Fundamentals of Commercial Real Estate This course is designed for agents or brokers who are in the residential business and want to learn about commercial real estate and for agents and brokers who are currently in the commercial business.
The course covers the basics of commercial real estate, and is written so you may complete the course without the use of any financial calculator. Financial information in the course is on a “before tax” basis. The course provides basic, practical information that can introduce you to the commercial real estate practice.
After completing this course, you will be able to determine if you want to enter commercial real estate practice on a full-time basis, if you want only to refer prospective clients to experienced commercial practitioners, or if commercial real estate practice is not for you.
If you are already active in commercial real estate, this course will provide basic, practical information that can be used to better serve your existing clients, and help you to attract new clients.
The course includes Core Law, and is approved by the Florida Real Estate Commission for 14 hours of Continuing Education credit.
Besides the 3-hr mandatory Core Law issues, there were some major topics we wanted to cover in a relatively short course. They are:
- Commercial Real Compared to Personal Use Real Estate
Here we wanted to compare the practice of commercial and investment real estate to that of residential real estate in the areas of ownership entity, financing, market area, holding period, maintenance and occupancy. In addition we discuss supply and demand factors in commercial real estate. - Types of Properties Found in Commercial and Investment Real Estate Practice and the Basis of Demand for Each Type of Property
Here we define the four property types, residential income, office, retail and industrial. We describe the property characteristics of each property type and the basis for demand for each property type. - Areas of Activity in Commercial and Investment Real Estate
We discuss the activities of leasing, brokerage, development and financing and investing. We suggest that the successful agent or broker specializes in one of these activities and in one of the four product types. - Anatomy of an Investment in Commercial and Investment Real Estate
We discuss the characteristics of investments through the introduction of the acronym IDEAL (Income, Depreciation, Equity, Appreciation, Leverage). We also introduce the cash flow model as a way to display the benefits of ownership or costs of occupancy. - Financial Rules of Thumb found in Commercial and Investment Real Estate
Without the use of a financial calculator, we teach the four common rules of thumb an agent or broker would use in the commercial real estate business: Cost per square foot, Gross Rent Multiplier, Capitalization rate, and Cash on Cash. We also discuss the shortcomings of each of these rules of thumb to let the student know that there is more to learn. - Forms of Group Ownership
One of the major differences in the practice of commercial real estate and personal use real estate is in the actual ownership of the property. Most agents and brokers are aware of joint tenancy and community property, but need to be exposed to the common forms of ownership they will find in the commercial real estate field. Also, many agents and brokers want to go into this new field to make investments of themselves or with others, so we discuss some basis Security regulations. - Before Tax Cash Flow Analysis
We take the student through the development of a first year projection of Net Operating Income and Cash Flow Before Taxes, using a very simple form and no calculator. Then we expand this to show a five-year Cash Flow Before Tax projection, using a second very simple form, to show how the numbers can change over time. We relate this section back to the Rules of Thumb section. Using a third simple form, we take the student through Sales Proceeds Before Taxes. This gives the student a look at a five-year cash flow analysis through acquisition, ownership and disposition. - What Comes Next?
Here we take the student back to a discussion of the three levels of involvement available to them in this field. We tell the student that if they want to be a full time participant in this field they will need to add the skills of Time Value of Money and Taxation. We point them in the right direction to find the sources of the additional education they will need to serve their clients well or to serve their own investment needs.
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