Monthly Archives: December 2015

Believe – Girls Fly! Race Day

Join INCO Commercial for horse racing and casino fun!

INCO Commercial enthusiastically invites you for a day of fun at Santa Anita Racetrack! Join us on January 30th, 2016 at 12pm for Believe – Girls Fly! Race Day. This charity event benefits Girls Fly!, an organization promoting girls and women to realize their life dreams. This event will be held in the exclusive Chandelier Room at Santa Anita Racetrack, with valet parking and private escorted entry. Enjoy delectable dishes from amazing chefs, a chance for entry to the Winners Circle, and ample networking opportunities among celebrities, entertainers, elected officials, athletes, business leaders and more! Don’t miss the auction, which includes hot-ticket items from the entertainment, fashion, and sports industries.

Believe – Girls Fly! Race Day will be a day to honor women and their avid supporters. Congresswoman Judy Chu will help honor Judge Consuelo B. Marshall as well as fashion designer Sir Keith Holman, for his tireless support of women equestrians. The Chandelier Room at Santa Anita serves as a lovely venue for this event, as Girls Fly! focuses much of their efforts within the equestrian, athletics, aviation, and the arts sectors. Santa Anita Racetrack naturally lends itself to equestrian and athletics interests, but its history and charm can entertain anyone.

INCO Commercial is a proud sponsor of the Girls Fly! organization, which empowers girls and women to realize their dreams. Girls Fly! embraces females from all walks of life and through mentoring and other engaging experiences, provides them with the tools and inspiration they need to succeed. Their curriculum emphasizes science, technology, arts, and math activities for real-world and practical experiences. Girls Fly! is an inclusive program and accommodates individual needs to ensure every participant’s dream is within her reach.

INCO Commercial is committed to helping build a strong, successful community. We believe in supporting organizations that serve to enrich and uplift our local area. By empowering individuals to find success and integrity, we are creating stronger members of our community for everyone’s benefit.  INCO Commercial is honored to be a part of this and other wonderful charities and events.

For event details and ticket information to this charity event, please click the link Believe – Girls Fly! Race Day .

We look forward to seeing you there!

The Turnkey Advantage: The Benefits of Owning a Turnkey Restaurant

INCO Commercial specializes in commercial and industrial real estate, which is commonly associated with apartment buildings, warehouses, offices, industrial parks, and more.

We are also involved with restaurant spaces, some of which can be purchased as turnkey businesses. Turnkey restaurants or businesses are an excellent opportunity to make an investment and have the potential of generating cash flow from the first day you take over the operations. Here we explore the benefits of owning a turnkey restaurant, and other things to look out for.

Advantages of Owning a Turnkey Restaurant
The known benefit of a turnkey restaurant is that everything is already established and ready to go. There is no time expense of building up and designing your space or developing a business plan; and if it’s a full package turnkey business, then training and management support are already in place and only the investment capital is required. It’s a great way for newer business owners and restaurateurs to gain experience in the industry with a reduced risk of failure compared to starting a brand-new business from the ground up.  

Cost Considerations
Often turnkey businesses are well-established franchises with a recognizable brand and a solid customer base. A large up-front cost can be expecting in acquiring a turnkey, but our agents can help distinguish whether there has been an exorbitant mark-up, and, if possible, even inquire with other franchisees if necessary for comparison. A franchise fee, and on-going royalty payments to the parent company are also common, or their money may be earned on proprietary products or recipes which must be purchased for the franchise. The regular operating costs of a restaurant are still applicable: utilities, rent, product inventory, insurance, building maintenance, and so on.

Research
If this franchise is not a new location, finding out why the previous franchisee is selling can give insight to the success of your future investment. The reasons can be harmless; perhaps they were instrumental in getting the business up and going, and it’s time to move onto their next venture, or maybe they are simply retiring. Even if the reasons may indicate a slight risk, it could have been a poorly managed operation, and you may have the skillset and strategy to turn it around and see success and higher profit margins. We are ready to help you examine all of these factors and determine whether a particular turnkey is the right investment for you.

If you are planning on taking over an existing operation, INCO Commercial can guide you through the necessary particulars to get the overall picture. A review of the full inventory can be requested to get an idea of the regular purchasing costs. Finding out if the current staff will remain or if a hiring process is necessary is important; sometimes the parent company can assist with hiring procedures, but typically it’s up to the franchisee. If the current staff does agree to stay on, expect a discussion of salary negotiations, which often happens during a time of ownership or management change. If the turnkey is of a well-established franchise, then a good marketing plan should already exist. However, if it’s a newer brand or lesser known business, then discovering what kind of marketing strategies have been successful (or not) in the past can help guide the planning of your marketing campaign in the local area.

INCO Commercial will also assist in performing due diligence on a prospective turnkey business to protect against any surprises and ensure your decision to invest will be an informed one.

Things to Consider with a Turnkey or Franchise Business
A turnkey franchise is great for people who have the investment capital and are looking to enter the restaurant industry without all of the risk of building a business or brand from the ground up.

However, there are some limitations, which largely have to do with creative and procedural decision-making. Because the customer base of a well-established franchise is expecting the same quality and similar experience from each location, franchisee operators must follow strict guidelines provided by the franchisor. These already-proven models guarantee the success of the franchises and ultimately the parent company. Any breach of contract or failure in complying with the standards are grounds for termination of contract between a franchisor and franchisee owner. Expansion is another limitation; franchisors will not want individual franchises competing with each other, so owning two of the same franchise within a small geographic area is unlikely.

Is a Turnkey Restaurant for You?
The largest advantage of a turnkey restaurant still remains that the business is generally ready to go when you take over operations. Depending on the kind of turnkey restaurant, you may want to consider a few things about your business style before choosing what you’d like your investment to look like.

If your turnkey restaurant is part of a well-established franchise, make sure you are agreeable to working within a highly structured organization. If you enjoy more creative control or flexibility, then independently owning your own restaurant might be the better direction for you. If you’re at the early stages and unsure which path is better, INCO Commercial always performs a Client Needs Assessment to help us understand your priorities and requirements. We can help you better understand your options and which would be the right match for you.

When you’re ready to venture into the restaurant industry, whether you’re looking for a turnkey restaurant, or break ground and independently own and operate an establishment, INCO Commercial is here to help! Check out our inventory of turnkey and restaurant spaces, and contact us through our website or give us a call at one of our locations most convenient to you!

Different Types of Leases on Commercial Property

Buying and owning commercial property is a great investment, but sometimes buying outright isn’t possible; therefore, leasing is an option that many commercial property investors take advantage of.  If you’re looking into leasing commercial property, there are several types of leases to explore before making a commitment. The INCO Commercial agent working with you will cover these in detail, but we’ve provided an introductory overview of the leases you can expect when looking into the commercial real estate market.

Gross and Net Leases
Two types of lease categories are gross and net leases, and the different subtypes of these leases have to do with the degree of financial responsibility from the lessor and lessee.

Gross Lease / Full Service Lease
The tenant pays only the rent, which is designed to cover all of the expenses the landlord needs to pay on the property. Usually this includes general janitorial services, property maintenance, and utilities as well. However, if the use of any of these may be ‘excessive’ because the  business has a high electricity demand, for example, these charges can fall back on the tenant. The tenant is also responsible for paying their own property insurance and taxes. The rent itself may seem higher than other types of leases, but remember, it’s all-inclusive.

Modified Gross Lease
While the payment is still a lump sum, some of the net payments like pro-rata property taxes, insurance, and CAM fees (Common Area Maintenance) can be included along with the rent. The tenant typically has the ability to negotiate which fees they’ll be paying; it varies whether utilities or janitorial services are included.

NET LEASES
Net leases have a lower base rent, however, the tenant is also responsible for paying part of the expenses associated with running or maintaining the property. The triple net lease is the most common, which is listed first. For example, almost all retail spaces are triple net leases. However, single and double net leases do exist, and are listed below. In the different types of net leases, the tenant assumes more financial responsibility at the next level. In each of these leases, the tenant is responsible for their own utilities and janitorial services.

Triple Net Lease (NNN Lease)
This is the most popular, and a favorable lease among landlords, as the tenant assumes much more of the financial responsibilities. The name refers to the three ‘nets’ the tenant is responsible for paying: net taxes, net building insurance, and net CAM fees, in addition to the base rent.  

Double Net Lease
The tenant is is responsible for the base rent, a share of the building’s property tax, and the property insurance. The landlord still covers other building or operating expenses.

Single Net Lease
The tenant is responsible for the base rent, plus a share of the building’s property tax. The landlord takes on the other operating expenses of the property.

With any of these leases, some of the details to consider include the terms of the security deposit, what kind of signage is your business allowed, clauses specific to co-tenancy, sub-leasing or exit-plans, and what kind of escalations in rent or fees (e.g., CAM fees) may occur.

INCO’s Eye for Detail
Since the specifics of the fees, especially the CAM fees, can vary, the INCO Commercial agent working with you will ensure clarification of all fees, caps, and lease contract terms, and help you determine the best choice based on your requirements and financial circumstances. We will also help you go through the provisions of your lease, and negotiate any adjustments where possible, to maximize your benefit.

Master Lease Agreement
Another type of lease is the master lease agreement. This is basically leasing with the option to purchase, similar to lease-option when pertaining to a single family residence. The master lease agreement can work with most commercial real estate properties that are generating some kind of income, such as apartment buildings, mobile home parks, or retail stores.

The master lease agreement is often favorable to both buyer and seller of the property. In a master lease agreement, the buyer gains equitable title to the property, which means all of the profits and tax benefits go to the buyer. In this arrangement, the buyer is responsible for everything involved with the property: management, maintenance, utilities, taxes, and so on, while the seller remains the legal owner of the property and receives monthly lease payments from the buyer. Another perk for this arrangement is that the banks are not involved in this process; this is beneficial if the buyer has little or no experience or credit, and it’s less risky for the buyer because the title and any loan on the property are still in the seller’s name. The buyer does not need to put money down, and also has the option to purchase the property after an agreed-upon number of years.

The great benefit to the buyer is, again, the profit on the property. After the monthly lease payment and operational expenses are paid, any profit gained goes only to the buyer. If the buyer decides to increase the value on the property with upgrades or improvements, or raises the rents on the tenants – the money from those profits go to the buyer.

The INCO Commercial agent working with you will ensure that all of your bases are covered, and that everything concerning the terms of your lease are clearly understood. Additionally, we will look closely at the type of lease and the terms of the lease in the context of the property. The length of the lease also factors in, and often the most tenant-friendly type of lease is a short-term one, with multiple options for renewal. With this kind of a lease, it’s easier to assess your situation and decide if, at the end of the lease, whether to remain with the space because it serves you well, or if it’s time to move because the space is either too big or too small.

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Our INCO Commercial agents are integral in the process of acquiring or leasing a commercial real estate property. Because our agents have intimate knowledge of the area, they are highly familiar with the history and context of the local market, and which types of properties will best serve our clients needs and requirements.

Let us know when you’re ready to make your move in commercial real estate! We specialize in commercial real estate brokerage, and can help you in the acquisition, leasing, or disposing of a property. Explore the rest of our newly re-designed website, www.incocommercial.com, or find out how to contact us at any one of our three locations, /contact-inco/! We look forward to working with you on your next venture!

Purchasing Commercial Real Estate Property

Purchasing commercial real estate property can be an intimidating experience, as there is so much more to consider than a residential real estate purchase. The process itself can be overwhelming, especially for a first-time investor, but working hand-in-hand with an INCO Commercial agent will greatly ease the burden. Our agents are armed with years of experience, expertise, and local market knowledge. We are confident we can help you find the best property at the right price to suit your needs.

The following is a basic overview of things to consider and expect when preparing for a purchase in commercial real estate.

Determine Your Objective

You probably already have a good idea of the intended use of your future commercial real estate property. The use of the property will ultimately help determine the importance of other factors when purchasing your ‘ideal’ property.

When our clients come onboard with INCO Commercial, we perform a Client’s Needs Assessment to ensure that we fully understand our clients, their goals, and requirements for the property. Our philosophy is to keep our organization and business client-centered, and getting to know our clients is top priority in order to best serve your needs.

Analyzing the CAP Rate and Operating Income

Examining the capitalization rate (CAP Rate) and operating income are also key factors in determining interest in a property. Net Operating Income (NOI) is the income the property generates, less the cost of operating expenses.

The CAP Rate is the ratio of NOI over the cost or value of the property, just one of the metrics used in measuring the value of real estate. Basically, analyzing the CAP Rate can help you figure out how fast the investment will pay for itself, and also give insight to the risk factors associated with the property.

Financing

How will you be financing this endeavor? Know how much you can afford to pay, and who you might be financing through. If you’re not familiar with some of the commercial real estate terms, we can help you understand what is your LTV (loan-to-value ratio), DSC (Debt Service Coverage Ratio), Cap Rate, Cash on Cash, and Ad Valorem, for example.

Location

This is the most clichéd, but truest components when it comes considering any property. The location has to serve your investment’s purpose well.  INCO Commercial is committed to finding the best match between you and a property or space to fulfill your interests.

We’ll help you consider the intention, requirements, and features of a prospective property. If the intent of the property requires heavy foot traffic for customers to interact with your business, then obviously looking for something in an urban or downtown suburban area is desirable. Having a good understanding of your customer base also helps in choosing location, to determine where those customers are and how to get in front of them. If this is your first venture and you’re unsure about your customer demographic, observe your close competitors and see what kind of clientele they attract.

Access for people with disabilities and adequate parking are important things we will also consider. On one hand, being in a high traffic/high volume area is great, but losing out on business because your customers can’t find parking or access and go elsewhere is a detriment.

We discuss the positives and negatives if the neighborhood is undergoing gentrification; the finished product could be ideal for your business, if it coincides with your timeline, or it could hold back traffic flow if it doesn’t. If you’re requiring more of a warehouse or distribution space, an industrial center closer to a freeway might be more ideal.

Expansions or the need to lease part of the property is a real consideration which we will address as well. Would your business or the prospective property allow for expansion in that same location? Or, going the other way, would you consider leasing the extra space if it ended up being too much for your needs?

As part of the due diligence process, INCO Commercial will also help you discover the property’s past uses and limitations and how that factors into your purchase. The physical demands placed on the property or the structures could mean potentially costly repairs for you down the line. Our agents are well-versed in the type of zoning laws and building codes particular to the local area, which determine what kind of alterations are legally allowed.

Allow Time… and Due Diligence

There’s a lot that goes into changing hands on a commercial real estate venture, so naturally the process could potentially take longer. Keep in mind that it is actually both the buyer and the seller’s responsibility to do due diligence on the property, which may or may not end up working out for you in the end. This process in itself can take a few months, but it is worth it to protect yourself from a bad deal. Our agents at INCO Commercial will ensure the due diligence process is meticulously handled and guide you through accordingly. We work hard to make sure your money is invested wisely and that the property best matches your needs, but sometimes unexpected reveals from the inspections, reports, or the appraisal can negate interest. Expect to make a small investment towards due diligence, but know that it can save you from some potentially unpleasant surprises and their subsequent costs, and/or help confirm your choice in property.

Letter of Intent or Purchase Contract

When you are ready to make a serious offer, INCO Commercial can help draft a Letter of Intent (LOI), and/or a Purchase Contract. An LOI, as the name suggests, is a typically non-binding document (unless declared otherwise) outlining your intent, as the buyer, to purchase the specific property at “x” price, along with a summary of the principal terms and deal.

The Purchase Contract is the legally binding document which details in full the terms of the transaction, listing of parties involved, adjustments, recitals, conditions to closing, etc. for example. Our agents determine for each individual case whether both an LOI and Purchase Contract are necessary, or just the Purchase Contract.

These are just some of the aspects of purchasing a commercial real estate property. INCO Commercial is highly dedicated to our clients; we work closely with you through each step of the process. Our extensive local knowledge, experience, and commitment to your best interest drives us to find the right match in order to maximize your profit gains. Check out our website for more information, or contact us to start your new business venture today!

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