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TICs: Tenant in Common risks and rewards

TIC-tenant in common There have been many articles recently on TICs.  First, what is a tenant in common (TIC)?  A TIC is a tax structure that allows investors to pool their funds with other investors to purchase real estate.  For…

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Hard Money Commercial Lending

Hard Money Commercial LendingI’m commonly asked about hard money commercial lending.Many folks are confused about what it is, how it is different than traditional lending and resources available for borrowers/brokers.Fairview Commercial Lending specializes in hard money commercial loans.The loans are…

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Lehman Bankruptcy impact on commercial lending

Many people are wondering what impact the bankruptcy filing by Lehman brothers has on commercial lending.  Lehman Brothers was a large player in commercial real estate lending.  Up to about 12 months ago their small balance commercial lending program was…

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Offshore Drilling: Impact on Commercial real estate

Offshore Drilling: Impact on Commercial real estate

It appears that anyone that is asked has an opinion on whether we should drill off the coasts of California and Florida. The current administration feels that it would reduce the price of oil in the near term. Unfortunately this is not necessarily a true statement. Each location would take at a minimum 10 years to develop before the first drop of oil ever comes out of the ground. The price of gas might be reduced a very nominal amount if at all.

Regardless of one’s opinion on whether we should drill for oil offshore, it is important to look at the impacts to the communities near where the drilling would take place. For this analysis, I am going to strictly focus on Florida. According to the various sources, including recent articles in the Houston Chronicle and the Denver Post small oil spill have been relatively common in the last 30 years.

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1031 Exchange Risks

Before delving into the risks of a 1031 exchange, it is important to define at a very high level what a 1031 is. A 1031 exchange allows individuals who sell an investment property to use the proceeds from the sale to invest in another “like” property. The 1031 exchange allows property owners to defer their capital gains tax liability. The purchase of a like kind property must occur within 180 days.

Although the definition above sounds simple there are a number of considerations to keep in mind before engaging in a 1031 transaction. Ensure that you fully understand the rules associated with this type of exchange. Details can be found at www.irs.gov. One requirement of all 1031 exchanges is that an intermediary be used. Once a property is sold, money is placed with this intermediary until a like kind property can be located and closed on. Intermediaries are unregulated and the funds held by them are not FDIC insured like a traditional deposit at a bank. As a result a number of bad apples have crept into the intermediary business. A Denver Post article reports that in the past year “Three hundred and thirty investors nationwide including 80 in Colorado, lost 132 million when qualified intermediaries absconded with their money.”


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Hard Money Lawsuits

As I’ve mentioned in several articles on our Hard Money Commercial Lending Resources Page, there are a number of items that brokers/borrowers need to be mindful of before engaging in a commercial lending transaction. The number one tip is: Be wary of large upfront fees. A recent article in the Wall Street Journal further highlighted this advice. The article titled: U.S., States probe real estate loan broker (www.wsj.com 6/25/08 p:A3) discusses how “the advance fee plan has cost borrowers millions”. This article highlights an all too common problem within the commercial lending arena.

Two firms are being probed by the FBI and SEC (Bluestone Capital and Remington Financial Group). The California department of corporations is also investigating Landbridge equity. These firms are accused of taking large upfront fees with the intention of “not seriously pursuing financing”. Unfortunately a substantial number of borrowers have likely lost millions as a result of the “advance fee” plan that these three companies have utilized.

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Oil Price Spikes Impact On Commercial Real Estate

Possible Impact Of Offshore Drillings On Commercial Real Estate Values

I’m often asked how commercial real estate has been impacted by the recent spike in oil prices. With the recent rises in gas, ripple effects can be felt throughout the commercial property sector. For this blog, I will focus on one group that has been impacted: the retail strip mall. During the last five years a plethora of small/midsize strip malls were constructed. Many of these strip malls were finance or purchased based on a very low cap rate (5-7%) and very high $/ft rental rates.

As gas prices have increased many of the smaller tenants are struggling and unable to afford the high initial rents. As a result many are moving to lower rent centers or renegotiating their current rents. This trend has accelerated as gas prices have continued to rise.

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