Commercial Real Estate 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.

The Bay Area real estate market has been booming since 2012, thanks to strong demand and relatively contained supply. Demand has been supported by a particularly strong local tech economy, which created wealth and high paying jobs for people in the region. This growth attracted an influx of new residents, which put strains on the supply-restricted residential real estate market and raised prices further. Homes in San Francisco are now among the most expensive in the United States, coming in at an average of $946 / sqft, compared to the US average of $128 / sqft. As it stands, the housing market is reportedly in good health, and home prices are widely expected to grow over the course of the next year. However, these prices are contingent on employment, wages, and number of units available. With a number of signs pointing to a contraction in the technology sector, a staple of the Bay Area’s economy, housing price growth may not be as strong as current predictions suggest.Real estate prices are determined by the supply and demand of housing units available. Demand can be measured, for the most part, by the size of the population in the area, the employment rate of that population, and the income of those employed. For the Bay Area real estate market, demand from Chinese investors has to be taken into consideration as well, but that’s a research project for another time. Suffice it to say that a drop in Chinese demand would negatively impact Bay Area housing prices, as well.In recent years, a rising population, rising income, and falling unemployment (rising employment) rate have driven home prices skyward. However, you can see where past economic downturns have caused bumps in unemployment and population growth, and how home prices responded. After the dot-com bubble burst in 2000, the unemployment rate jumped and population growth dropped, then plateaued. Residential real estate price growth slowed, then briefly reversed before recovering. Unemployment jumped again after the housing bubble in 2008, and population dropped as well. Residential real estate prices fell for much of 2008 and 2009, and recovered momentarily in 2010 before falling again throughout 2011. The high growth in home prices we’ve been seeing lately started in 2012.Supply, on the other hand, can be understood by looking at the number of homes on the market, and the number of new homes being constructed. I was only able to find data on the number of on-market units since 2010, but the contraction in number of units available in 2011 and 2012 coincides with the price per square foot picking up.As for units completed, the housing crisis and the subsequent fall in real estate prices is clearly reflected in the drop in units completed in 2009 to 2010. This fall in unit completion is offset by about a year from the crisis because of construction time. While the number of units built in recent years has returned to, and likely surpassed, pre-housing crisis levels, it may have only recently reached the point that it has contributed to a fall in overall housing prices.I don’t know that we’re in a bubble. I do think, however, that the San Francisco real estate sector isn’t growing at the same pace it has been since 2012. I think this slowdown in real estate may be related to a slowdown in San Francisco’s tech sector, which makes up about 13% of San Francisco’s private sector; over twice the US private sector makeup of 5.7%. A tech slowdown would have huge implications for the Bay Area’s residential real estate sector, as well as its commercial real estate sector, given that an estimated 80 to 85% of office demand in San Francisco is generated by tech companies.To start with, the number of tech-related layoffs in the Bay Area, while still low, has increased over the last few years. In fact, layoffs so far in 2016 are more than double those in the same period from last year. Job growth, while positive, has slowed from previous years as well. It experienced a particularly sharp contraction in San Francisco’s technology industry, dropping from a 10.5% annual growth rate last January to a 5.1% rate this one.This may be a result of tightening venture capital conditions, with a decreasing trend in the number of venture capital deals made as investors start to examine the mismatch between the valuation and profitability of venture-backed companies. While the amount of venture capital being invested does not seem to be decreasing, fewer companies have access to that capital. The number of Bay Area IPOs by has also slumped, from 35 in 2014 to to 26 in 2015. Half of those 26 companies exited 2015 with values below their initial price.All of this is accompanied by a marked increase in the amount of subleased office space, an early indicator of past downturns, which has jumped 46% from the Q3 2015 to this past February. 41% of the subleased space on the market was put up due to companies contracting or consolidating, and 55% of that space was put up by tech companies.I believe that, in reaction to these contractions, home price growth in San Francisco has dropped, hitting its lowest point in 4 years. March 2016 shows only a 1.3% price increase since March 2015. Compared to the 14.5% March-to-March increase the previous year, and the 18.7% increase the year before that, price increases have slowed drastically.Another source reported that March 2016 was actually the first year-on-year decrease in house prices San Francisco had seen in 4 years, with a rate of -1.8%. Whether home prices in San Francisco have begun to stagnate or fall, it seems that the high growth rates we’ve been seeing since 2012 have come to an end.Predictions for real estate performance in 2016 vary widely, though, with estimates ranging from 2.9% to 14% projected growth. The mean of the predictions I was able to find was 6.2%. This is rather close to the average 6.6% annual growth trend the San Francisco housing market has been experiencing since the 1940s.Given the data we have on year-on-year housing price growth so far in 2016 (February’s 2.6% and March’s 1.3%), I think these estimates are a little too optimistic. Below is a chart of 2015’s and 2016’s price growth so far, with the current 2016 predictions on the right-hand side.Over the next few years, if the current tech slowdown continues, both residential and commercial real estate prices in the San Francisco Bay Area will either stagnate or slightly decrease. If funding activity improves, or more tech companies prove their profitability, a pickup in wages and/or employment growth could boost real estate price growth, though likely at a lower level than 2012-2015. A substantial decrease in home prices is unlikely, given the magnitude of change in wages, employment, or housing units necessary to effect that change. For instance, according to Eric Fisher’s model, a price decrease of two thirds would require “a 53% increase in the housing supply (200,000 new units), or an 44% drop in CPI-adjusted salaries, or an 51% drop in employment”. So, I would posit that real estate in the San Francisco Bay Area will remain steady or slightly decrease over the next few years, with potential for higher growth if tech gains speed again, and a relatively low potential for catastrophic failure.

Don’t make the mistake which many non-experts in real estate investing make: namely, don’t think that real estate investing is all about investing in residential real estate.To the contrary, investing in commercial real estate for rent can be an equally profitable or even more lucrative real estate investment strategy. As a real estate investor striving for success, you should keep your mind open and explore all available options to make money through real estate investments, whether through residential properties or commercial properties.How Commercial Real Estate for Rent Makes Money for Investors1. Rental IncomeAfter all, commercial real estate for rent is commercial real estate properties which you build or buy with the purpose of renting out to tenants. In this sense, it is not much different from residential rental properties. The only major difference is your tenants. With residential real estate for rent, your tenants are people who want to live in your investment property. With commercial real estate for rent, your tenants are businesses which want to obtain from you offices, retail space, storage place, parking spaces, or any combination of those. You make money from renting out your commercial income property, so you should make sure to choose a strategic location (where businesses want to be located) and to choose good tenants (businesses which will be paying their monthly rent regularly and in full).2. Real Estate AppreciationSimilar to residential rental properties, commercial real estate for rent also experiences real estate appreciation over time. Indeed, commercial real estate properties can undergo much stronger and faster appreciation than homes if their location becomes a new industrial, commercial, or trade hub. Thus, commercial real estate investors should choose the location for their commercial income properties carefully by analyzing both current traffic and future prospects for development and growth. After all, appreciation is the way to make big money in real estate investing and become a real estate tycoon.How to Make Even More Money with Commercial Real Estate for RentWhile commercial real estate for rent could be making you relatively passive income through rental income and real estate appreciation, there are certain things that you as a commercial real estate investor can do to boost your rental income.1. Optimize the Rental Space UseThe first way to boost your commercial rental income is to optimize the use of rental space within your commercial property. In case you are buying a commercial building which has not been finalized yet, you can divide the interior space in a smart way to create as many offices and stores as possible and reasonable. Optimize the parking spaces too. Don’t make them too small and thus uncomfortable, but do not leave them too spacious either. In this way, you can secure that each office gets a parking slop, for which you can charge in your rent.2. Provide Additional Parking SpacesActually with commercial real estate for rent, you don’t have to offer parking spaces to each and every tenant. You can decide to keep the parking spaces separately, and rent them out as independent units. You can rent them out on daily or monthly basis to either the businesses in your commercial property or other individuals. This is definitely a smart and fully legal way to make extra money from your commercial real estate property.3. Offer Additional ServicesIn addition to renting out offices with or without parking spaces, there are other services which you can decide to offer for your commercial real estate for rent and charge additionally for them. For example, you can include (for a fee) or exclude trash removal from the lease contract. You can provide maintenance (for a fee) for your commercial income property or leave tenants take care of this. For any additional service that you decide to offer optionally, you are able to charge your business tenants a bit more rent. These small incremental increases can lead to a large boost to your monthly rental income if you have a large number of commercial units for rent.4. Provide Advertising SpaceThe large difference between residential real estate investing and commercial real estate for rent is that in the latter case your tenants are businesses. Similar to you as a commercial real estate investor, your tenants in the form of businesses are also looking for ways to make money. You, as a good landlord, should try to help them achieve this goal. How? By providing them with a space to advertise their business right outside their office! For a fee, of course… To do that, you can install a billboard outside your commercial property and offer it to your business tenants at a preferential rate. In case none of them is interested in advertising there, you can offer the advertising space to other businesses. They will be happy to advertise on the outside of a commercial real estate for rent as both the employees and the customers will be seeing their ad on daily basis.5. Enjoy Tax DeductionsLast but not least, don’t forget available tax deductions. Similar to residential real estate investors, commercial real estate investors can also enjoy certain tax deductions. Make sure to study the local legislation of your investment location of choice carefully to ensure that you exploit all opportunities to decrease your tax bill. To give you a small hint: You might want to invest in commercial real estate for rent as a company rather than as an individual because the corporate tax rates are generally lower than the individual tax rates.