Bernstein & Feldman, P.A.

Providing Personal Counsel
And Representation For Over
30 Years

Annapolis Real Estate and Business Litigation Law Blog

Hotels and industrial real estate could benefit investors

Maryland commercial real estate investors will likely find some profitable opportunities in hotels and industrial real estate. Analysts have identified support for revenue growth in both of these sectors.

As of July 2016, 1,305 hotel projects were underway nationwide according to researchers. These new hotels or hotel expansions will increase available rooms by 171,276. Although forecasters expect room supply to outpace demand in 2017, current growth in average daily rates and revenue per rooms will insulate investors from slightly lower occupancy in the future.

Evaluating online lenders before investing

Online lenders have popped up in order to fill in the gaps in traditional lending enterprises. Opportunities that were once only available to a select group of investors are now becoming more accessible. Being able to carefully evaluate the strengths and differences between these lenders can help Maryland investors and others make prudent decisions.

One significant way that online lenders have changed the scope of investing is by providing greater access to commercial real estate investment opportunities through debt investments. Typically, this option was only available through investments in mortgage REITs. This type of investment provides a number of benefits to investors, including providing a steady stream of fixed income as well as greater security in the investment.

Benefits and drawbacks of food trucks as investments

A food truck might be a good first-time commercial real estate investment for people in Maryland who have experience in the industry, but potential investors who are not interested in participating in the day-to-day aspects of running the business might want to look elsewhere. Running them can be time-consuming and may require an understanding of the food and restaurant business.

Food trucks can generate anywhere from $50,000 to upwards of $200,000 yearly, and around half of them make more than $200,000. Furthermore, their startup costs are low relative to a restaurant. It costs around $250,000 to $500,000 to start a restaurant. Starting up a food truck requires purchasing the truck itself, hiring staff, and paying for insurance and licensing fees along with a commissary and initial inventory. This all adds up to about $25,000 to $115,000.

Hard money commercial real estate loans

Home buyers in Maryland and around the country often have little trouble finding a mortgage lender, but obtaining financing can be extremely difficult for commercial real estate investors and developers. Homeowners tend to stay in their properties for many years, and their mortgages are generally based on their credit history and earning potential. The ownership of commercial properties is often far more fleeting, and hard money lenders frequently make their decisions knowing that the property in question may be sold within a matter of months.

This type of commercial real estate financing is inherently risky for lenders, and hard money loans often feature higher interest rates and may require large amounts to be paid upfront. However, they can be an attractive option to developers or investors who are working with tight schedules because decisions are generally made quickly. These loans are most often made by private groups rather than traditional banks, and they rarely advance more than 75 percent of the property's appraised value.

Top 9 "dos" when starting a business

Search the internet for startup business "do's and don'ts" and you may find more than two million results. Much of the advice from other entrepreneurs or business gurus is valuable, although some may be specific to a particular business or trade. When it comes to starting a business, there are some common steps to take to ensure your legal structure is sound. Here are some top "dos" to keep in mind if you are considering whether to start a business.

Limit your liability

Create a corporate entity to get your business going. Doing so limits your own financial liability to the amount of your initial investment. Your attorney will advise you on whether to incorporate or form your business as a limited liability company, depending on your needs and goals.

Stock indices change real estate designation

On Sept. 1, 2016, two major stock indices set aside a separate class for real estate. Investors in Maryland and other states may be interested to discover that the new class includes all non-mortgage real estate investment trusts, real estate operating companies and other real estate products that were formerly grouped within the financial sector. Although experts say that the transition has generated understandable concern among some, the new eleventh sector was initially predicted to offer improvements for real estate investors.

Real estate's removal to a new category in the Global Industry Classification Structure, or GICS, is the result of indices like the MSCI and S&P Dow Jones acting on recommendations from analysts and investors. Industry observers suggest that this separation could minimize the perceived risk some investors have associated with real estate since the 2008 crash.

Crowdfunding a big hit with real estate investors

Crowdfunding has grown from humble origins to become a multi-billion dollar industry in only a few years, and the online financing marketplace CrowdStreet has carved out a niche matching commercial real estate opportunities with wealthy investors in Maryland and around the country. The Oregon-based company was launched in 2014, and it has developed a reputation for oversubscribing eight figure real estate offers in 30 days or less.

CrowdStreet reports that June and July 2016 have been its best months to date, and one of its solicitations attracted more than new 100 high-net-worth investors. People who are looking for real estate crowdfunding opportunities currently have few choices other than CrowdStreet, but competitors will likely start to emerge if the concept remains popular. The company's co-founder and CEO says that CrowdStreet is successful because it provides investors with a more comprehensive solution.

Banks have transitioned to real estate lending

Maryland residents may be surprised to learn that American banks were once prohibited from making real estate loans of any kind. These restrictions were put into place in 1864 by the National Banking Act, but legislation like the Federal Reserve Act and the McFadden Act eased banking restrictions and mortgages and other real estate loans now make up about half of all bank lending. Mortgage borrowing surged in the months leading up to the 2008 financial crisis, and many financial experts predict that looser underwriting standards and a flood of commercial property borrowing could be creating another bubble.

When the United States economy was based mainly on manufacturing, the financial sector accounted for less than half of the nation's economic output, but that share has now grown to 83 percent of GDP. This growth was made possible by the transition to a service-based economy that has been sustained by an ever increasing amount of consumer spending. Commercial and industrial lending made up more than 40 percent of bank financing in the late-1950s, but it only accounts for about 20 percent of today's loans.

Commercial lease basics for your business

Running a business can be exciting and a little intimidating. One of the most important elements of your business is its location. For some, it can take more than a single try to get it right, and often that means negotiating a commercial lease with a property owner rather than purchasing property. Not every business owner fully understands that negotiating the terms of a commercial lease can be much more complex than renting residential space. Working out the right deal for you business space will likely be one of the most important business deals you make, and getting the details right can sometimes make or break the overall success of your business. Here are some things to remember before embarking on the journey for your business's perfect location.

Not like renting a house or apartment

Residential leases tend to be very standardized; if you've rented one apartment or house, you probably have a good understanding of how it works because there is very little deviation from the standard form. Not so with commercial property. The leases tend to be longer, and can be up to 5-10 years, rents are much higher, as are security deposits, and there is a lot more negotiation necessary when it comes to making modifications to the property as your business needs change, how rent adjustments work, who pays for maintenance and limits on leasing other property in the building to competitors.

Investing in real estate after the recession

There are numerous ways to make money investing in Maryland real estate. An investor could purchase an apartment building and earn rental income, buy a house to fix up and sell for a profit or purchase shares in a real estate investment trust. Whatever route people decide to take, it is important to become educated on real estate investing before jumping into a deal.

Many commercial real estate analysts are talking about the interesting phase that real estate markets are going through right now. Real estate markets have pretty much recovered from the housing crisis that left properties vacant and caused prices to drop in 2008 and 2009, and interest rates are still at historic lows. Investors are now returning to areas that were abandoned during the recession, and billions are being spent on real estate renovations.