Wednesday, 1 February 2017
Asset management is an essential element for business owners and real estate investors. These systems help keep track of business assets and investment properties. Software programs calculate data necessary for taxes, financing, and deciding when to liquidate property and equipment.
Asset management software can be a valuable asset to real estate investors. Collected data help investors assess an expected return on investment for each individual property. The reports provide information that can be used to predict cash flow, benchmarking and overall performance, along with revealing possible pitfalls.
There are different types of asset management classification. For example, financial investments usually fall into the wealth management category, while taking care of government assets is labeled as city, county, state or federal financial management.
The highest form of asset management is conducted at the International level. Just about all forms of foreign currency are traded all over the world. Asset managers are needed to keep watch over foreign markets. The information they compile is beneficial to everyone from private investors to world leaders.
One of the most common uses of asset management software is within the real estate industry. Making sense of what to do often feels as if navigating through a landmine. With the unpredictable status of the market, it's imperative for investors to utilize as many tools as possible to evaluate risks while retaining positive cash flow.
Every person that has residential or commercial real estate investments ought to make asset management software their main priority. This software can also be advantageous for investors that control hedge funds or real estate investment trusts.
Bank of America is also recognized as an innovator of asset-based financing. BOA is among very few banking institutions sanctioned to engage in loan syndication. This practice is utilized to supply funds to investment firms or business enterprises that need at least $50 million in working capital.
Analyzing the return on investment for expansive portfolios calls for suitable asset management systems. Bank of America not only provides important tracking systems, they also supply investors with additional tools for increasing profits.
To successful manage real estate assets requires developing an organized approach to monitoring investments and constant watch over performance. The approach has to be systematic in order to improve cash flow from the purchase, sale, trade, or acquisition of every property.
Multiple factors need to align to produce forward momentum with investing practices. While the list can be extensive, the basic factors include: property location; overall quality of the building construction; projected growth rate; and maintenance costs.
Few people can calculate the outcome of various scenarios that can play out with investment property without making use of asset management software. Investors that utilize these programs can more easily make informed decisions and better profits.
Daniel Kalenov, Global Diversified Partners is the investment firm of choice for individuals seeking to diversify their portfolios into tangible assets, not just paper ones. Daniel Kalenov, Global Diversified Partners has a global focus and we're opportunistic, but prudent. We help people take control of their financial well being by educating them on the benefits of investing in tangible assets and by altering their perception of what “smart investing” means.
To get more details, please visit here at: http://danielglobaldiversified.fishinblogs.com/about-us/
Sunday, 22 January 2017
Financial diversification simply lets you apply the age-old adage of "not putting all your eggs in one basket." In practical terms, it means that you take your savings and spread your savings among different type of investment options. This type of investment does take some work and it will take some planning on your part.
This leaves the question of why. Why would anyone put forth the time and energy to diversify their portfolio? The answer comes down to risk. Financial diversification is designed to help minimize overall risk in order to gain long term, steady returns.
If all your eggs are in one basket and the basket happens to get run over a car, you may be left with nothing. Similarly, if you were one of the ones who invested their entire future of savings in Enron, you may be working a second or third job to pay your bills in retirement.
If you want to minimize your financial risk, it is time to diversify. Some tips by our experts at Daniel Kalenov, Global Diversified Partners to help you achieve this goal:
Split your portfolio up among 3 or 4 different industry. Do not put all of your savings into real estate or oil or the newest "widget" your neighbour created. Making this type of split helps you to weather the downturns in one industry without seeing your savings substantially drop.
Choose different types of investments. Some types include stocks, bonds or cash. You can put money into a savings account, which is very stable because of FDIC insurance, but has a lower interest rate. The stability of bonds and stocks really depend upon the type of stock or bond you wish to purchase. It is important to research your specific investment to make sure you know all the pros and cons about your choice.
Do not limit to one only. If you choose to invest in stocks and bonds, make sure you purchase more than just one stock or bond. That way, if the one company in which you own stock declares bankruptcy, you are not hit as hard as you would be if you owned stock in multiple companies. If you are unsure of how to select stocks, then check out mutual funds.
Financial diversification can take some time for research and some effort to understand your options. Although many people handle their own investment choices and manage their own portfolios, others choose to find a financial manager to do that for them.
No matter the amount you have in your nest egg, financial diversification provides a safer path to a more comfortable future.
When it comes to your finances, if you don't know where you're going, any road will get your there. We at Global Diversified Partners partner with your to re-claim your decision making, and ultimately your future.
Our goal is to be the investment firm of choice for individuals seeking to diversify their portfolios into tangible assets, not just paper ones. Daniel Kalenov, Global Diversified Partners has a global focus and we're opportunistic, but prudent. We help people take control of their financial well being by educating them on the benefits of investing in tangible assets and by altering their perception of what “smart investing” means.
Learn more about real asset investing, retirement security, offshore diversification, and many other topics you can use to shape your future, please visit here: http://globaldiversifiedpartners.freeblog.site/
Wednesday, 18 January 2017
The Property investment market today is troublesome due to the overwhelming competitions that consistently coming out. Thus, it is very important to measure the growth of your property investment in order to know its current value and improvements. Once you will know the current value of your investment; do some ways to increase its value so that you will achieve a big amount of profit when the time comes that you will resell your property.
Investment growth is an important factor in determining the value of an investment after a particular time frame. One of the most important things you can do to measure the growth of your property investment is to know the current estimated price of your investment. Search for your property's current prices in the market and how they based their prices. Once you will have your own property price basis, you can now price your property including the additional enhancements or renovations you had made. Do this pricing consistently in order to monitor the value of your investment as time goes by. You can be able to know the market value through further research with the help of knowledgeable professionals like Daniel Kalenov,Global Diversified Partners.
In determining the market value, you need to base your decisions to the recent condition of real estate market. The recent market is the only one that matters because the old market situations, even if it is just a year ago, is still different from the present. In the property investment world, changes are inevitable because the market is in a state of fluctuation.
Property investment value can also be measured by being aware of the competitions. You should know your competitors and compare their property values to yours, in that way you can see the needed growth or enhancements on your property. Look for other properties that are for sale on the market, those properties that are similar to your amenities, size, and location.
Another way to measure the growth of your property is the investment growth calculator. Property growth is too difficult to calculate because of the number of variables on each investment. The variables depend on the type of investment, amount of investment return, amount invested, outside factors like taxes and inflation.
An investment growth calculator can really help investors to go on with the different factors and adjustments. This calculator is based on accurate information based on output data. Calculating is done by breaking down the earnings of the investment into four categories - initial, investment, simple earnings, compound earnings, and total value.
Global Diversified Partners an investment firm has a global focus and we're opportunistic, but prudent. We source promising domestic and international real estate projects that offer income, growth and diversification we do so with Integrity and creativity.
To get more details, please visit here: http://www.globaldiversifiedpartners.com/global-diversified/
Tuesday, 17 January 2017
One of the best, most secure, most certain to grow investments you can make is real estate, but with an IRA, investing in real estate never seems to be an option offered. That's not, however, because you're not allowed to invest in real estate with your retirement cash; rather, it's because most IRA funds don't take advantage of a little-known IRS rule that allows for it.
If you're like most people holding IRA account, you have your funds invested with a bank or a brokerage. That means you're limited to stocks, bonds, annuities, and other paper securities - not real property. In today's market, that may mean your IRA funds are tanking, and it certainly means that they are not growing as robustly as they were five years ago. The real money to be made right now is in real estate.
You can get into IRA real estate investing by looking for custodians that specialize in real estate IRAs, using the rules contained in Section 408 in the Internal Revenue Code. These special IRAs build a portfolio around all kinds of cash-generating and appreciating real estate: commercial, residential, rental, industrial.
It is not legal to hold your own 408-based IRA; investing in real estate with your retirement funds must be done by special custodians. However, you have freedom in many ways to work with your IRA real estate. For one thing, your custodian holds your property, but doesn't necessarily administer it, select properties to purchase, or even set and collect rents. These may all be your tasks, and they give you a great deal of leeway in how your own money gets invested.
It's easy to see that an IRA investing in real estate gets very complex. Do rents get re-invested in your IRA? Can you charge yourself for administering your own properties and make cash from your IRA in that manner? What kinds of property can you purchase to include in your real estate IRA? Is it possible to hold foreign real estate in your domestic IRA? A good custodian can tell you the specific rules governing your IRA; real estate investing through this route is more complicated than just doing it yourself but the tax advantages make it worth it.
While if you work it properly you can benefit to a certain degree from IRA real estate investing beyond the simple IRA, you cannot put your own home into your IRA, nor can you lease space in one of your IRA properties for your own business. You also can't put properties you or your immediate family already own into your IRA.
IRA investing in real estate rules does allow you to purchase property in conjunction with others to put into your fund, and it allows you to include some leveraged property as well, provided your custodian allows for it. You can also sell properties while they are in your IRA, provided you don't sell them to yourself or to a family member.
One of the best ways to realize a great benefit from IRA investing in real estate is to hold a property that will become your retirement home in a Roth IRA. Upon maturity, you have the custodian distribute the property in-kind - assigning the title of the home directly to you. If you did this with a traditional IRA, you'd be liable for income tax based on the value of the property at the time of distribution; with a Roth, you owe nothing outside of costs associated with the transfer. There are few nicer gifts to give yourself to celebrate retirement.
Daniel Kalenov, Global Diversified Partners can help you for your retirement savings plan. Global Diversified Partners are San Diego, CA financial planners who can develop a retirement savings plan for you. We are prepared to help you in the investments you want to pursue. With our help, we can help you safely plan your retirement income. Let us get you started right, for your retirement money at Retirement savings plan.
To get more details, please visit here: http://danielglobaldiversified.fishinblogs.com/tag/daniel-kalenov/
Wednesday, 4 January 2017
The reason why we're investing in the stock market volatility is for the reason that we identify the huge potential returns. But we are in the time of liberally traded markets and that is focusing the desire of the sentiment investors. When cash is concerned, feelings might sometimes be great.
We have turn out to be stock market investors, because we realized that not just is there no simple cash, and also that the stock market volatility would do it is extreme to free us of our money.
We are much uncomfortable with the approach of the buy-and-hold investment, and realize that if the purchase-and-hold might be very well if you are willing to remain twenty to thirty years, it frequently leads to loss from shorter durations. The illustration being in 2008 while the S & P 500 and NASDAQ Composite decreases fifty%. Big losses.
The stock market volatility is a final of the Huge Leagues, & you'll find investors who know the emotional warfare you're facing and the way to use it to take your cash.
Understanding those Big League policies may place the winning chances back in your side. The market timing approaches at swing timing alert were intended to identify & stick with trends. They allow returns to be accepted & reduce losses short. That is what the experts do, but a many people find it difficult to do.
Market Timing is Unique
Market investors deal with sentimental battle that some people face of their existence. There are a lot of differences between the sentiments knowledgeable in the trading on the fiscal markets, & what we experience in our lives; it might easily get in the way with our ability to buy and sell.
If we're able to recognize the feelings that we might take measures to protect ourselves, we prevent them from influence, and successful (beneficial) market investors and traders.
To illustrate, in workplace, work hard and looks to be honestly rewarded for that part of the American vision. Who can disagree from the logic?
However in stock market volatility, working as difficult as possible plus the stock market can still reverse on you & provide you with a loss. To buy and sell perfect and might still go wrong.
It's for the main reason that the timing of stock market isn't our work ethic. It's not good or chance. It is regarding numbers and probability.
Numbers and Probability
Toss the coin fifty times and you will expect twenty five times it's going to land heads up, & 25 times it can land tails up. However there is no law that claims the very first 7 tosses won't all come up tails.
Once we realize that over time the figures all the time add up in our favor, we may more easily endure the short-term swings. This is stock market volatility.
Be ready for all the stock market volatility will throw on us, assists us to keep our trading system.
When you face the fact which stock market volatility is not straightforward to make cash, or you cannot become rich in a single day, you may be able to make yourselves mentally for the long term.
If you expect that occasionally are going to be loss of trades, you cannot be disappointed when they happen. You might have eyes on the big image, which puts the probabilities in your favor over time.
The Trading Edge
There are 2 vital aspects of all winning stock market timing system or trading strategy, and both had to be considered.
1. Probability - We all understand that in time, that once we flip that coin sufficient times, it's going to land fifty% heads up, as well as fifty% tails up. We might add up on that. A sequence of tosses that has the same outcome denotes little, as we still toss the coin.
2. Risk vs. Benefits - Potential benefits (returns) has to be greater than risk (losses).
Looking at the history of stock market volatility for many years, we find that almost all of the time it's either rising or else there is a downward trend. The truth is, about eighty% of time it is in long-term trends. The fact that trending stock market is the common is our market timing trading edge.
Understanding the guidelines of the chance are on our side over time, even if we can found that risk vs. reward is in our favor, we can use this probability to generate a stock market trading approach.
If each toss of the coin have even chance, but few tosses stay profitable for long intervals of your time, whereas those tosses which are unprofitable are of the short period and restricted stock market volatility (small losses), we understand that we'll success over time as long as we made all tosses.
No one knows ahead of time which trend is one which will carry on for many months and create the huge gains. All we understand for various is the stock market will spend more time trending than they should spend in trendless sideways trading.
The stock market volatility is which trading all the trends creates few losses if the trend will not follow.
By the trading all trends, we continue fewer losses, since we will not stick with the trend to lose. If trend changes, we reverse the position or go into benefit accordance from the method functioned.
The profit is that we'll not at all lose a trend, and since stock market are in trends more than they are not, and we make larger gains when the markets trend than the little losses from trend failures, we're beneficial in most situations.
It is the in between times (trendless markets) that need stock market investors to know this logic. Remain the course, make all the coin tosses, and over time, you win.
Frightening ideas are scarier after finding them and understand not only to wait, however they do not harm you when you hold true for a course.
The more you may recognize the scary aspects of the stock market timing (or any trading), & prepare for each possibility, the most likely you'll persist in the face of the adversity.
Market timing is a challenge. Many that begin in the fall by the wayside later they know it won't make them rich in days or even weeks (wonderful, but a few really look forward to that), or after a couple of small losses.
Consider there is lots of investors available who've taken up the challenge and have the successful track record to show it.
No sentiment is involved to enhance their appearance over the years. However in short term, there have been some tiny losses.
Concentrate on the war, not the little battles along the way. Stick with the trading strategy and you will be winning.
We at Daniel Kalenov, Global Diversified Partners help people take control of their financial well being by educating them on the benefits of investing in tangible assets and by altering their perception of what “smart investing” means. After achieving years of strong double-digit returns in personal real estate holdings, Global Diversified Partners was formed with the intention of bringing stability and value to like-minded investors. The firm has a global focus and we're opportunistic, but prudent.
Friday, 30 December 2016
When we talk about offshore financial companies, the term conjures up an image of huge, shadowy financial monoliths investing funds without any transparency. These types of companies also exist. e.g. many mutual funds and hedge funds whose investors prefer 'foreign country' investments.
But ordinary investors like us too can form offshore investing companies of relatively smaller size to fulfill our more mundane everyday needs. Or we can invest, via our offshore banker, into offshore investing companies who operate investment funds.
There are various uses:
- Professional Services Companies
- Trading Companies
- Investment Companies
- Holding Companies
- Dot Com Companies
- Property Owning Companies
- Shipping Companies
- Employment Companies
- Intellectual Property & Royalty Companies
- Asset Protection Companies
Professional Service Companies:
Individuals, e.g. Consultants, IT professionals, engineers, designers, authors and entertainers operating outside their resident country can benefit significantly from using an Offshore Company. The offshore company shows the individual as a company employee and gets a fee for the services rendered by the 'employee' [owner]. This fee is received and saved tax free. The individual can then take the payment as he or she wishes to minimize their taxes.
Import/Export and general trading companies’ activities are also well suited for the structure of Offshore Companies. The Offshore Company takes orders from the supplier and has the goods delivered directly to the customer. It does the invoicing to the customer and saves the difference in a tax free country. E.g. Products from China to Kenya could be invoiced by a Seychelles offshore incorporation and the profits retained there.
Individuals use offshore investment companies to the n buy mutual funds, shares, bonds, property, jewellery and precious metals. Sometimes they will also use these companies to trade in currency, equities and or bonds either via the internet or through managed funds run by banks and financial institutions. The very rich will also have different offshore investing companies for different class of assets; for different countries or by different types of investments.
The diversification hedges the risk. But also in cases where capital gains taxes are levied, e.g in property or equity, sometimes it is cheaper to sell the company rather than the individual asset itself.
Offshore companies can also be used to own and fund operating companies in different countries. They could also be joint venture partners or the 'promoter' of publicly quoted companies. Mauritius is well suited as a country for investing companies because of its favourable double tax treaties.
Dot Com Companies:
The internet has made the cost of business entry very low and consequently the legal protection of the company's assets, both physical and intellectual, that much easier. Dot com companies now use this flexibility to develop different software projects in different offshore companies to invite different investors and to keep the flexibility of raising funds separately for different projects depending on the project's success. Both Mauritius and Seychelles have Protected Cell Company [PCC] structures available for just this kind of need.
Property Owning Companies:
As discussed earlier, owning property in an offshore company saves you the capital gains taxes that may be levied at the time of the property's sale, which are avoided by selling the company instead of the property. Other important advantages are the legal avoidance of inheritance and other transfer taxes.
The use of Offshore investing companies to own or charter merchant ships and pleasure craft is very common worldwide. Shipping companies accumulate profits in tax free offshore jurisdictions and, if each ship is placed in a separate Offshore Company, it can obtain significant asset protection by isolating liabilities of each individual ship.
Multinational companies use offshore investing companies to employ expatriate staff who are deployed in different tax jurisdictions around the world. To facilitate transfers, reduce the employee's taxes and administer benefits easily an offshore company employment is preferred. Working on assignments throughout the world.
Intellectual Property and Royalty Companies:
Offshore investing companies are being seen as vehicles to own Intellectual Property and royalties received for software, technology rights, music, literature, patents, trademarks and copyrights, franchising, and brands. These companies are in the form of trusts or foundations.
Asset Protection Companies:
It is estimated that a professional in the US can be expected to be sued every 3 years! And that more than 90% of the world’s lawsuits are filed in the US. Amazing statistics! If you have an income or assets of more than US$ 100,000, you should seriously consider offshore investing companies!
Most offshore jurisdictions require that for a law suit, a lawyer must be hired and paid up front before a suit can be filed, thus keeping frivolous law suits away. Often a substantial bank bond has to be placed with the government, to even implement a lawsuit. It can also (take years of waiting) to get into court in some offshore jurisdictions.
If you have substantial liquid assets you should consider a Trust which would own the offshore company. This will provide a greater degree of protection, at the least expense. However, we should remember that this structure is for asset protection, not for tax savings and so the focus should be maintained.
What Is Offshore?
Simply put, any country other than the one where you live could be considered "offshore". Providing you are from outside the jurisdiction that you choose (both as a citizen or a resident) you can obtain some special financial or asset protection considerations. If you live in the US, other countries are offshore. If you live in the UK, other countries and the US are offshore.
More often than not however, "offshore" is used to describe a nation where there are either no taxes or low taxes for foreigners either personal or corporate. For anyone except Americans, the US can be an offshore haven of value. Banking, investment (trading/brokerage accounts) and financial activity are included in this. This includes real estate ownership, stocks and securities and bonds.
True, offshore havens have created a unique legal and tax climate for foreign individuals and businesses. They cater specifically to them. More than half the world's wealth resides in such asset havens. Financial privacy, a stable legal climate and realistic regulations are the hallmarks of these jurisdictions.
Learn about real asset investing, retirement security, offshore diversification, and many other topics.
Daniel Kalenov, Global Diversified Partners can help you for your retirement savings plan. Global Diversified Partners are San Diego, CA financial planners who can develop a retirement savings plan for you. We are prepared to help you in the investments you want to pursue. With our help, we can help you safely plan your retirement income. Let us get you started right, for your offshore investment plan.
To get more details, please visit here: http://www.globaldiversifiedpartners.com/global-diversified/
Tuesday, 27 December 2016
When looking at a commercial property of any type you need to spend time on the financial aspects of the property before you form an opinion about the price that you think that you can achieve. The financial aspects of the property can have a major impact on the price and or the interest of purchasers. The financial aspects of a building or a property can impact the asset for many years and for this reason must be analysed and identified.
We have detailed some of the major aspects of financial concern in a property purchase or sale scenario. Whilst these are not the only categories of activity and concern, they are the major ones in most circumstances.
We at Daniel Kalenov Global Diversified Partners recommend that you create a checklist from these items so that your property review and inspection process is suitably enhanced and professional.
The Asset Schedules: The property will contain many fixed and moveable assets. These will normally be detailed on the asset register. A well maintained commercial property will have an up to date asset register for your review. Obtaining the asset register at the early stage of sale consideration is productive as it will tell you in detail what you are selling and later become part of the due diligence process.
Bank and Personal Guarantees: An investment property comprises leases and other documents which support tenant occupancy. A normal leasing process would involve and create some form of guarantee to be provided by the tenant to the landlord for the duration of the lease. It is important that this guarantee has both strength and substance to reimburse the landlord in situations where the tenant defaults under the terms of the lease. At the time of property sale, these guarantee documents should have some form of ability to be transferred or re-issued to the incoming purchaser. This process is called an assignment of the guarantees. You should consult with the landlord's solicitor to identify the types of guarantees involved and the ease in which this can be achieved at time of sale.
Capital Expenditure: Major items of plant and equipment which are replaced in a commercial property are usually regarded as capital expenditure and are separately itemised for the purposes of taxation and depreciation over a period of time. Taxation laws in your location will stipulate the depreciation terms as they apply to different types of capital expenditure. For example, a computer that is purchased for the building control system will depreciate far quicker than the air handling unit which was purchased for the air conditioning plant. Well maintained property records will include a detailed capital expenditure register and the date at which the capital item was purchased. Purchasers to the property will be interested in the depreciation that this register provides against the cash flow in coming years.
Taxation and GST: Every country and property location has its own unique taxation laws and requirements relating to property and particularly investment property. In the sale process, it is important to understand that these matters have been correctly handled and are up to date. It is sometimes necessary to view the net returns for the property for the last few years that were applied to the taxation statements and lodgement process. You can also seek written confirmation from the owner of the property that all taxation matters are up to date.
Income and Rent Analysis: The income for the property is a reflection of the leases and occupancy licences therein. It is essential to understand that the rent has been collected in accordance with the leases or licences and that all rental matters are up to date. Part of this process will also involve the checking of the rent review profile and the expiry profile of all leases. A property with a volatile leases or leases that are soon to expire is likely to impact the price or the buyer interest. When reviewing tenant occupancy against leases, you should review the original documents and cross reference this to the tenancy schedule and any discussions or information provided by the landlord.
Independent Valuation: Many property owners will obtain a valuation regularly in support of their property financing package. It is not unusual for such valuations to occur annually. Importantly they are done by a qualified and registered valuer. If you view this documentation and take it into account in the pricing process for the property, it is wise to consider the true independence of the valuation when it was done and its relevance to the current market. Some valuations for financing purposes may not be in parity with the existing market conditions. It pays to sometimes seek a true independent valuation at the time of sale or in preparation for sale.
Land tax issues: Property land tax has a direct impact on the investment aspects of commercial real estate. In different locations, the recovery and payment of land tax is impacted uniquely by local legislation. In some circumstances the land tax can or cannot be recovered from the tenants within the property. This will have immediate impact on the bottom line and net return from the property; this then impacts the price. Consulting with the financial adviser for the owner of the property, or the taxation office, will achieve clarity in this taxation impact. Given that most agents and brokers are not taxation experts, you should involve other professional taxation people as appropriate.
Lease disputes: Rarely is there a property that does not have an existing lease dispute or has been impacted by a previous lease dispute. For this reason it pays to question the matters of lease dispute and resolution. If in doubt, seek a copy of correspondence and any subsequent agreement between the appropriate parties. Unresolved lease disputes can jeopardise or slow the process of property sale.
Mortgaged interests: Most commercial real estate properties will have a mortgage of some type to a financier. When a mortgage exists, it is necessary to understand how it will be handled or discharged in the process of sale. The client should consult with the mortgagee to clarify these matters for you. In a situation of distressed properties, the sale of the property may need to realise a particular price before clear title can be achieved.
Operational expenditure: The running of a commercial property will involve the operational expenditure attributed to running costs. Most of properties of particular types in the same location will have similar operational expenditure. If however a property has excessive operational expenditure which is above the averages in the area, then the property is likely to be difficult to sell. Most purchasers of properties understand the averages of property expenditure deemed to be realistic for each property. This also says that real estate agents and brokers should be well aware of the expenditure averages and analysis process that should apply in this situation. Operational expenditure is analysed on the basis of $'s per m2 or $'s per ft2 (depending on your location, monetary base, and country)
Statutory charges: These are commonly referred to as rates and taxes. These will involve matters such as water rates, land tax, council rates, and any other form of charge which is raised by the statutory bodies. Importantly the charges so raised must be analysed for parity to similar properties in the same region. Part of the rating process involves a statutory valuation of the land on which the building and property is located. Whilst some property owners like to think that their valuation is high and justifiable (and therefore gives substance to the sale price of the property), it is this valuation that is the foundation for the charging and payment of statutory charges. The astute property investor will always question this statutory valuation undertaken by rating bodies in an endeavour to restrict or lessen the amount of statutory rates and charges paid each year.
Rent reviews: A significant concern in the sale of a property is the size and stability of future rent reviews. It is the rent reviews which will underpin the cash flow and hence the attractiveness of the property to purchasers. It is essential that the real estate broker or agent read all of the leases, before any assessment of price or method of sale is given. It is quite possible that the rent reviews projected and detailed in the leases can either hinder or attract purchasers to the property.
Rent arrears: Existing rent arrears should be identified with the owner of a property. Any matters of associated legal pursuit should also be identified. It is possible that the property has had a history of rent arrears and instability. Look for these matters and question the cash flow stability. A history of financial performance from the property over the last few years is the best way to achieve this.
Current building budget: This will involve a budget of income and expenditure as it applies to the building currently in the existing financial year. A good building budget will be written and supported by sound property strategy, projections, and controls. At the time of any potential property sale, it is important to understand that the current financial performance is in line with the expected building budget. If there are any shortcomings or overflows, it is necessary to clarify the reasons for such. If you do not do this, the purchaser of the property will.
The side agreements or deeds: Property occupancy and usage can involve supplementary side agreements and deeds. This can be with tenants or neighbouring properties. Documents of this nature will have impact in the sale even though they may not be registered on the title of the property that you are to sell. Documents of this nature will usually be supported by aspects of common law. If in any such arrangements exist, you must seek further detail and clarity as to how they will be handled at the time of sale. One of the common events here is the existence of rental incentives provided to tenants at the commencement of the lease. When these situations exist, the most common method of resolve is the discharging of the arrangement by the landlord prior to settlement. This can become a term of the contract.
Sinking funds: It is not uncommon for sinking funds to exist on larger properties. The fund is essentially established to set aside money to cover the cost of major items of repairs and maintenance. This would not normally include items of a capital nature. As an example, sinking funds may be used to cover the cost of painting the exterior of a large building such as a shopping centre every five years. If a sinking fund exists, it is important to understand how it will be handled at the time of sale. Consultation with the client's solicitor and accountant is essential to the process.
Taxation depreciation schedules: The property will have a taxation depreciation schedule. When correctly maintained, these schedules have the ability to lessen the net property income in forthcoming years. This is an immediate taxation benefit to the purchaser of the property who will assume the depreciation schedule as part of the sale and settlement. As the broker or agent in the sale you should check the existence of such documentation and identify what benefits it brings to the sale process. A well constructed and detailed depreciation schedule will make the property sale more attractive.
Short term leases: Many properties have short term leases or casual occupancy active at any point in time. It is vital to know the mechanism under which this occupancy occurs and how it will be terminated. You do not want a short-term occupancy to jeopardise the stability and processes of the sale.
Un-documented lease occupancy: Some may call this a casual lease; however a casual lease can create concern and uncertainty in the process of sale. Some tenants may claim a long-term occupancy from the existence of a previous casual lease arrangement with the landlord. Claims of this type must naturally satisfy the requirements of law to be sustained or upheld by the courts; however you should be cautious in such circumstances given that it can slow down or even jeopardise the sale process.
Warranties and guarantees: When properties are constructed, the normal process of warranties and performance guarantees apply from the construction process. At the time of sale, you need to know if any such matters apply or exist. Copy of the documentation is essential. Further to this, in an existing building where recent fit out activity has created newly constructed premises, it is likely that warranties and guarantees exist for the tenancy construction. These will transfer to the new owner of the property in most circumstances however the documentation to allow this to occur must be suitably constructed. This is a matter for the solicitor acting for the client.
Utilities costs and supply: Every commercial property will be supported by the supply of water, gas, electricity, and communication systems. The process of supply needs to be understood together with the cost of the process. Obtaining copies of recent accounts for those services will help you here. It is possible that some utilities will be supplied direct to the tenants and some others will be supplied direct to the building owner. Any differences in supply should be identified and documented. The costs of supply should be compared to the averages of other properties in the area.
This brings to an end the matters relating to financial due diligence. These are the major issues that apply in the sale of commercial real estate; however you should look for any other items given that each property is unique in its performance and financial structure.
To learn about real asset investing, retirement security, offshore diversification, and many other topics to shape your future, consult Daniel Kalenov, Global Diversified Partners.
Daniel Kalenov, Global Diversified Partners has a global focus and we're opportunistic, but prudent. We help people take control of their financial well being by educating them on the benefits of investing in tangible assets and by altering their perception of what “smart investing” means.