Page 31 - Trump University Commercial Real Estate 101

Commercial Real Esta te Investing

Then the people who will work in those offices begin to move into

town. Because homes can ’ t be built fast enough, the apartment market
suddenly heats up.
Many people want to see if their job will work out, and they want
to get a good feel for the community. They check things out by rent-

ing first. After their leases expire, they start to buy single - family houses.
Retail space tends to follow housing surges, as merchants realize they
can make money by moving closer to where people live and work.
Discovering how to recognize the signs of emerging markets — and
then acting on that knowledge — will make you a very rich person.

Forced Appreciation

This is one of the fastest ways to make money with commercial prop-
erties. The concept is also called a value play . Whenever you look at a
deal, always look for ways to force appreciation beyond what the local
market may naturally generate.
To force appreciation, you must find a deal with a slight problem.

It won ’ t be a problem for you , but it ’ s been a nagging issue for the
previous owner. Maybe he ’ s been afraid to raise rents, so his rents are
under market. Maybe he is charging the correct amount for rent, but
has higher - than - normal vacancies. Perhaps his expenses are running
high.
These are all opportunities to buy a property with a built - in
reward, as long as you buy based on the actual numbers . That is the key
to buying right with commercial properties.
Let me take a minute to talk about the numbers that a potential
seller will propose to you. Most sellers try to sell based on projected or
pro forma numbers. This means that they are basing their price on
what they think you can earn after you buy the property. The problem
with pro forma numbers is they are not real. You are buying based on
future cash flows that may never materialize.

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