Archives for April 2022

Don’t Wait to Find Out Your Business Valuation

April 27, 2022 by Peter Spoleti / Vertex Markets Inc. Leave a Comment

I’ll figure it out when I’m ready to retire, which is the day after never …. That is the response we get from small business owners when we ask how much their business is worth.The wealth of nearly two-thirds (70%) of all small business owners is tied up in their business. For many of those individuals, the business becomes the personal retirement savings vehicle. Those individuals, however, could be driving blind. Without knowing the value of the business, how will they know when they can stop working or the lifestyle to expect in retirement?

Having the information needed to prepare adequately for retirement is just one of the many benefits to a business valuation. Here are several others:• Increase value. What is measured improves, and valuation is no different than establishing and overseeing a sales quota. A comprehensive business valuation will provide owners with a clear explanation of the value of the business along with evidence to support the result. It can tell an owner if efforts need refocusing, or … even better .. if the company is headed in the right direction. The data helps guide strategic decisions and business development plans and can even help an owner determine whether the right people are in place to support long-term goals.• Capital infusion. Outside investors and lending institutions will evaluate the business plan, shareholders’ agreement, investment memorandum, and valuation before investing or loaning capital.• Mergers, acquisitions or share-swaps. A business valuation facilitates a negotiation between entities entertaining a possible merger, acquisition or share swap. • Dissolution of partnership or partial exit by an owner. When a business partnership goes bad or partners agree to part ways, the parties have to find a fair and equitable split of interests. Whether the weighting shares changes, one partner buys the other out, or the partnership gets dissolved, a business valuation will facilitate the process.• Divorce. Business interests represent marital assets and could become part of an owner, partner, or shareholder’s divorce settlement. Both spouses may approach the settlement proceedings with independent business valuation reports, so historical valuations could provide valuable insights.• Tax strategies. A valuation report can lead to tax benefits an owner might not otherwise claim. A current valuation is also required for estate tax settlements, to calculate capital gains tax liabilities, and for income or property tax disputes.• Employee incentive programs. A company must disclose its value to employees to satisfy annual requirements for Employee Stock Ownership Plans.• Insurance planning. Nearly three-quarters (70%) of small businesses do not have adequate insurance coverage. When an owner doesn’t know the value of his/her business, it is challenging to determine how much insurance is needed. Also, if an owner is injured or wrongfully distracted from business, a historical valuation could help recover losses.The real reason most business owners put off knowing the value of their business could have less to do with timing than an error in perception. Traditional business valuations involved an extensive, expensive, and seemingly invasive process. Thanks to innovative technology, however, those barriers no longer exist. An online valuation costs a fraction of what traditional business valuation specialists charge, and can be completed in minutes, not weeks.While business owners are often stretched for time, when it comes to discovering how much the business is worth, there’s no time like the present.Our firm specializes in meeting the financial needs of small business owners, and business valuations are a critical step in our process. To get started on your business valuation, simply go to https://abbelamarco.bizequity.com/As a small business owner, it is important to recognize the vital role your business plays in achieving both your personal and professional goals. At Abbe LaMarco Inc. we can help remove some of the mystery about your future by arming you with the data you need to make the best financial decisions possible. We specialize in working with small business owners and can help you gain a deeper appreciation for your business’s true value. Our confidential business valuation tool will provide you with an accurate business valuation you can rely upon as you plan for the future.Simply go to https://abbelamarco.bizequity.com/ and start your business valuation today. There is no charge and no obligation, however, we hope you find value in this service and would be open to discussing how we can use the valuation report to help you achieve your goal

Some Types of Commercial Real Estate To Invest In

April 27, 2022 by Peter Spoleti / Vertex Markets Inc. Leave a Comment

Commercial real estate (CRE) is potentially one of the more profitable investments which can be made. There are many advantages created by these income-producing investments over residential investments, they can not only generate monthly income through reoccurring rental cash flow, but they are also a great way for building wealth.

Types Of Commercial Real Estate

There are various types of commercial real estate, many used for business purposes, with owners leasing the occupied space for monthly rent. Commercial real estate normally consists of the following property types:

Multifamily

These commercial properties consist of the apartment “four-plexus,” high-rise condominium units, and smaller multi-family units, which can range from four to 100 units. Unlike other forms of commercial real estate, the lease terms on multi-family buildings are typically shorter than office and retail properties.

Office

Office space is the most popular type of commercial real estate is office space. They range from single-tenant offices to skyscrapers are broken down into one of three categories: Class A, Class B, or Class C.

Class A commercial real estate properties are typically newly built or extensively renovated buildings in excellent areas with easy access to major amenities, typically professionally managed.
Class B commercial real estate properties are frequently older buildings requiring capital investment, to upgrade the building and property. These are usually a popular target for investors.
Class C commercial real estate properties are typically used for redevelopment opportunities. They are generally poorly located, require major capital investments to improve out-of-date infrastructure, and their high vacancy rates are much higher than higher-classed buildings.

Retail

Also popular, retail buildings are properties, ranging from strip centers, malls, community retail centers, banks, and restaurants, which are often located in urban areas. These properties may range in size from 5,000 square feet to 350,000 square feet.

Industrial

From warehouses to large manufacturing sites, and industrial parks, industrial buildings are typically manufacturing industries, warehouses as they offer spaces with height specifications and docking availability. Also, these commercial properties generally lend themselves more to investment opportunities.

Special-Purpose

Unlike the properties mentioned above, special purpose commercial real estate properties are constructed by the investor. They typically consist of car washes, self-storage facilities, and even churches.

Because the best commercial real estate properties are in high demand, investors must focus on location, future development, and improvements. Resulting in these properties increasing in value and a greater return on investment.

Commercial Real Estate Interest Rates & Fees

Unlike residential loans, the interest rates on commercial real estate loans are normally a little higher. Several fees attribute to the overall cost of commercial real estate loans, including appraisal, legal, environmental studies, application, origination, potential zoning changes, and survey, or engineering fees. While some of these are subject to the particular deal, some fees apply annually, others must be paid upfront even before the loan is approved.

Commercial Real Estate Loan Prepayment

Sometimes, a commercial real estate loan may have prepayment restrictions. These restrictions are designed to preserve the lender’s anticipated yield. Investors can settle the debt even before the commercial property investment loan’s maturity date. If they do so, there may be prepayment penalties.

How To Get Commercial Investment Property Loan

The idea of obtaining commercial real estate financing may seem intimidating at first. Investors who educate themselves about the process and the various types of commercial real estate loans discover they are very attainable. The following are the key steps involved in obtaining a commercial investment property loan:

Determine whether you will file as an individual or an entity.
Evaluate mortgage options and determine which loans will work best for your specific property and exit strategy.
Calculate LTV to measure the value of the loan to the value of the property.
Determine the ability of the project to service the debt by using the debt service coverage ratio.

Types Of Commercial Real Estate Loans

There are many types of commercial investment, and the investor and their advisors determine which financing option best fits their needs and strategy. Each loan type will have its unique eligibility requirements, down payment necessary, minimum credit score, and experience level. These loans also have varying terms to focus your attention on, including the loan term, interest rate, and loan-to-value (LTV) ratio.

The following are some of the commercial real estate loans which may meet your specific goals:

Small Business Administration (SBA) 7(a) Loans

The U.S. Small Business Administration offers several loans under the 7(a) umbrella, each of which is designed to provide financial assistance for small businesses. Investors looking for commercial real estate loans should carefully consider which of the following 7(a) Loans will work best for their next project:

Certified Development Company (CDC) / SBA 504 Loan

The 504 Loan Program is another SBA product made available through Certified Development Companies (CDC). These loans are specifically intended to stimulate business growth and job creation by offering small businesses yet another financing avenue. More specifically, however, the “504 Loan Program provides approved small businesses with long-term, fixed-rate financing used to acquire fixed assets for expansion or modernization,” according to the SBA.

Conventional Loan

Also known as traditional loans, conventional commercial real estate loans are issued by banks or lending institutions. Consequently, conventional commercial real estate loans are not backed by the federal government. Often used to purchase and finance assets like owner-occupied office buildings, retail centers, shopping centers, and industrial warehouses, conventional loans have developed a reputation for some of today’s most widely used commercial real estate loans.

A traditional commercial property loan typically finances anywhere from 65% — 85% of an asset’s loan-to-value ratio. As a result, borrowers will often be expected to cover anywhere from 15% — 35% of the property’s fair market value/purchase price. That said, there is usually no loan maximum. Borrowers can, however, expect commercial real estate loan terms to last anywhere from 5 — 20 years, with payments fully amortized over the loan’s duration. While conventional loans tend to come with lower fees, they are often harder to receive approval for.

Commercial Bridge Loan

As their names suggest, commercial bridge loans represent a temporary loan option for investors to exercise—one that bridges the gap—until refinancing becomes available to make the switch to a longer-term loan. Typically offered by institutionalized lenders, commercial bridge loans award many borrowers the ability to compete with all-cash buyers. Since commercial bridge loans usually finance up to 90% of a property’s LTV, those who can’t use cash should find it easier to get their foot in the commercial real estate sector. Since bridge loans are short-term, they don’t tend to last longer than three years. Therefore, borrowers should expect to refinance to a long-term loan sometime shortly.

Hard Money Loan

A hard money loan is made available to commercial investors by organized semi-institutionalized lenders. More importantly, however, hard money lenders are typically licensed to lend to real estate investors and specialize in short-term high-rate loans with fees that award many investors the chance to buy commercial real estate that they wouldn’t be able to otherwise.

In return for roughly 60% — 75% of the asset’s after repair value (ARV), hard money lenders will require interest fees upwards of 15%, in addition to about four points (another upfront percentage fee based on the loan amount). While hard money lender fees are sometimes as much as four times that of traditional lenders, they may be well worth the cost of admission for short-term loans. Not only is funding granted within a few days (as opposed to months with traditional lenders), but it can be a lot easier to receive approval for. If, for nothing else, hard money loans are asset-based, meaning the lender makes a decision based on the subject property and not entirely on the borrower.

Conduit Loan

Otherwise known as commercial mortgage-backed securities (CMBS), conduit loans are commercial real estate loans secured by a first-position mortgage on a commercial property. Conduit loans are traditionally offered to borrowers through commercial banks; conduit loans offer borrowers a fixed interest rate over 25 — 30 years. However, it is important to note that conduit loans will require a balloon payment at the end of the term. Thanks primarily to their relative flexibility, conduit loans allow many commercial real estate investors to qualify for a loan that typically wouldn’t.

Insurance Loans

Life insurance providers, or conglomerate companies, offer commercial real estate loans where the borrower’s line of credit is secured with a first lien position on the property. These loans are typically only used by strong borrowers who have an excellent credit history. Further, they are best used on newer properties, or those deemed less risky for the borrower. Most providers will favor industrial, office, retail and apartments though investors may still find success funding a mixed-use property with an insurance loan.

Summary

To truly understand how to invest in commercial real estate, investors need to fully comprehend the financial components that go along with it. Commercial investment property loans are nothing short of instrumental in the success or failure of a particular exit strategy. Therefore, take the time to review the commercial real estate financing process or consult an expert before getting involved in the process, including the various loans made available to you and everything else that will affect the success of the project.

Benefits of Multifamily Investing

April 21, 2022 by Peter Spoleti / Vertex Markets Inc. Leave a Comment

Create Passive Income Through Multifamily Investing

Real estate investors have many options for their investments, with many different types of properties to consider. Real estate investing may seem overwhelming to the new investor. While considering types of properties to invest in, multifamily properties make your list. From passive income to tax advantages and more, there are many unique benefits of multifamily properties for investors. In this article, we’ll discuss some of the top reasons to consider adding multifamily property investments to your portfolio.

What is a Multifamily Property?

Any property consisting of two or more housing units is a multifamily property. Properties are as small as a duplex to as large as an apartment complex with hundreds of units. Smaller properties consisting of four or fewer housing units are considered residential multifamily properties, while properties with more than four units are considered commercial properties.

The Strong Demand for Multifamily Properties

There are always people who want or need to rent rather than buy. Creating a virtually “endless” pool of potential tenants makes multifamily properties especially attractive investment opportunities to all types of investors.

Homeownership declining. According to census.gov, homeownership has been on the decline since 2005, with only a small uptick in 2020. As property values continue to rise, young people are finding it more difficult to afford their first home. That increases demand in the rental space and should drive up rent prices as well. That’s a win/win for multifamily investors.
Increasing rental demand. Renter-occupied housing units have been on a steep increase since 2006.
Apartment vacancy declining. Rental vacancy rates in the US have been in a downward trend since 2010. Nearly 39 million people live in apartments today, and the industry is quickly exceeding capacity.
Production is short of demand. It will take building an average of at least 325,000 new apartment homes every year to meet demand. Yet, on average, just 316,000 apartments were delivered from 2012 through 2020. If progress continues at this pace, there will continue to be strong demand for rental properties, with demand exceeding available units.

Property Improvements Can Increase Asset Value

The value of traditional investments such as stocks and bonds is determined by the markets. With a multi-family property, however, you can perform improvements to increase the asset value, and the ability to increase rents.

A strategic strategy for many multifamily property investors is to seek out underperforming properties, then increase property value by adding modern amenities, performing interior and exterior renovations, upgrades, and more. Apartment buildings provide the opportunity to actively increase property value and revenue by making improvements to the property that can allow you to increase rental rates and attract more tenants.

Historical Performance

No investment is guaranteed, and past performance is not indicative of future performance, apartment buildings have historically provided greater returns compared to other types of real estate. According to a study by the National Multifamily Housing Council (NMHC), apartments dominate holding period returns and risk-adjusted returns for 3, 5, 7, 10 and 15-year holding periods.

Hedge Against Inflation

Inflation negatively impacts many sectors. But historically it hasn’t been the case for real estate. During periods of inflation, both property values and rental rates have tended to increase significantly. This makes multifamily properties a potentially viable investment to hedge against inflation as part of a diversified portfolio.

Risk is Minimized in Multi-Unit Buildings

In multifamily properties, all tenants contribute to the income for the property. Losing a few of your tenants in a 100-unit building isn’t going to impact the property’s gross income as much as if you lost your sole tenant in a single-family property or a major tenant in a commercial building.

Tax Benefits

There are several tax benefits of investing in multifamily properties, including:

Depreciation. Property depreciation can be written off, so you can keep more of your income in your pocket.
Mortgage Interest Deduction. Any interest paid on the mortgage for a multifamily property can be deducted at tax time.
Capital Gains. Income generated through the sale of an asset is considered a capital gain. This income is taxed differently than regular income. Real estate properties held for more than a year before the sale would be considered long-term capital gains, which are generally taxed at a lower rate than typical income or short-term capital gains (held for less than one year).

Property Management is Easier

Taking care of one multi-unit building is simpler than doing maintenance and repairs in multiple single-unit structures. It’s also cheaper if you break it down by cost per unit because many of the systems require repair services for all the tenants.

Growth Markets Easy to Spot

Buying a newer apartment building on the outskirts of an expanding urban area can pay off for you. As the population of the city increases, more folks will be looking for out-of-town living options. Additionally, there is an opportunity in searching out undervalued or underperforming buildings in high-demand areas that can be renovated or improved to increase the value substantially.

Get involved in Multifamily Properties Today

Are you interested in the possibility of generating passive income through multifamily investing? Vertex Markets can help. Our team specializes in CRE & Multifamily real estate Projects and can walk you through how to get started. The benefits are clear, and the process isn’t complicated. The best time to get started is right now because property values continue to rise. Contact us today to learn more.

Guide to Business Growth Through Strategic Business Partnerships

April 21, 2022 by Peter Spoleti / Vertex Markets Inc. Leave a Comment

Business partnerships are a very efficient and effective strategy for growing a business, some say, dating back hundreds of years, and why not they work. Partnerships strategies have survived all these years because their benefits are without question. They help the partners expand their capabilities, capitalize on synergies, exploit opportunities, reduce risk and benefit from an expanded marketable database

For businesses in today’s ever changing essentially digital marketing & operational business environment, partnerships can provide a very beneficial role now and for the future of the business: they help businesses stay productive and competitive in a very aggressive and crowded marketplace. It’s understandable why so many businesses pursue this strategy.

Strategic Business Partnerships, What are They?

In business strategic partnerships can help them close gaps in content and capability, expanding each business’s exposure online and off and expanding their expertise, and offerings, while with the potential business able to lend or borrow the branding of their new partner.

Though not all strategic business partnerships meet their goals. Success depends largely on finding the right partners, forging the right partnership, and doing the work to make them successful.

Since partnerships have the potential to be very lucrative, many businesses of all sizes pursue some form of partnership to help grow their business.

Most businesses will promote their new partnership by displaying each other’s logos on their website or on some digital media platforms. Many even will deliver a collaborated announcement to their respective databases. Though few will collaborate on ongoing marketing and business development throughout the pre-client and client-experience stages. They assume the additional value they have created, through their new partnership, for the benefit of their clients should be acknowledged by their clients and the industry. This way of thinking undercuts a primary benefit of partnerships enhancing audience reach, conversion, and engagement.

What’s a good strategic business partner firm?

A good strategic partner business will have the following characteristics:

Audience: Serves the same (or similar) audience you currently–or wish to–serve.
Synergies in areas of expertise: Offers a service or product that complements–rather than competes with—yours and is interested in your offering.
Branding & Reputation: They should increase your credibility with an audience and not raises any red flags when you’re searched for online, for the business or its team members.
Visibility: Has a sizable database with minimally overlaps with yours, a site whose domain authority is just as good if not better than your site’s, and has a similar size social media footprint as you do. Try to find a partner that shares your social media and industry exposure as you believe in.
Content Development and Distribution: They frequently and consistently produce insightful, educational content in different formats—blog, video, infographics, etc.—that they disseminate through integrated marketing platforms and campaigns.
Commitment to reciprocity: Is comfortable sharing the stage (figuratively or literally) with you.
Clients: They will give you access to their database and clients you don’t have access to.

These are an outline of the characteristics to look for in developing a strategic partnership. Though finding a good fit as a good strategic business partner requires a closer look at how partnerships fit into your business strategy.

Where to find the right strategic business partners

As soon as you have an outline and goals of how you and strategic business partners can collaborate, it’s time to implement a plan and start looking for prospective partners. Some good places to start are:

Start with your own professional network
Experts or thought leaders in your target industries
Industry-specific professional networking platform groups
Industry conference’s Sponsors and/or speakers
Targeted Industry association members
Business journal lists
Targeted Industry publications
Professional networking platforms
Industry-specific digital media contributors

How to probe for prospective partner information

Once you have a list of potential partners, it’s time to do the research on each one. Start with their website. Next, sign up for their newsletters, attend their webinars, and follow them on social media. Then ask yourself:

Do their services meet your client’s/audience needs without competing with yours?
Do any of your services meet their clients’ needs?
What new value proposition can you offer clients by joining forces?
Do they develop high-quality educational content?
How do they promote their services? Through what channels?
Is their brand a good match for yours—ie, is their reputation, values, and style in sync with your firm’s?
Do they partner with your competitors?
Do they have an engaged audience on social media?
Do they externally publish and speak at conferences?

It’s crucial to know whether prospective partners have the digital marketing chops, service capabilities, or both to help you reach your business goals.

As soon as you narrow down your list, you can start reaching out.

Partner meeting agenda

Once you contact and agree to talk with your prospective strategic partner, plan an agenda for your conversation. These are some ideas of items to include:

Ways your firm could help theirs. Remember, this initial conversation has to be focused on what you can do for them and or how the partnership can be mutually beneficial. Make sure to include several specific ideas on how your products/services will benefit their clients.
Ask about their target audience (company sizes, demographics, job titles, etc.)
Ask how they market to their prospects, and what they think their audience
needs most.
Ask how they’ve conducted joint promotions or joined-up services with partners currently or in the past and how it may have changed over time.
Ask how they usually measure success and what goals they have for a strategic partnership.

No matter how thoroughly you vet a potential partner and negotiate your agreement with them, you won’t know if you’re compatible until you start collaborating. To ensure success, clarify the roles, goals, and measures of success for both sides.

Don’t Wait to Find Out Your Business Valuation

Suggested Reading:

Some Types of Commercial Real Estate To Invest In

Suggested Reading:

Benefits of Multifamily Investing

Create Passive Income Through Multifamily Investing

What is a Multifamily Property?

The Strong Demand for Multifamily Properties

Property Improvements Can Increase Asset Value

Historical Performance

Hedge Against Inflation

Risk is Minimized in Multi-Unit Buildings

Tax Benefits

Property Management is Easier

Growth Markets Easy to Spot

Get involved in Multifamily Properties Today

Suggested Reading

Guide to Business Growth Through Strategic Business Partnerships

Strategic Business Partnerships, What are They?

What’s a good strategic business partner firm?

Where to find the right strategic business partners

How to probe for prospective partner information

Partner meeting agenda

Suggested Reading: