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 CENTURY 21® Commercial Program
FREQUENTLY ASKED QUESTIONS
1. How can the CENTURY 21® Commercial Program help me achieve my investment goals?
The CENTURY 21® Commercial Program is a unique network within the CENTURY 21® System. With approximately 550 offices and 2,000 sales associates nationwide and in Canada, the CENTURY 21® Commercial Program has an enormous network of experienced and trained commercial investment professionals who specialize in the field. This network has complete access to the referral services of the CENTURY 21® Global Support Network of 6,600 offices and 109,200 sales people. Members of the CENTURY 21® Commercial Program are active and productive in the commercial investment field on a daily basis.
2. What investment specialties are available within the CENTURY 21 Commercial Program?
Included within the CENTURY 21® Commercial Program are qualified professionals who focus on the sale and purchase of Farms & Ranches, Business Opportunities, Motel & Hotels, Mobile Home Parks, Golf Courses, as well as, the compete field of Apartments, Commercial Retail or office properties, Industrial facilities, Leasing, and land for development.
3. Why is leverage important to my investment decisions?
The purchase of real estate is one of few investments where leverage is available to the investor. This involves a small down payment, usually 25% of the purchase price, by the investor, with the balance, usually 5% of the purchase price by the lender. With a 25% down payment the investor controls the entire property and the cash flow. After the lender is paid, this becomes the Return on Investment (ROI) for the investor.
4. What are financial ratios and why are they an important part of the decision process?
Financial ratios are used throughout the commercial industry by investors, lenders, real estate agents and brokers. They provide a common "yardstick" by which buying and lending decisions are made. Some of the financial ratios are Capitalization Rate (CAP Rate), Gross Rent Multiplier (GRM), Debt Coverage Ratio (DCR) and Loan to Value (LTV). Your CENTURY 21® Commercial associate can explain these and many more commonly used financial ratios.
5. Do I need Property Management and how can this help me?
A Professional Property Management may be required by your lender, especially on major properties. Property Management companies take the day-to-day contact and management out of your hands. They provide rent collections, expenses payments and monthly financial reports to you. They also provide maintenance, late notices and oversee legal, landlord-tenant services. Your property is professionally managed with one point of contact for the tenants and timely reports to you, the owner.
6. What is a cash flow analysis and why do I need it?
A cash flow analysis is a report showing the current or scheduled income including rents and other income, vacancy and/or credit loss and a complete list of all operating expenses. With this information you get a Net Operating Income figure which is the net income of the property before loan payments or debit service. Loan payments are subtracted from the Net Operating Income to get the cash flow before taxes for each property. These reports may be done on a monthly, quarterly or annual basis. The larger the property the more often these reports need to be competed. Most property management firms will produce these on a monthly or quarterly basis in addition to the annual report that is necessary for preparation of income taxes.
7. What is a 1031 Tax Deferred Exchange?
Internal Revenue Code section 1031 allows investors meeting certain qualifications to sell an investment property and reinvest in another investment property within certain prescribed time periods and defer any capital gain income taxes on this transaction. There are specific time periods that apply and the basic rule to defer capital gains income taxes is the price and mortgage of the new property must equal to or greater than the old property and all the cash involved in the sale must go to the new property. Your CENTURY 21® Commercial professional can inform you of all the details.
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