Page 93 - Trump University Commercial Real Estate 101

Ho w to Read a Deal

the area matures. I encourage you to get my book on the subject, called
Emerging Real Estate Markets , published by John Wiley & Sons.
When you notice an area where buildings are being rehabbed and
new construction is going up, you can bet this area is being revitalized.
What was once a poor location may now become desirable.
Just be careful: Enter a revitalization zone only after other investors
and the local government have committed to the project. Why? Sig-

nificant change is often very slow to occur. If you start to buy and
rehab properties too early, you may be left carrying those properties
financially for a long time before your plan comes to fruition.

Don ’ t be a pioneer. You can tell these people because they ’ re the
ones face-down in the mud with all the arrows in their backs. Instead,
be a fast follower, who doesn ’ t get in quite on the ground fl oor, but
doesn ’ t take nearly the amount of risk, either.

Expenses

Always focus on the expenses your seller is reporting to you. Expenses
at most properties run at around 50 percent of gross income, as a gen-
eral rule. If expenses are running higher, it could indicate ineffi cient
management, or an owner who is paying expenses such as utilities for
tenants.
Also look at expenses per square foot. Divide total expenses by the
number of rentable square feet. Each area and property type has a
normal range. Any broker, property manager, or appraiser on your
team can give you this information.
Expenses per unit are calculated by taking the total expenses and
dividing them by the total number of units in the property.

Price

When evaluating a multi - family property, find out what the per - unit
sales price was for similar properties. You can bet your lender will want
to know.

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