Burt M. Polson - Commercial Real Estate Broker

Guiding you through the real estate part of your life™

Commercial Sales, Leasing, and Consulting

Private Equity Real Estate Funds

Commercial vs residential real estate salespeople

If you sold or purchased a house, there is a good chance a residential agent assisted you. If you are a business owner or an investor, then you most likely interacted with a commercial broker at some point.

Both residential and commercial salespeople have several things in common. Both need to be licensed with the state, both use real estate contract forms, and both receive a commission as payment for their work.

However, there are many differences not only in the types of real estate handled, but what each does, how they stay on top of the market and the resources available to them.

Selling and Leasing

Commercial brokers sell and lease commercial real estate. Investment real estate such as a retail storefront or industrial building has tenants who come and go. Property owners usually use the services of a commercial broker to secure a new tenant.

Residential agents usually only sell houses or help buyers purchase a home.

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Proforma "pixie dust"

You will find several opinions regarding a proforma financial report for an investment property. Some descriptions used may be “working magic,”  “pie in the sky,” and “using a bit of pixie dust,” to coin a few terms.

With accurate research, a proforma statement can be a valuable tool an investor can use in determining the viability of an investment.

What is proforma?

Proforma is a method applied to a financial analysis that can draw focus to a specific figure of current or future projections. A “method” is a loosely used term as some would consider this manipulation.

You will find a proforma analysis widely used when analyzing investment real estate. There are several types of metrics used over a five or ten-year period, for example, IRR, net present value, and many more.

One could consider the five or ten-year projection of an investment property’s income and expenses to be a proforma analysis.

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Understanding the lease - part six

We have covered significant ground in this series of articles on leasing. In this final article, we are going to examine a case study where we look at the high-points of a recent lease I completed.

We started with part one where we compared a lease to a month-to-month rental agreement and what happens when your lease expires while the commencement date and rent payments were highlighted in part two.

Part three explained the security deposit and why to pay attention to the property condition and maintenance.

In part four we discussed how to handle repairs and alterations, the landlord entering the premises, subletting and terminating a lease early and in part five the types of forms and leases were illustrated.

Our case study is for a 7,500 square foot industrial building in the Napa Valley used for the production and storage of wine as well as retail sales, tasting, events and an office. I have withheld any identifiable features from our discussion for privacy.

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Understanding the lease - part five

Highlighting where we have been, in part one we compared a lease to a month-to-month rental agreement and what happens when your lease expires.

Part two defined the commencement date and why you should pay your rent on time if not early.

The use of the security deposit, property condition and maintenance was highlighted in part three.

Part four explained how to handle repairs and alterations, the landlord entering the premises, subletting and terminating a lease early.

I promised you we would be discussing the commercial lease, which we will start to do in this article. Fortunately, as I highlighted the major points of a residential lease, this laid the groundwork for the commercial lease because most of the terms are common to both.

The forms used

Just as there are several residential lease agreement forms available the same is true for commercial leases. In my locale, the majority of leases for most of the property types I handle use the 19 page (usually ends up being 31 or more pages) AIR CRE forms. CAR (California Association of Realtors) does offer a six-page commercial lease but is only suitable for basic properties when only a simple lease is needed.

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Understanding the lease - part 4

The lease is an essential document as it gives a tenant the right to use a property from the owner. Knowing the terms in the lease before you sign and during your use will provide you with peace of mind with minimal surprises.

In part one, you learned how a lease is a contract that creates a relationship which gives the tenant a right to use a property.

In part two we discussed the commencement date and the responsibility of paying the rent promptly.

Part three explained the uses of the security deposit and repairs & maintenance issues.

We are going to wrap up this portion of the series as we discuss alterations, entry, subletting and early termination as it pertains to the ten page CAR (California Association of Realtors) “Residential Lease or Month-to-Month Rental Agreement.”

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Understanding the lease - part 3

A lease can be an often skimmed-over document with most not concerned about its contents until a problem arises or the lease expires and you are wondering what to do next.

A lease agreement is a long-term contract bringing together two parties that details the relationship and what to do when it goes awry.

In part one, you learned how a lease is a contract that creates a relationship which gives the tenant a right to use a property owned by the landlord.

In part two we discussed the commencement date and the responsibility of paying the rent promptly.

We will continue our discussion on the ten page CAR (California Association of Realtors) “Residential Lease or Month-to-Month Rental Agreement.” We are referencing terms of tenant law in the State of California, but keep in mind I am not an attorney so be sure to consult with one if you have specific questions.

Here is what to know regarding security deposits, the condition of the premises, maintenance, and damage.

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Understanding the lease - part 2

Unfortunately, some leases can last longer than some marriages. Do not be caught in a lease you do not understand, a property that does not fit your needs, a landlord that does not seem to take care of their property, or a tenant who does not pass your qualifications.

I am currently working with a property owner of an industrial property and a winery tenant who wants to lease it for 15 years. Both parties are concerned with the terms in the lease and are investigating it and the property thoroughly.

In part one of this series of articles

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Understanding the lease - part 1

Getting stuck in a lease with less than favorable terms you do not fully understand can give you years of regret. Both landlords and tenants need to be sure they ask questions and know the specifics before signing.

Unlike purchasing real estate, the relationship created between a buyer and seller is relatively short-term lasting only a few months. A lease can be from one-year up to several decades so knowing what you are signing is important.

A lease is a contract between a landlord and tenant (often termed a lessor and lessee) that allows the tenant rights to the use of a property owned by the landlord for a period.

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House hacking - part 2

In part one we discussed my clients, Steve and Cheryl, who doubled their money using the house hacking technique in purchasing, managing, and living in one unit of their fourplex multi-family property.

House hacking is purchasing a two to four unit multi-family residential property, living in one of the units and renting out the others.

You too can be a house hacker if you have the passion for becoming a real estate investor and the fortitude of being a landlord.

The financial side of house hacking in Napa

If you find the right deal in the right location, you could have the tenants’ rent cover your monthly loan payments or more. However, in Napa, this could be difficult as we shall see why.

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