Page 94 - Trump University Commercial Real Estate 101

TRUMP UNIVERSITY COMMERCIAL REAL ESTATE 101

I was initially considering a property in Huntsville, Alabama, for
$ 23,000 per unit. My local banker told me that similar properties were
selling for $ 19,000 per door.
I went right back to the seller and told him that. When he realized
I was willing to walk from the deal, the seller came way down on his
price. That one conversation with my banker saved me big money.

Be sure to verify taxes with the local assessor ’ s office before you

finish your analysis of the property. Assessors have a habit of reevaluat-
ing properties at the time of sale and increasing the taxes. I do not like
surprises.
If the assessment is more than 40 percent below market price, assume
that the taxes will soon go up and factor that into your numbers.

Leases in Place

When you buy a commercial property, you are actually buying the

leases. This is your cash flow, so really focus on the leases in place.
Some aspects of leases are relatively standard, such as the length,
or term . For instance, multi - family leases are usually written for a term
of one year. Sometimes tenants will move into a property without
signing a lease. In most states they become a tenant at will , which
means their tenancy is renewed every 30 days.
Other commercial properties like office buildings usually have

leases for three or more years. Some leases — especially on land — can
go out as far as 99 years. Why not 100 years? Because real estate law
considers any lease over 99 years to be a sale.
You must look at the term of all existing leases in a property when
doing your due diligence. If the market has risen and rent per square
foot is up, you may not be able to take advantage of that rising market
if you have leases that expire years from now.
Similarly, watch out if rents are dropping and most leases for major
tenants will come due in a year or two. The value of the property will
soon fall unless the market changes or you do some fancy negotiating.

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