Patrick Graham

What is a 1031 Exchange? A Beginner’s Guide

To minimize or defer the tax bill when selling investment real estate, investors commonly use what’s known as a 1031 or Like Kind Exchange. In this article you’ll learn what a 1031 exchange is, how a 1031 exchange works, what the 1031 exchange rules are, the 1031 exchange timeline, and then we’ll cover some frequently asked …

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Understanding The Right of Offset

Whether you work at a financial institution, develop real estate, invest in property, or act as a broker, there’s a common thread that binds all facets of the real estate world together.  It’s highly likely that you have one or more financial products like a credit card, debit card, deposit account, car loan, commercial real estate …

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Introduction to Lease vs. Own Commercial Real Estate Analysis

Imagine you are a mid-level manager at a fast growing small business.  As part of the company’s expansion plans, you have been tasked with finding office space in a new city and deciding whether to lease it or purchase it.   Fortunately, there is an objective way to make this decision.  But, it can be a little …

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Understanding a Commercial Real Estate Rent Roll

When real estate investors are evaluating a potential rental property purchase or a bank is underwriting a potential loan, one of the first documents that they will ask for is the property’s “rent roll” or “rent roll report.” In this article, the rent roll document is described in detail and its utility in the CRE due diligence process is highlighted. …

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Three Types of Commercial Real Estate Obsolescence

One of the unique challenges of commercial real estate investment is that markets, types of property, return expectations, and physical environments are in a constant state of change.  As a result of these changes, a commercial property could be cash flow positive one day and undesirable the next due to shifts in tenant desires or some other factor. …

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Understanding the Personal Financial Statement

More often than not, some portion of every commercial real estate transaction is financed with debt. Typically, that debt comes from a bank or non-bank lender who agrees to lend a certain amount of money in return for certain concessions from a borrower.  For example, they will almost always require a 1st position mortgage on the property …

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Understanding the Co-Tenancy Clause

A typical retail shopping center or mall works under a tried and true business plan.  The owner and/or developer of the property works first to attract one or more “anchor” tenants and then surrounds them with a variety of smaller tenants who benefit from the traffic they create. Together, the anchor and their supporting tenants …

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Understanding the Texas Ratio

The retail banking system operates on a fundamental promise between the bank and the customer.  The customer opens an account and deposits money in it with the expectation that the bank will continue to stay in business and that the funds will be available for withdrawal when needed. But, history tells us that this isn’t …

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Understanding the Construction Draw Schedule

In some ways, a commercial real estate construction project is just like any other project. There is a start date, several interim milestones, and an end date when the property is complete and a certificate of occupancy has been issued. However, a commercial real estate construction loan is not like other loans. It is distinguished …

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How to Calculate an Interest Reserve for a Construction Loan

There’s no doubt about it, construction lending is tough.  From changing interest rates, long lead times, and freak weather events, there are a myriad of risks that can derail a project.  However, from a lender’s perspective, there’s one risk that is top of mind when making a construction loan – the borrower’s ability to make …

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