Brian Fielding Discusses Where to Get Financing for Commercial Real Estate Investment

Feb 12, 2015 by

Picture of a man holding the keys to a house being given on rent

Brian Fielding explains that there is just more to the credit rating of your tenants that you should know.

Brian Fielding has been in the commercial, office, industrial and retail property management industry for over 40 years. One of the biggest questions that potential investors oftentimes have is where they can get financing for their investment ventures. In order to help investors, commercial real estate advisor Brian Fielding is revealing these tips.

Choose tenants carefully. Unless the investor has a credit score well into the 700s, commercial lenders will be looking to the quality of the tenant, the term of the lease and the demographics of the market. If an investor has found a really good location and signed on a national (or even a strong regional) tenant, lenders will be likely to lend anywhere from 50 – 75 percent of the purchase. Of course, it helps if the investor can show that they have been prudent in their personal finances, but over time the investor’s track record of successes can enable them to borrow on a non-secured or partially secured basis, shares Brian Fielding.

Bring in other investors so that the upfront contribution to the purchase merits consideration by more than one lender.

The more capital that the investor can raise, the more able they will be to establish the sort of credibility that lenders are “comfortable” with,explains commercial real estate advisor Brian Fielding. When starting out, investors are unlikely to be able to obtain sufficient financing to pursue more than one or two properties at a time. Lenders want to see a track record of success and repayment and by limiting the investor’s leverage (the amount of borrowing divided by the equity), the investor can quickly establish their credentials as a prudent, cautious and creditworthy investor.

Consider the alternatives.

It is important to use whatever assets the investor has prudently. Investing in real estate, as with any other venture, should be done with funds that an investor can afford to lose and not change the investor or their family’s lifestyle. As the investor demonstrates their proficiency, speaking with their family and friends about the investor’s ideas to try to show them they have, indeed, become an expert in their target market. Many investors seek loans from peer-to-peer lending sites, and from private investors, but the best resources are those people who know the investor best. Just make certain that they also limit their investment to capital that they can also afford to lose.

Think about seeking financing from smaller lenders.

It is advisable to not start the search for financing at a large bank since they are likely to have less flexibility and may be somewhat less understanding and accommodating than a neighborhood bank, or local credit union. Some investors plan for their future financing needs and open accounts at their hometown bank. It is important to always do some homework on the broker and financial institution that the investor goes to.

For more information about these and other topics, visit commercial real estate advisor Brian Fielding’s website at http://brianfielding.com.

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Brian Fielding Shares How to Get Started in Commercial Real Estate Investing

Feb 9, 2015 by

Business Commercial Real Estate

Commercial real estate advisor Brian Fielding knows that oftentimes people are more likely to invest in residential real estate because it is something with which they are more familiar. They own a home, and they know what it takes to keep up a home, approximate the taxes, and be more aware of local laws and regulations when buying, selling or adding onto a residential property. However, commercial real estate advisor Brian Fielding has been quoted numerous times saying that savvy investors often find that commercial real estate is the way to go for both short- and long-term financial gains.

There are several things that investors need to know about commercial real estate, but with some time and effort, everyone can learn the ins and outs very quickly and enjoy the many benefits of commercial real estate ownership.

1. The benefits of commercial real estate.

There is a wide range of benefits that come along with investing in commercial real estate. For one, it helps to diversify an investor’s risk in their real estate and overall investment portfolio. When commercial real estate owners lose one or two tenants out of the ten tenants in the building, the owner only loses 10-20% of their income, as opposed to losing a renter in a residential piece of real estate, where the owner would lose all of their income. Tenant rights are also almost always much stronger for residential tenants than commercial tenants. Courts tend to be more lenient with apartment and home residents, recognizing the basic needs for personal housing.

2. Cash flow.

Commercial real estate leases tend to have longer-term commitments than what one finds in residential property investments, and often, those tenants have an established financial history.  While it is true that a local pizza parlor might have limited historical financial data, many commercial tenants are extremely strong and their credit can be financeable. Indeed, if the tenant has a good Moody’s rating, investors will find that lenders will be more than willing to lend monies on the basis of their term. For example, if the investor has a very creditworthy tenant with a 20-year lease commitment, lenders will often tailor their terms to that period of time, allowing the investor to leverage their investment heavily.

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Essential Commercial Real Estate Terms Shared by Brian Fielding

Feb 3, 2015 by

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Before getting involved in the commercial real estate market, Brian Fielding believes that it is essential investors take the time to learn all that they can about the market. While commercial real estate can be a great investment, it is important that no one goes into the market blind, and the more that each investor knows, the easier it will be for them to be able to make smart decisions about how and when to invest and which properties to choose. To help these new investors, Brian Fielding offers understanding about common industry terms and how they are used.

  1. Cash on Cash: This term refers to the relationship between the return annually on a property and the investment first made on the property. By diving the income on the property each year by the amount of the investment on the property, this number can be determined. This number can be used to compare competing or similar properties to determine their performance.
  2. NOI: Also known as the Net Operating Income, a positive NOI indicates that a property’s annual income is actually profitable. A negative NOI means that the property is losing money. To find the NOI of a property, Brian Fielding shares that the operating costs for a year must be subtracted from the total income on the property for a year. The resulting number will be positive or negative and reveal whether the property is profitable.
  3. Capitalization Rate: This number will show the value of a property and can help determine future profits that the property may produce. Brian Fielding shares that this number can be found by dividing the income of the property by its total value. This method works for properties that are regularly producing an income for the investor.
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Why Commercial Real Estate is a Wise Investment According to Brian Fielding

Dec 30, 2014 by

Brian Fielding real estate advisor

Brian Fielding, an expert in the field of commercial real estate, wants to ensure that investors interested in commercial real estate are making expert decisions about their investments. He knows that commercial real estate is a safe investment and a wise choice over residential real estate for a number of reasons. With the New Year approaching and investors looking for investments that will ensure a return and Brian Fielding recommends considering commercial real estate and the following advantages that it offers.

  1. Set operation hours: Investors who purchase residential real estate to rent may find that their hours will vary depending on the renters. The commitment to the tenant means that they will have to be on the tenants’ schedule, which usually means evening and weekend hours. In contrast, Brian Fielding points out that when you own and operate a commercial property, you will be more likely to have tenants address needs during their office hours, making it easier and more convenient to be aware of and fulfill these needs.
  2. Higher earnings: Because of a number of factors, such as the higher number of quality retail and commercial tenants, and the fact that commercial real estate tends to be more easily financed, commercial properties generally see a greater annual return than residential properties do. There are of course factors in all kind of real estate that will determine the return on the investment, but Brian Fielding believes that these factors of commercial real estate make it a more promising and a safer investment than residential real estate.
  3. Easy price evaluation: When purchasing a piece of real estate, another advantage of commercial real estate is revealed. Brian Fielding reveals that this advantage is the easy price evaluation that is associated with commercial real estate. While residential real estate may depend on sentimental factors that will mask the actual value of the property. Commercial real estate however is easily determined by the operating income and a comparison to like properties and their value.
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Brian Fielding Informs Commercial Real Estate Investors this Fall of Best Practices

Nov 20, 2014 by

Calculating Market Risk with Mathematical formula

Real Estate Investment Options Comparison is Imperative according to Brian Fielding

Brian Fielding of Fielding Investments shares that there are many different resources for those who are interested in commercial real estate investment. However, these resources oftentimes have conflicting information, or are written by individuals who do not have the 40 years of experience that commercial real estate advisor Brian Fielding does. In order to assist these individuals with their efforts in the industry, Mr. Fielding is sharing some of his best practices.

Consider multiple facets of commercial real estate investment.

Brian Fielding shares that one of the most unique and attractive aspects of commercial real estate investment is the fact that there are many different arms of the industry. There is much more to commercial real estate than residential investments. Commercial real estate also includes mobile home parks, office buildings, land development, industrial space and so much more. While Brian Fielding suggests becoming a master at one of these areas before moving on to another one, investors are advised not to limit themselves to just residential offerings, and are encouraged to explore the other types of commercial real estate investment.

Knowing formula is essential.

Commercial real estate investment involves a lot of math. From formulas to determine how much an investor can potentially make on a property, to formulas such as ROI, Cap Rate and IRR, Brian Fielding shares that a successful commercial real estate investor is very well-versed in the math and equations that permeate the industry. These formulas allow the investor to grasp the true value of their investment, and these terms are extremely common. Brian Fielding suggests that anyone looking to invest in commercial real estate become familiar with these terms, so that they are knowledgeable and build credibility with lenders, brokers and other professionals who will be on the look out for how much knowledge they posses.

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Understanding Different Types of Leases from Brian Fielding

Oct 7, 2014 by

When considering investing in commercial real estate, Brian Fielding of Fielding Investments and Fielding Companies knows that there are many things to consider. One of the biggest factors of a great commercial real estate investment is the type of lease that tenants will sign. Here, this commercial real estate advisor gives a quick overview of the four most common types of leases: Gross Lease, Single-Net Lease, Double-Net Lease and Triple-Net Lease. He gives some bullet points about what each lease and how it can benefit you, the investor.

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Q and A: Brian Fielding Discusses Short-Term Financing and “Flipping” Assets

Sep 12, 2014 by

Hello Mr. F.

My wife and I have been doing some diligence on commercial real estate investment and found one site online that suggested that most investors buy net leased properties with short term financing and then “flip” those assets as the loan matures. We have really enjoyed reading your stories and blog and see no reference to that sort of investing. Is there a reason you haven’t written about this sort of investment strategy? I hope you can answer our question … we are getting very excited about venturing into real estate investing.

Mr. and Mrs. Robert S – Biloxi, Miss.

 

Dear Mr. and Mrs. S,

Your question is one that has been coming across my desk very recently and I appreciate your writing me.

There are persons who make money in a great many ways and there certainly are those persons who can “time a market” … buying low and selling high, but for every success we believe there is a less spoken story of failure. That is not to suggest that buying an investment with a relatively short term mortgage is a bad practice, but we avoid doing so because there are too many variables that would concern us in a relatively short “hold” of an investment.

First there is the obvious … the concern that the property that pretty much needs to be sold could hit the market at the wrong time. In the past ten years we have seen some dramatic shifts in the economy in general and in some cases to an even greater extent in the commercial real estate pricing. If you are lucky, or perhaps really prescient, you might buy a property at its nadir and sell at the height of the market. But if you time it incorrectly, you could face a severe economic loss – forced to sell a few months or years before the market fully rebounds.

The second is a tad less obvious, but of equal concern. With lenders currently required to pay out almost nothing on savings deposits, they are currently motivated to lend at remarkably low rates. But if the economy continues to rebound and the Fed starts to tighten money supply, the rate to refinance a new mortgage can rise sharply and whether it is you, or your potential buyer, that will need financing, the full cost to own your investment will be substantially higher. The net return you [or the acquirer] is often net of mortgage costs, so if rates move higher, the net income will be reduced [or disappear entirely].

In short, we believe in a strategy of acquiring solid properties with longer term leases and finance our holdings for long term appreciation, not for sale within a shorter timeframe. It does work well for some, but we feel it to be higher risk than we would want to suggest for the new investor.

Hope this helps.

Best Regards,

Brian F.

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Q and A: Capitalization Rates and Property Investment Discussed by Brian Fielding

Aug 26, 2014 by

Dear Mr. F.

Everything that I read about buying and owning commercial real estate references “Cap Rate.” What is “cap rate” and what is its importance to the investor?

 

Dear Dean,

Thanks for writing me and for authoring such a good question. The actual term is capitalization rate but mostly everyone uses the abbreviation. It is a standardized valuation method using the ratio of Net income to selling price. By way of example, consider an investment that is netting [after all expenses] $10,000 and is available for sale at $200,000. A prospective investor would calculate the property by dividing the net return [$20,000] by the sales price [$200,000] and compute that the prospective cap rate is 5%!

Cap rate is a simple tool to measure return and to compare properties against each other. Generally the difference in cap rate between similar properties will be explained by differing inherent risk of the tenancies and the term remaining on the underlying leases.

As an investor, you can use Cap Rate to compare your intended acquisition to others that have occurred in that market. You can also follow trends within that marketplace, perhaps giving you a sense of where investment properties are headed in the future.

A quick warning, however … cap rate is best when used for comparing consistent cash flow and is thus highly emphasized in offerings such as net leased investments and rarely used where rents fluctuate greatly and there is a high risk for tenant turnover.

I hope this helps get you started. Please let us know how your efforts to become financially independent progress.

 

Brian Fielding

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Brian Fielding Discusses the Popularity of Net-Leased Properties

Jul 25, 2014 by

Brian Fielding, a leader in the industry of commercial, retail, office and  industrial property management shares that over the past several years, there has been a significant growth in investor’s desire for net leased properties across the United States. Having managed properties from coast to coast including properties in Texas, Connecticut, New Jersey, Mississippi and New York, Mr. Fielding finds that balancing his personal and client portfolio with net-leased properties has balanced the risk and return in a highly satisfactory way.

 

So what is a net-leased property? A net-leased property is one that has already been developed by others and sold to investors such as Mr. Fielding.  While there is a wide range of offerings, most net investments limit the day-to-day management responsibilities of the Landlord, depending upon the form of the lease. He explained that investors who have interest in assets that are not proximate to their offices often choose absolute net [also known as NNN] or primarily net alternatives … the former placing responsibility for every element of the property onto the tenant.

 

These properties are so popular, in part, because they are easily financed and provide a reliable return with the assurance of the creditworthiness of the tenant. Brian Fielding shares that the market for net-leased properties has withstood most of the negative and crushing effects that the recession had on other markets and that demand still exceeds supply, particularly for highly credited tenancies.

 

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