Tag Archives: Bridge Loans

Is The Student Housing Sector Impacting The Commercial Mortgage Lenders Bottom Line?

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Needs for amenity packages get real including the best that technology has to offer

 

Over the last five years the student housing sector has witnessed an overflow of amenities in properties and this trend has continued to this day. One is likely to see amenities like rock-climbing walls, lazy river pools and spas among others. There’s actually no real demand for such amenities although many developers seem to believe that students find these fancy things, cool. That’s not the case though. One can expect good sense to prevail and developers will realize before long that such amenities only end up escalating the construction cost which finally means that only affluent students are able to afford such housing which is not how it is supposed to be.

 

Technology Based Facilities are in Demand

 

Owners of student housing units need to take up the matter with property developers and offer them some insights into student preferences in a house. The students don’t come looking for the ultimate in luxury and high end amenities and certainly not if it inflates the cost of their lodging. As young people, they are more interested in working hard to get good grades in whatever line of education they are pursuing. What they really want in their rooms is the best Internet and information technology facilities as they usually have three to five devices connected to the Internet at any given time.

 

Owners of student homes need to understand that these students get annoyed when Internet service is inconsistent and they want every unit to be well-equipped for wireless Internet connections. Property owners must avoid buying cheap Internet services and stop considering these as expenses more than investments. Internet services are a vital necessity today especially for students who rely on such services to augment their knowledge base. Therefore, student home owners should make efforts to understand Internet technology better and learn more about the service providers. They need to make sure that they are providing their tenants with top-quality Internet services rather than fancy luxury amenities.

 

Investors Getting Wiser on Student Housing

 

Today, commercial mortgage lenders look at the student housing sector more favorably as they’re now better educated on how properties located close to large, tier-one universities usually show strong net operating income growth over time. This realization has helped to create premium pricing for such properties and yet, up to some years back, the average property buyer was unwilling to offer commercial bridge loans for student housing properties. They didn’t show any interest even in strong locations in markets that serve tier-one universities, let alone markets close to tier-two universities.

 

How far the perception of commercial mortgage lenders about the student housing market has changed can be understood from the large number of student housing firms that now take a more serious approach to owning and managing their properties than they did a few years ago. In fact, these investors now look around for meaningful information on the performance of existing student housing properties as well as the new developments that are in the pipeline. There is realization among lenders offering commercial bridge loans that student housing is an attractive asset class that performs well even in tough economic times. During the Great Recession of a decade back, it was the student housing sector that was least affected compared to the overall real estate market in the US.

 

Park West Capital is among the commercial mortgage lenders that look favorably at the student housing sector and offers its commercial bridge loans to investors interested in the sector.

Commercial Real Estate Owners Need to Know the IRS Depreciation Schedule Better

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Did you know that the Internal Revenue Service (IRS) considers commercial real estate an asset and not an expense? That’s exactly why you don’t get to write off the cost of your property in the year you buy it. In order to make good the gradual loss of your property’s value while it deteriorates, you will have to decrease its value by a small amount every year, which is what depreciation, is all about, as per the IRS. Although commercial buildings generally have a lifespan of around 39 years, you have the option of speeding up the process of depreciation in less time in order to claim the compensation.

 

Depreciation Applies Only to Commercial Buildings

 

According to the IRS land doesn’t deteriorate over time and hence commercial land cannot be depreciated. However, people buy land and building together which makes it necessary for owners of commercial property to allocate the value of the property proportionately between the land and the building because commercial buildings older than 39 years fall under the depreciation rule. This is where things begin to get complicated and the need for expert advice is felt. You can speak to the experts at Park West Capital to know how to allocate the value of your property in a way that not just maximizes your depreciation but also ensures that it complies with IRS requirements. In case you just buy land on which you later construct a building it will be depreciable over 15 years.

 

Depreciation on Leasehold Property

 

The 15 year depreciation rule also applies when you build space to lease out to a tenant since the property will require periodic changes with a change of tenants since the changes don’t last as long as the building. You need to make sure though, that the changes are done only to the portion that has been leased out and no structural changes are made to the building. You can contact Park West Capital for a bridge loan to carry out the changes to your leasehold property at competitive terms. Aside from the option to speed up depreciation in 15 years, the IRS allows you the option of writing off the remaining leasehold changes with a one-time payment if your tenant decides to move out before completing 15 years.

 

Divide your Cost to Enable Faster Depreciation

 

Not all parts of your building have a lifespan of 30 years which allows you to divide it into different parts. For instance, there would be fixtures and electrical and electronic equipment installed in the building on which the depreciation can be speeded up. Therefore, it is advisable that you divide the cost of the different segments of your building. This is easier said than done and you will need expert advice to help you know how and where such depreciation is applicable. When you speak to us at Parkwest Capital for a bridge loan to fund the changes in your property you also get valuable insights on how to utilize your credit and asset value in the most optimum way. You can avoid claiming more depreciation going forward when you take more depreciation in the initial stages.

E-commerce Growth Impacting the Industrial Real Estate Market?

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The industrial real estate industry market is rapidly evolving with the demand of consumers for faster delivery of products and with advanced technology in the logistics and retail industries. Due to the changing habits of today’s consumers and the rapid growth of e-commerce, there has been a big spike in the development of massive distribution centers in the US.

 

There has been an increase in demand for well-located “last-mile” fulfillment centers that are located near population centers by major e-commerce players and retailers for the purpose of meeting the precise needs of consumers for quicker product delivery at their doorstep. Before the product arrives on the doorstep of the consumer, the last mile is essentially the last leg of the product’ trip.

 

It is essential to understand that the new “retail model” requires industrial distribution centers that should be located near population centers. In addition, these centers should have high ceilings and be compatible with online purchases. It is essential to understand that the development of the modern distribution centers has increased rapidly in the last few years due to the rising demands of these centers by Amazon, Walmart and various other e-commerce leading companies.

 

The industrial real estate sector is the big winner

 

Due to the rising demands of the distribution centers by the leading e-commerce players, the landlords are enjoying record high rents and increasing property values. It is important to understand that the industrial vacancy is at an all-time low in the US. It has rapidly declined by 70 basis points from a year ago to an aggregate nationwide vacancy of about 5.3% in the fourth quarter of 2016.

 

There is no doubt that e-commerce is driving the demand of distribution centers in the US due to increased demand for inventory by the e-commerce players such as Amazon. For example, Amazon, which is one of the leading e-commerce players in the US, continues to broaden its product and service offering. It is estimated that it will require three times or more distribution centers.

 

Finding the right distribution center is challenging

 

In the last few decades, the biggest challenge faced by the e-commerce site is to locate distribution centers near the population pools. In order to deliver products quickly with lower logistics costs, it is beneficial for the e-commerce players to have distribution centers near highly populated cities. Major developers in the US are involved in the construction of distribution centers that are not more than six to nine miles away from the major metro cities, as per the recent report published in a leading real estate journal.

 

Finding such centers has significantly increased the same-day delivery services by major e-commerce players such as Amazon, Walmart, Instacart, Google Express, and others. Most of the major players require easily accessible warehouses in order to deliver products within the promised time frame.

 

Are logistic facilities, changing to meet these standards?

 

It is essential to understand that the logistics facilities are not a new concept in the US real estate market, but what is new is the state-of-the-art technology that is used for meeting the needs of the consumers. There were a large number of catalog houses where consumers would make an order and their order would be ordered in old buildings as they have their own trucks. This has been going on as part of the business. But consumers in the US are no longer using catalogs for making orders. They visit the online website and make an order while sitting in the comfort of their home or office with just a simple click.

 

It’s all about accuracy, speed, and customization

 

The e-commerce site has the unique ability to track what their online order is. Consumers are able to track their orders online and know where the orders are actually located in most cases immediately. Due to their wide distribution network and strong logistics support, big players like Amazon can deliver it to you in some cases within hours. It has captured a way to do it faster, cheaper and more customized solutions based on the needs and preferences of the customers. How’s that possible? It’s technology. As much as they’re a logistics company, they’re a technology company.”

 

E-commerce is big business

 

It is essential to understand that consumers alone in 2016 bought about $400 billion in goods from different online portals. Moreover, the sales of major e-commerce have been increasing rapidly by about 15% per year. In addition, many experts believe that the e-commerce business in the US will only continue to grow and the business is just in its infancy stage. The e-commerce business has driven the business of the industrial real estate sector in a big way.

 

This update is provided to you by Park West Capital. With over a decade experience specializing in real estate financing and commercial lending opportunities. We have assisted numerous clients with growing their real estate portfolios and providing the funding resources. We firmly believe in accountability, excellence, integrity, entrepreneurship, and teamwork. Contact us at 800-969-4901 to learn more about how we can professionally assist you with your investing needs or fill out our hard money loan application and we’ll get in touch with you.