Expert offers advice on the challenges and rewards of commercial real estate investing
Veteran commercial real estate investment expert Jeff Johnson has just published the second updated edition of his highly regarded book Cash Flow Forever!: The Real Secrets of Real Estate Investing.
Commercial Real Estate Investing advice
With over 35 years of experience, Johnson shares his best client stories and experiences and takes the mystery out of doing the right things properly, the first time. He describes his best tried and true procedures and techniques for setting and reaching realistic goals in real estate investing.
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“There’s no luck in this business,” Johnson said. “Success comes from active involvement and constant due diligence. You have to study hard, work hard, and stay on your toes. You have to investigate things thoroughly, and make rational decisions based on the facts you find.”
For both new and even experienced investors, the devil is always in the details. Johnson offers a very conservative view from the point of view of someone who has been in the trenches and weathered the ups and downs of the marketplace. His book is a comprehensive and yet easy-to-understand primer that covers the essential elements of real estate investing concepts and strategies garnered and refined over many years.
Commercial Real Estate Investing example from book
Here is an example from his book, in which he lays out a well-defined path buyers concerning the use of one of the essential legal documents, the real estate purchase and sale agreement (excerpt from Cash Flow Forever!: The Real Secrets of Real Estate Investing Chapter 32, The Paperwork):
Whenever you make an offer to purchase property, you will use a purchase and sale agreement. This should be a comprehensive agreement put together by an attorney, legal document company or real estate organization. The language of the agreement should fit the laws of the state in which you are purchasing real estate. There are generic documents that will work in multiple states but it is best to have a document that fits the state you are in. The language in a purchase and sale agreement is most important when a problem arises; in such a situation you want to be protected and have a legally binding document.
Commercial Real Estate Investing – Here are a few important points to keep in mind:
- Make sure that you have the correct legal entities listed on the document.
- Make sure you have the legal description of the property correct and completely spelled out.
- Make sure that you have a very clear contingency clause (due diligence) that gives you a time period to inspect the property and determine if you want to purchase it. That clause must allow you to cancel the transaction and receive a full refund of your earnest money if for any reason you are not satisfied with the property during the due diligence period.
- If possible use earnest money in the form of a note due if and when you remove your contingencies. This saves you from putting up cash that will sit in a trust account for a property you may not purchase.
- Request that the seller provide and pay for a current Phase I Environmental Report upon acceptance of your purchase and sale agreement. If the seller will not pay for a Phase I, pay for one yourself. You can ask the seller to reimburse you for the report if it shows that the property has contamination and you want to cancel the transaction.
- Make sure that the purchase and sale agreement allows you to assign the agreement to another entity.
- Read the default language in the agreement carefully. In the event of default, you want the seller’s only remedy to be limited to retaining your earnest money. Default would occur if you remove your contingencies, put up your earnest money, agree to close, and then change your mind and do not close.
- Make sure all hand written changes made to the purchase and sale agreement during negotiation are initialed and dated. These agreements can get a little messy with a lot of back and forth negotiation. All parties want to be very clear on what their final agreement is. When the changes to the agreement are not legible it can cause problems.
- Remember that you can never be too specific. Tie down all the details. If you think something is not clear, clarify it.
- Request that the seller provide you with a preliminary title report upon acceptance of your offer; then, read the title report. Look for any easements, agreements or other issues that may affect the property.
Investing in real estate is a risky business. Johnson believes that real estate investing mirrors the very nature of life. Half of the battle in life is finding the right path. The other half of the battle is working to stay on the path and continuing to make forward progress, no matter how difficult the obstacles become.
Cash Flow Forever
In Cash Flow Forever commercial real estate broker Jeff K. Johnson lays out a simple but highly effective formula for building net worth and cash flow through real estate investing. Jeff shares his unique insight from working with a number of highly successful real estate investors for over thirty five years. The book contains real life stories and investing experiences that have proven to be invaluable. This practical and easy to read book cuts right to the chase and lays out “The Real Secrets of Real Estate Investing”.
Available at Amazon.
About the Author
Jeff K Johnson CCIM SIOR is the President of Black Commercial Inc., the brokerage division of NAI Black. NAI Black in Spokane, Washington. Jeff has over 35 years working with highly successful real estate investors and has formed numerous real estate investment partnerships. Jeff has taught “Real Estate Investing” at Spokane Falls Community College and is the past President of the Washington Commercial Association of Realtors. Jeff grew up in Forest City, Iowa where he attended Waldorf College and met his wife Kae. Jeff is an avid rock and alpine climber.