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Investors looking forward to purchase a commercial real estate privately can make use of private equity funds allocated exclusively for them. These funds do not come under SEC rules
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Dc Fawcett Reviews – Types Of Private Equity Commercial Real Estate Funds
Introduction Types of private equity commercial real estate funds Investors looking forward to purchase a commercial real estate privately can make use of private equity funds allocated exclusively for them. These funds do not come under SEC rules. DC Fawcett Reviews throws light on the 4 investment strategies to avail private equity funds in this article. They are core, core-plus, value added and opportunistic.
Core The risk-free strategy is core and requires only low investment. In other words, it is the safest form of investment. You can buy or sell assets which have low-vacancy rates. You can get a steady cash flow and you can sell the property easily. A class building comes under this category. These investors have to make a huge capital investment initially. They are considered to be an alternative investment apart from bonds and average internal rate of return is more or less 10 percent. These properties are usually situated in cities like New York, Chicago, San Francisco, and Washington. Investors with good credit are mostly eligible. These properties are usually owned by REIT, institutional investors. When there is an economic downturn, the investor may lose his tenants.
Core-plus It has mild risk and ROI (return on investment) is higher when compared to core investing strategy, you make efficient investments and invest on stable assets. This strategy is considered when there is an improvement in the lease value and if there is a potential growth for rental properties. Light cosmetic rehab is required for these properties and investors have to choose properties that are quite appealing.
Value-added It involves moderate risk but returns are high. The investors purchase properties which will have a subsequent increase in the property value in the longer run i.e. return on investment as they need to do heavy rehab work before occupying the property. 10 to 15 percent internal rate of return can be expected. Leasing is considered to be a key factor in this strategy. With strong negotiation, you can get tenants in a competitive market. 55 percent of the investors come under this category.
Opportunistic An investment strategy involving high risk properties as well as risk-quotient is high. These properties require major renovation and rehab. The high-vacancy rate properties come under this type which may lead to no or minimal cash flow at the time of occupation. The time period of a typical asset lasts long which can be 3 to 7 years or a decade or so.
The occurrence of scam is high in these kinds of properties as sellers quote a higher price than the market value and sell off the property to first-time home buyers. New development properties are also included in this category. the remaining 45 percent of the investors use this strategy. Foreclosed homes and distressed properties come under this category. You can learn more about foreclosed homes in Dc Fawcett virtual real estate investing club.
Types of Commercial Real Estate Leases It is quiet natural to feel a bit overwhelmed if you are wading into the world of commercial leases as a newbie and this perplexity exists not only with regards to this type of lease, but by every different terms that are thrown about.DC Fawcett Real Estate Having said all that, as a matter of fact, they are not as intimidating as they sound, this piece of writing will decode all of them for your easy understanding. So, without further ado, let us get into them.
The gross lease- Often used and associated with single tenant, multi-tenant office buildings, they are also applicable for industrial and retail properties, most importantly for those with seasonal income fluctuations. With a better percentage lease, it allows their rent to rise and fall with income. Fixed rents are collected by the landlords and the expenditures are paid out of them. Seeing that the costs add to, over time, the gross and full-service leases will contain escalation clauses that amplify over time to counterbalance tax increases and high costs involved in insurance, maintenance, and other miscellaneous expenses. As a leaseholder or tenant, one should clearly understand the escalation clause to project rent expense into the future.
The triple net lease- Classified under the category of turnkey investment, in this lease structure the occupant is responsible for paying all operating expenses related to a real estate property. In order to have a better understanding of triple net (NNN) lease, a clear understanding of the spectrum of commercial real estate leases is required. In general, all commercial real estate leases fall somewhere along a range either with absolute net leases or absolute gross leases, anything which falls between the two is known as hybrid lease.
The modified net lease- The modified net lease has found the middle ground between the gross lease and the triple net. The landlord and occupant usually set up a split of the janitorial expenses along with the maintenance which exists in a different form, while the occupant agrees to pay taxes and insurance. In this type of lease, utilities would also be negotiated. Often popular with in dustrial, retail or multi-tenant office properties, this lease type is highly flexible which makes things easier between the tenant and the landlord.
Conclusion Other investment strategies used are corporate and security. From the review, we infer that most of the investors should use core or core-plus investment strategies to stay safe. The investor should understand the risk involved and concentrate on return on investment.
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