be arranged before the buyer’s termination-option deadline.During the final walkthrough, the buyer finds new defects or unfinished repairs.The buyer has difficulty qualifying for a loan.The seller tries to stop the progress of the deal and do not want to enter into an agreement anymore with the buyer, because another buyer offered a higher price.The buyer cancels the purchase because he gets cold feet or he/she may have found a nicer real estate to purchase.The real estate owner(s) are quarreling (divorce) and not really want to sell at all.There could be a problem in the ownership title creating an issue to close the purchase in a timely manner or according to the agreement.A major personal issue between the real estate owner and the buyer.A deposit may not have come in on timeThe real estate sustains damage caused by fire or flood before the closing happens.The loan commitment could be very bad and the question could come up that the commitment is not sufficient.Issues with the purchase contract, for example if the wrong location is mentioned.The buyer moves in (on a temporary lease) prior to closing and causes damage to the real estate.The seller stays in the real estate after closing (on a temporary lease agreement before he/she finds another place) and causes damage to the real estate (consider this issue when making a purchase contract: Proposal to Purchase Real Estate).The real estate may not rise in value.The real estate appraisal comes in lower than the paid purchase price.In the end, the agreements made regarding the purchase for buying and selling real estate become something of a matter of good faith, due diligence and relative trust between all stakeholders involved.Source: Top 15 mistakes or issues happening in the real estate business!