Constant Commercial Real Estate Articles & Insights

Portland's Unreinforced Masonry Buildings

Tue, 21 Apr 2026 16:01:09 GMT

What Buyers, Sellers, and Investors Need to Know

If you own, are buying, or are financing commercial real estate in Portland, unreinforced masonry has probably come up in conversation. Maybe your insurance carrier is asking questions. Maybe a lender flagged it during underwriting. Maybe you've seen alarming posts on social media claiming the city is on the verge of fiscal collapse because of it.

The underlying issue is real. The alarm, in many cases, is overstated. Here's the factual picture.

What Is an Unreinforced Masonry Building?

Unreinforced masonry buildings — the historic brick commercial blocks that define Portland neighborhoods from the Central Eastside to Alberta Street — were constructed primarily before the 1960s. They were built in an era when seismic risk in the Pacific Northwest was poorly understood. Their defining structural characteristic: brick or block walls with little to no steel reinforcement, and in many cases no structural connection between the exterior walls and the floor or roof diaphragm.

When the Cascadia Subduction Zone produces its anticipated major earthquake — scientists put the probability at roughly 37% in the next 50 years — these buildings are among the most vulnerable structures in the region. FEMA classifies URMs as "typically the most vulnerable to earthquake damage," including the risk of partial or total collapse.

Portland began formally inventorying its URM stock in the 1990s. At various points, city documents have cited the total at 1,600 to more than 1,700 buildings, spread across virtually every established neighborhood — Old Town, the Central Eastside, Mississippi, Division, Alberta, St. Johns, Montavilla, and beyond. These buildings are the architectural DNA of Portland's commercial districts. They're also one of its most complicated asset classes.

The Regulatory Picture — And Where It's Headed

This is where a lot of the public narrative goes sideways, so it's worth being precise.

There is currently no blanket mandatory retrofit deadline applicable to most privately owned URM buildings in Portland. The city has been working toward one since 2014, when the Portland Bureau of Emergency Management launched the URM Seismic Retrofit Project. Working groups, policy committees, and public hearings have produced recommendations — but not a mandatory citywide program for the Class 3 and 4 buildings that make up roughly 94% of the inventory: the retail storefronts, apartment buildings, mixed-use blocks, and small commercial properties that most private owners hold.

A 2019 attempt to require exterior placards on all un-retrofitted URMs was struck down after a federal judge found the city's building list inaccurate, ruling it "falsely identifies some buildings as unreinforced and erroneously identified some buildings as constructed of URM, even in situations where such a statement is patently untrue." That set back the mandatory program significantly.

What does exist is Portland City Code Chapter 24.85, which establishes cost-triggered retrofit requirements: when a URM building undergoes renovation work exceeding specific per-square-foot thresholds, or a change of occupancy, seismic upgrades are triggered. The city updated this code in October 2025, with new ASCE 41 evaluation requirements taking effect January 1, 2029 — a date you'll hear cited frequently. That date is real and consequential, but it activates evaluation triggers tied to renovation permits above $175,000, not a stand-alone compliance deadline for all URM buildings.

The policy trajectory is clear: requirements will grow over time, not shrink. But the cliff many people are describing doesn't exist in the form they're describing it.

Where the Real Market Friction Lives

None of the above means URM buildings are easy to transact. The private market has moved faster than regulation, and the friction is significant.

Insurance is the first pressure point. Carriers have become increasingly reluctant to write or renew policies on un-retrofitted URMs, or they price those policies at substantial premiums. When insurance is expensive or unavailable, lenders freeze — because virtually every commercial loan covenant requires continuous property insurance. When lenders freeze, owners can't refinance, which accelerates financial stress.

Financing compounds the problem. When a structural engineer's estimated retrofit cost approaches or exceeds the building's current market value, no conventional lender will underwrite the acquisition. The math breaks. This is not hypothetical — it's a real constraint in the Portland market today, and it directly suppresses achievable sale prices on un-retrofitted buildings. Cash buyers, value-add investors with contractor relationships, and long-horizon owner-users become the realistic buyer pool.

Renovation triggers create another layer of complexity. Owners who have been deferring capital improvements may find that the moment they pull a permit for meaningful work, they've activated a seismic upgrade requirement that dramatically changes the project budget. Working with a structural engineer and code consultant before planning any improvements is not optional — it's essential.

What the Downtown Decline Adds to the Equation

Portland's commercial real estate market has experienced well-documented distress since 2020. The downtown CBD office vacancy rate reached 34.7% in Q4 2024, among the highest of any major American city center. The most dramatic illustration: the U.S. Bancorp Tower — Big Pink — sold in July 2025 for $45 million, against its 2015 sale price of approximately $372.5 million. That's an 88% decline in nominal value from one cycle to the next.

Big Pink is not a URM building, but its sale represents the broader pressure on Portland's commercial property values and tax base. Falling assessed values, widespread tax appeals, and compressed property tax revenue all reduce the financial resources available to city and county government — and reduce the cushion that property owners have to fund capital improvements like seismic retrofits.

The URM problem and the downtown office crisis are separate issues that interact. Owners facing declining rents and rising vacancies have fewer resources to address seismic compliance. That cycle is real and deserves attention.

If You Own a URM Building

The most important action right now is understanding your specific exposure — not the aggregate statistics, but your building's BDS classification, its permit trigger history, its current insurance status, and any outstanding compliance questions.

Before planning any renovation work, talk to a structural engineer familiar with Portland's Title 24.85 requirements. Know exactly what threshold you're working against, and what a seismic upgrade would actually cost for your specific building. That number will be project-specific — the range across the URM inventory is wide.

On the insurance front, don't assume your current policy will renew on the same terms. Have a direct conversation with your carrier about their URM posture, and if you're approaching renewal, get to the market early.

If you're considering selling, accurate pricing is everything. A URM listed at full market value equivalent will sit. The buyer pool is narrow and sophisticated — they know the cost-to-cure, and your asking price needs to reflect it. Getting ahead of the disclosure, rather than reacting to buyer discoveries during due diligence, is almost always the stronger position.

If You're Buying a URM Building

The opportunity is real, provided you price the risk correctly and have a clear capital strategy before you close.

Before writing an offer: get a structural engineer's assessment of actual retrofit scope and cost, have a direct conversation with insurance carriers — not just your broker, go to the market directly — and work with a lender who has actually funded URM acquisitions before. The discount you receive at acquisition must be calibrated against total cost-to-cure, not just the purchase price.

The buyers who will do well in this asset class are those who underwrite the full picture, acquire at the right basis, and have a realistic plan for either completing the retrofit or holding in a way that manages the regulatory and insurance exposure over time.

The Bottom Line

Portland's URM inventory is a genuine, documented challenge — for property owners, for lenders, and for the broader commercial market. The seismic risk is not hypothetical. The financing friction is real. The insurance difficulty is real. The regulatory environment is moving toward greater requirements over time.

What it is not, at least not yet, is the sudden universal crisis some are describing. The market for URM buildings is difficult, not dead. Transactions are happening. Informed buyers and motivated sellers are finding one another. The buildings that will suffer most are those whose owners are caught unprepared — unaware of their regulatory exposure, unaware of their insurance gaps, and pricing as though the URM designation is a footnote rather than a central underwriting factor.

Information and preparation are the answer. That's where we come in.

Cory Carlson is Principal Broker and President of Constant Commercial Real Estate, Inc. , a regional boutique commercial brokerage and mortgage brokerage serving investors and business owners in Portland, Salem, and the greater Willamette Valley. Questions about a URM listing or acquisition? Reach us at constantcommercial.com.

Commercial Real Estate Broker Services in Oregon: Buyer Representation & Listing Agent Expertise Across the Willamette Valley

Mon, 13 Apr 2026 15:59:20 GMT

Income & Owner-user real estate brokerage services across Oregon.

Whether you're an investor hunting for your next income-producing asset, a business owner looking to acquire your own building, or a property owner ready to take chips off the table, who you choose to represent you in a commercial real estate transaction matters enormously. At Constant Commercial Real Estate, Inc. (CCRE), we provide dedicated buyer's agent and listing agent services across Portland, Salem, and the greater Willamette Valley — with deep market knowledge, boutique-level attention, and a track record of closing complex deals.

This article breaks down what each service looks like in practice, the types of properties and markets we specialize in, and why working with a focused commercial brokerage produces measurably better outcomes than working with a generalist or part-time practitioner.

What Is a Commercial Buyer's Agent — and Why Does It Matter?

A commercial buyer's agent works exclusively on behalf of the purchaser in a real estate transaction. That means your broker's fiduciary duty, market research, negotiating strategy, and deal structure are all oriented around one goal: getting you the best possible asset at the best possible terms.

This sounds obvious — but it's surprisingly common in Oregon's commercial real estate market for buyers to work with a listing broker, an agent who simultaneously represents the seller. Dual agency creates conflicting loyalties and almost always disadvantages the buyer. When CCRE represents a buyer, we are fully and exclusively in your corner.

What Does CCRE's Buyer Representation Include?

Our buyer's agent services include:

Investment criteria development — We help you define what you're actually looking for: asset class, price range, risk tolerance, cash-on-cash return targets, financing assumptions, and exit strategy.
Off-market and on-market property identification — Using CoStar, LoopNet, proprietary networks, and direct broker outreach, we identify qualifying opportunities across Multnomah, Clackamas, Washington, Marion, Polk, Yamhill, Linn, and Columbia Counties.
Comparative market analysis and underwriting support — We analyze rent rolls, operating expenses, cap rates, vacancy trends, and comparable sales before you write an offer.
Letter of Intent (LOI) and Purchase and Sale Agreement (PSA) negotiation — We draft and negotiate transaction documents with your interests protected from the opening offer through final closing.
Due diligence coordination — We manage timelines, connect you with qualified inspectors, environmental consultants, title officers, and commercial lenders.
1031 exchange structuring — For investors rolling equity from a disposition into a new acquisition, we understand the replacement property timeline, identification rules, and how to stay compliant while still being selective.

Commercial Property Types We Represent Buyers On

CCRE represents buyers across a wide spectrum of commercial asset classes in Oregon. Each property type carries its own underwriting logic, due diligence priorities, and financing characteristics. Here's where we focus:

Multifamily and Apartment Buildings

From small four-unit residential investment properties to mid-size apartment complexes in Salem and Portland's surrounding communities, multifamily remains one of the most liquid and financeable asset classes in the Pacific Northwest. We represent buyers of:

Garden-style apartment complexes in Marion County and Polk County
Value-add multifamily assets with deferred maintenance and below-market rents in Clackamas County, Washington County, and Multnomah County
Small multifamily (5–20 units) in suburban communities like Woodburn, Canby, Molalla, McMinnville, Newberg, and Silverton
Mid-size apartment buildings (20–100 units) in Salem, Keizer, Portland, Lake Oswego, Oregon City, and Milwaukie

Office Buildings

Oregon's office market has evolved significantly since 2020, and that has created real buying opportunities for investors willing to underwrite correctly. We represent buyers of:

Single-tenant office buildings leased to credit tenants in suburban Portland submarkets including Beaverton, Tigard, Tualatin, and Sherwood
Multi-tenant professional office buildings in Salem's commercial core and along the South Salem corridor
Medical office buildings near major hospital campuses in Portland and Salem
Owner-user office acquisitions for professional service firms, healthcare practices, and financial services companies seeking to build equity through ownership
Flex-office and creative office conversions in close-in Portland neighborhoods and the inner Eastside

Industrial, Flex, and Warehouse Properties

Industrial and flex properties have been among the strongest-performing commercial asset classes in Oregon over the past decade, driven by e-commerce logistics, light manufacturing, and supply chain reconfiguration. CCRE represents buyers of:

Light industrial and flex buildings along I-5 and Highway 99 corridors from Portland south through Wilsonville, Woodburn, and Salem
Warehouse and distribution facilities in North Portland, Gresham, Troutdale, and the Columbia Corridor
Manufacturing facilities in Hillsboro, Forest Grove, McMinnville, and Albany
Owner-user industrial acquisitions for contractors, fabricators, auto-related businesses, food production, and specialty manufacturers
Multi-tenant industrial parks in Washington County, Clackamas County, and Marion County

Retail and Mixed-Use Properties

Retail real estate requires careful analysis of tenancy, lease structures, co-tenancy clauses, and the long-term viability of the tenant's business model. CCRE represents buyers of:

Strip centers and neighborhood retail in high-traffic Salem corridors, including South Commercial Street, Lancaster Drive, and Market Street
Single-tenant net lease (NNN) retail properties including fast food, convenience, automotive, and service-oriented tenants throughout the Willamette Valley
Anchored and shadow-anchored retail centers in suburban Portland submarkets
Mixed-use retail and residential buildings in walkable urban cores across Portland and Salem
Restaurant buildings including freestanding pad sites and in-line food-and-beverage spaces

Specialty Commercial Properties

Beyond the major food groups, CCRE also works with buyers pursuing:

Self-storage facilities across rural and suburban Oregon markets
Car washes and automotive service properties on high-traffic arterials
Hotels and hospitality assets including limited-service and extended-stay product in mid-Oregon markets
Commercial land and development sites for retail, industrial, and mixed-use projects
Rural commercial properties and agricultural-adjacent investment land in the Willamette Valley

Commercial Listing Agent Services: Representing Sellers in Oregon

Selling a commercial property is a deliberate, months-long process that requires precision pricing, targeted marketing, qualified buyer identification, and flawless transaction management from listing through closing. At CCRE, our listing agent services are designed for private investors and business owners who want maximum value, controlled exposure, and a broker who stays close to the deal.

What Does It Mean to Have CCRE as Your Listing Agent?

When you list your commercial property with CCRE, you get a dedicated, senior-level broker who understands your asset, your market, and what qualified buyers are actually underwriting. Our listing process includes:

Accurate Pricing and Positioning We perform a thorough Broker Price Opinion (BPO) or investment-grade Comparative Market Analysis before recommending a list price. We're not in the business of buying listings with inflated numbers — we price to sell, at market or above, with the data to defend it.

Professional Marketing Package Development Every listing receives a curated marketing package including financial summary, rent roll, lease abstracts, property highlights, and high-quality photography. We write offering memoranda that institutional-quality buyers expect to see, without the inflated projections that erode trust.

Maximum Market Exposure CCRE lists properties on CoStar and LoopNet — Oregon's most trafficked commercial platforms — as well as Crexi, our own website at constantcommercial.com, and targeted email outreach to our investor and broker database. We also leverage BiggerPockets and our broader digital footprint, which consistently generates organic buyer and seller inquiries from across Oregon and the Pacific Northwest.

Qualified Buyer Screening We pre-qualify prospective buyers for financial capacity before facilitating property access or sharing confidential financial documents. A signed confidentiality agreement and a financial qualification review are standard parts of our process.

Negotiation and Transaction Management From the first offer to final closing, we actively manage the transaction — redlining PSAs, tracking contingency timelines, coordinating with title, escrow, attorneys, and lenders, and keeping all parties moving toward close.

Real Example: Organic Discovery Leads to a Closing

One of our most rewarding transactions began when a property owner Googled "Clackamas County apartment brokers" and found CCRE. He reached out through our website, we met to discuss his multifamily holding, and that conversation turned into a listing engagement and eventual sale. He wasn't looking to list immediately — he was evaluating his options. But because our website was built to answer exactly the kind of questions motivated sellers are typing into search engines, we were in the room for that conversation.

That's the value of a content-driven digital presence in commercial real estate. The best clients aren't always calling the biggest names — they're searching for expertise, and the right answer shows up.

Geographic Markets We Serve

CCRE operates across a broad footprint in western Oregon, with deep relationships in the following markets:

Multnomah County

Portland, Gresham, Troutdale, Wood Village, Maywood Park, Fairview — Multnomah County is Oregon's most densely populated and most liquid commercial market. We work across all submarkets from the Pearl District and Lloyd District to outer East Portland, St. Johns, and the Columbia Corridor.

Clackamas County

Lake Oswego, West Linn, Milwaukie, Oregon City, Gladstone, Canby, Molalla, Sandy, Estacada, Happy Valley, Wilsonville — Clackamas County is one of the fastest-growing suburban commercial markets in Oregon, with strong demand for retail, flex, industrial, and multifamily assets along the I-205 and I-5 corridors.

Washington County

Beaverton, Hillsboro, Tigard, Tualatin, Sherwood, Forest Grove, Cornelius, North Plains — Washington County is home to Oregon's technology and semiconductor corridor and some of the state's most competitive industrial and office submarkets. Vacancy is consistently low and investor demand is high.

Marion County

Salem, Keizer, Woodburn, Silverton, Stayton, Mt. Angel — Marion County is the heart of our practice. Salem is Oregon's capital city and a highly active commercial market for office, retail, industrial, and multifamily. We know every major corridor and submarket in this county.

Polk County

Dallas, Independence, Monmouth — Polk County's commercial market is driven by agriculture, education (Western Oregon University), and Salem suburban growth spillover. We track industrial land and retail strip opportunities here closely.

Yamhill County

McMinnville, Newberg, Dundee, Carlton, Dayton — Yamhill County's wine country reputation drives hospitality, retail, and mixed-use demand, while its manufacturing base supports industrial and flex product. We've worked transactions here involving restaurant, light industrial, and retail assets.

Columbia County

St. Helens, Scappoose, Rainier, Clatskanie — Columbia County offers value-oriented commercial product for investors priced out of closer-in Portland markets. We've worked retail, hospitality, and commercial land transactions in this corridor.

Linn and Benton Counties

Albany, Corvallis, Lebanon, Sweet Home — The Albany-Corvallis corridor is a growing market anchored by Oregon State University and a strong manufacturing base. We track industrial, office, and multifamily demand here for investors seeking mid-valley yield.

Frequently Asked Questions: Commercial Buyer's Agent and Listing Agent Services in Oregon

Q: What is the difference between a buyer's agent and a listing agent in commercial real estate?

A buyer's agent (also called buyer's representative) represents the purchaser in a commercial real estate transaction. Their fiduciary duty is to the buyer. A listing agent represents the seller. Both parties deserve dedicated, single-party representation for the best outcome.

Q: How is a commercial real estate broker compensated in Oregon?

In most Oregon commercial transactions, the seller pays the commission, which is then split between the listing broker and the buyer's broker per the terms of a co-brokerage agreement or the listing agreement. Buyer representation typically costs the buyer nothing directly.

Q: Do I need a commercial buyer's agent to purchase a commercial property in Oregon?

Technically no — but practically speaking, commercial real estate transactions involve complex lease analysis, environmental contingencies, zoning review, title issues, and financing structures that can significantly impact value. Having an experienced commercial broker representing you reduces risk and improves your negotiating position materially.

Q: What types of investors does CCRE typically work with?

CCRE targets transactions of $1 million and above and primarily works with private investors, owner-users, and family office principals. We represent both Oregon-based buyers and out-of-state investors acquiring Pacific Northwest commercial assets.

Q: Does CCRE handle 1031 exchange transactions?

Yes. We frequently represent buyers identifying replacement properties in 1031 exchanges and sellers initiating exchanges on the disposition side. We work closely with qualified intermediaries (QIs) and tax counsel to ensure exchange timelines are respected throughout the transaction.

Q: Can CCRE help me find off-market commercial properties in Oregon?

Yes. Our off-market deal flow comes from direct broker relationships, our existing client network, prospecting tools like Reonomy, and our reputation in the Oregon commercial market. Not every great deal shows up on CoStar first.

Q: How do I find a commercial real estate broker in Clackamas County, Washington County, or Marion County?

CCRE is actively active in all three counties and across the Willamette Valley. You can reach us at constantcommercial.com or call our office directly. Whether you're buying, selling, or just evaluating your options, we're happy to have a conversation.

Q: What makes CCRE different from larger commercial brokerages?

We're a boutique. That means every client gets Cory Carlson and our senior team — not an assistant, not a junior associate. We bring institutional-quality process and market knowledge to every deal, regardless of size, and we stay close to the transaction from first meeting through final closing.

Ready to Talk?

Whether you're searching for an apartment building in Salem, a flex industrial building in Tualatin, a retail strip center in Oregon City, or you're a property owner in Clackamas County, Washington County, or Marion County thinking about your exit — CCRE is the boutique commercial brokerage built for investors and business owners who take their real estate seriously.

Why More Oregon Businesses Are Buying Their Space — And How the Process Actually Works

Tue, 31 Mar 2026 13:17:50 GMT

From Lease to Ownership: A Practical Guide to Owner-User Commercial Real Estate in Portland and Salem

There's a moment many business owners reach — usually somewhere around their third or fourth lease renewal — when they do the math and realize they've been paying someone else's mortgage for years. The storefront they've built their brand around, the medical suite their patients know by heart, the office their team shows up to every day — none of it is theirs. The landlord holds the asset. The business owner holds the expense.

That math is exactly what's driving a growing segment of commercial real estate activity in Portland and Salem right now: owner-user acquisitions. Businesses buying their own space. And in the $1M–$3M range — where a well-located retail storefront, a professional office suite, or a medical or dental facility typically transacts — the economics of ownership often make a compelling case.

But the process of buying commercial real estate as a business owner is meaningfully different from buying an investment property, and it's different in ways that catch people off guard. This article walks through three of the most important dimensions: occupancy and zoning requirements, how the property gets valued, and how the transaction itself unfolds from financing through closing.

Step One: Can Your Business Actually Operate There? Zoning and Occupancy

Before you fall in love with a building, you need to answer a foundational question: is your intended use permitted at that location?

Oregon municipalities — including Portland and Salem — regulate land use through zoning codes that specify what types of businesses can operate in what locations. Zoning classifications vary by jurisdiction, but broadly speaking, commercial zones are divided into categories like General Commercial (GC or CG), Mixed Use, Employment, Medical Office, and Industrial. Each classification has a list of permitted uses, conditional uses, and prohibited uses.

For a retail or storefront business, you'll typically be looking in general commercial or neighborhood commercial zones. For professional office users — attorneys, accountants, financial advisors — mixed-use and office-zoned properties are generally a good fit. Medical and dental uses have their own wrinkle: many municipalities carve out specific designations for medical office, and the presence of certain equipment (X-ray machines, surgical suites) can trigger additional permitting requirements related to radiation safety, HVAC, plumbing, and ADA compliance beyond what a standard office buildout would require.

In Portland, zoning is governed by the Portland Zoning Code and administered through the Bureau of Development Services. In Salem, the Salem Development Code controls land use, and the City's Planning Division handles conformance questions. The practical takeaway: before making an offer, your broker should be confirming that your intended use is permitted — not just assumed — at the property in question. A zoning letter or pre-application conference with the city can provide certainty before you're deep into a transaction.

Occupancy requirements also extend to the building itself. If you're buying a space that was previously occupied by a different use type — say, a former retail shop that you want to convert to a dental clinic — you should expect a change-of-occupancy review under the Oregon Structural Specialty Code. That review can trigger required upgrades to fire suppression, electrical, plumbing, and accessibility features that add material cost to your project. Budget for it early.

Step Two: What Is the Property Actually Worth? Valuation for Owner-Users

Here's where owner-user transactions get genuinely interesting — and where inexperienced buyers (and some brokers) get tripped up.

Commercial real estate is typically valued one of three ways: the income approach, the sales comparison approach, or the cost approach. For investment buyers, the income approach dominates: a property's value is largely a function of the income it produces relative to market cap rates. But for owner-users, the calculus is different — and sellers know it.

When a business owner buys their space, they're not just buying an income stream. They're buying control, stability, and the ability to build equity in an asset that also serves their operations. That has value beyond what a purely income-driven analysis would produce. As a result, owner-user buyers sometimes pay a modest premium over what a pure investor would pay — and sellers in the $1M–$3M range are often aware of that dynamic.

The sales comparison approach — analyzing recent sales of comparable properties on a price-per-square-foot basis — is particularly relevant for owner-user transactions. In Portland and Salem, we work from CoStar and LoopNet data to identify comps, adjusting for location, condition, size, and use. For medical and dental properties, functional utility matters enormously: the presence of exam rooms, plumbing drops, lead-lined walls, or specialized HVAC can substantially affect value in both directions depending on whether the buyer needs those features or would have to demo them.

The cost approach — land value plus depreciated replacement cost of improvements — is most relevant for newer construction or specialty-use properties where there are few comparable sales. For an owner-user buying a purpose-built medical building or a newer office condo, this approach can help sanity-check whether the asking price reflects a reasonable cost basis.

The key insight for business owners: the appraisal ordered by your lender will be based on market value standards, not on what the space is worth to you specifically. If you're paying a premium for a location that's irreplaceable for your business, that premium may not be fully reflected in the appraisal — which can create a gap between appraised value and purchase price that affects your financing. Plan for this conversation with your broker and lender early.

Step Three: The Transaction — Financing, Due Diligence, and Getting to Close

Owner-user commercial transactions in the $1M–$3M range typically follow a well-defined process, but the timeline and complexity are greater than most buyers anticipate coming from a residential background. Here's what to expect.

Financing

The most common financing vehicle for owner-user commercial acquisitions in Oregon is the SBA loan — either the SBA 504 or the SBA 7(a) program. Both programs are specifically designed for owner-occupied commercial real estate and offer below-market terms compared to conventional commercial financing.

The SBA 504 program is particularly well-suited to real estate acquisitions: it typically requires just 10% down (compared to 25–30% for conventional commercial loans), offers long-term fixed rates on a portion of the debt through a Certified Development Company, and can be used for properties up to several million dollars. The SBA 7(a) is more flexible but generally has variable rate components and lower loan limits for real estate.

Conventional commercial financing remains an option, particularly for buyers with strong balance sheets or significant equity. Terms typically include 20–25 year amortization with 5–10 year balloon structures and rates priced off the Prime Rate or SOFR. As a commercial mortgage broker in addition to a real estate broker, we often help owner-user clients evaluate both paths side by side before committing to a lender.

Letter of Intent and Negotiation

Most transactions begin with a Letter of Intent (LOI) — a non-binding document that outlines the key deal terms: purchase price, earnest money, due diligence period, contingencies, and proposed closing timeline. The LOI is where leverage is exercised and expectations are set. Owner-user buyers sometimes underestimate the importance of this document, treating it as a formality. It isn't. The terms you establish in the LOI shape the entire transaction.

Due Diligence

The due diligence period — typically 30 to 60 days in Oregon commercial transactions — is your window to verify everything about the property before your earnest money goes hard. For owner-users, due diligence should include at minimum: a third-party property inspection, a Phase I Environmental Site Assessment, a title review, zoning and permit history verification, a review of any existing leases or CC&Rs, and an ADA compliance assessment.

For medical and dental buyers, add a MEP (mechanical, electrical, plumbing) review and a buildout cost estimate if the space requires modification. For retail buyers, a traffic and visibility analysis and a review of any signage restrictions or CCR's governing the property are worth the time. Don't skip these. The cost of a thorough due diligence process is a fraction of the cost of discovering a problem after closing.

Closing

Oregon commercial real estate closes through escrow, typically administered by a commercial title company. Unlike residential transactions, there's no statutory closing timeline — the process moves at the speed the parties negotiate. From executed PSA to close, 45 to 75 days is typical for a well-organized owner-user transaction. Lender timelines — particularly for SBA loans — are often the controlling variable. Build buffer into your timeline and communicate early with your lender.

The Bottom Line for Oregon Business Owners

Buying commercial real estate as a business owner is one of the highest-impact financial decisions you can make. Done right, it converts a fixed operating expense into a wealth-building asset, gives you control over your physical environment, and positions your business for long-term stability in Portland and Salem markets where quality commercial space continues to be in short supply.

It's also a process with enough complexity that the right broker — one who understands both the real estate and the financing side — makes a material difference in the outcome.

If you're a business owner thinking about making the move from lease to ownership, we'd welcome the conversation. Reach out anytime.

Tags: owner-user commercial real estate, buying commercial real estate Oregon, SBA 504 loan Oregon, commercial real estate Portland, commercial real estate Salem Oregon, medical office real estate, retail real estate Oregon, commercial zoning Oregon, commercial due diligence

Salem's Next Chapter: The Cannery — A $150 Million Riverfront Transformation

Fri, 20 Mar 2026 04:40:21 GMT

From Green Beans to Ground-Floor Retail: How a 100-Year-Old Salem Cannery Is Being Reborn as the City's Most Ambitious Mixed-Use Development

If you want to understand where the Salem commercial real estate market is headed, start at the corner of Northeast Front Street and the Willamette River. There, on 13 acres of dormant industrial land, a $150 million development called The Cannery is taking shape — and what happens on that site will reshape the trajectory of Salem's downtown economy for decades to come.

As a commercial broker active in the Salem and Portland markets, I follow major developments closely. The Cannery is not just a real estate story. It is a statement: Salem is no longer a secondary market. It is emerging. And this one has just gotten a major shot of momentum.

A Century of Canning — and What Comes Next

To appreciate what The Cannery represents, you have to know what stood there before. The property on Northeast Front Street was established in 1917 as King's Food Products, processing the fruits and vegetables grown across the Willamette Valley's rich farmland. In 1973, brothers Peter and David Truitt acquired the operation and built what became one of Salem's most iconic employers. At its peak, the cannery employed more than 800 seasonal workers who ran around the clock canning green beans, cherries, and pears from thousands of nearby acres.

But like many regional canneries, Truitt Brothers couldn't sustain itself against rising international competition in the early 2000s. The operation transitioned into packaged and specialty foods before ceasing production entirely in June 2019. What remained was a vacant, 13-acre waterfront site surrounded by a city that had grown up around it — and a Truitt family committed to seeing it become something meaningful.

Jordan Truitt, who grew up at the cannery and later became a commercial real estate broker, said it plainly: this land had to become something bigger and better, for families and for the community. That philosophy set the stage for what may be the most consequential mixed-use development in Salem's modern history.

The Project Gets New Legs

The Cannery was originally announced in April 2023 by local developer Trent Michels and his firm FuND — Future of Neighborhood Development. In October 2024, the city's hearings officer formally approved the land use plans, clearing a critical regulatory hurdle. Demolition of the skybridge over Front Street had already begun as an early show of commitment.

However, the complexity of a project this scale caused the original development team to stall. That changed this month. Aaron Stickney, co-founder and managing member of New Jersey-based SilverSphere Capital, is now under contract to acquire the property and move the project forward. He expects to close on or before May 15, with demolition of the main cannery building beginning shortly after. Groundbreaking is targeted for October 2026, with a two-year construction timeline.

Stickney is not new to Oregon. He developed major projects in Bend in the 1990s — including the Old Mill District shopping center — before returning to the state about a year ago. He now lives in West Linn. His conviction about Salem is direct: "Salem's going to come back and I think it just takes someone. We'll be the first and we're taking the risk to do it, and then you're going to see a dramatic change happen."

"We put a lot of money into analyzing emerging markets, and Salem came up as one of the next. We're making a stake and willing to take the risk to be the first to do something different."— Aaron Stickney, SilverSphere Capital

The Plan: Two Phases, One Transformative Vision

Unlike the original single-phase concept, Stickney's plan rolls out in two distinct phases — each substantial enough to reshape the north downtown corridor on its own.

PHASE 1 — Ground Floor of a New Salem

383 residential units
50,000 square feet of retail
Six storefronts facing Front Street
Riverfront winery, restaurant, open market, and full-service grocery store
Historic 1914 building preserved and converted into a wine tasting room
Two riverfront piers transformed into a food hall and a market
Fully automated parking system — drive in, take a ticket, the system handles the rest

PHASE 2 — Doubling Down on Salem

400 additional residential units (roughly 783 total)
Up to 60,000 more square feet of retail
Replaces the soccer stadium idea from original plans — community feedback drove the change
Total buildout: 110,000+ sq ft of retail/restaurant across both phases

The soccer stadium, which had been floated in earlier plans, was deliberately set aside. Stickney was candid: "We realize the community didn't want that. We're sensitive to it." That kind of responsiveness to local input is exactly the kind of developer posture that earns trust — and long-term success — in markets like Salem.

A Design Built for the Pacific Northwest

The aesthetics of the project are getting a full reset under the new team. The previous Mansard roofline design — which Stickney described as feeling more "south of France than Pacific Northwest" — is out. OTC Pacific Northwest is now working on updated renderings built around a modern farmhouse aesthetic: brick, timber, cobblestone walkways, and materials salvaged directly from the original cannery. The result is a development that will feel rooted in Salem's industrial heritage while looking unmistakably forward.

Sustainability commitments carry forward as well — geothermal systems, EV charging, a riverfront greenway path, and biophilic design elements throughout. And the parking situation deserves a moment: the project will feature a fully automated parking structure. Pull in, leave your car, take a ticket. No attendant. No valet. Your vehicle shows up when you need it. For a mid-sized Oregon city, that is a genuinely novel amenity.

Why This Is a Defining Moment for the Salem Market

From a commercial real estate perspective, The Cannery is exactly the kind of anchor project that tips a market. The north downtown corridor — currently a stretch of mostly vacant warehouses and former industrial buildings — now has a compelling reason to attract retail tenants, investors, and residents who have historically gravitated toward Portland.

Stickney himself drew the comparison that commercial real estate professionals will find meaningful: "We're at the end of Market Street, we're the bookmark. When you get there, we want it to be notable. We want people from Vancouver and Seattle coming down just to spend a day because of what we created." That is not the language of a developer building apartments. That is the language of someone building a destination.

Think about what Vancouver, Washington's Columbia Waterfront District did for Clark County real estate — turning a dormant industrial riverfront into one of the most active mixed-use corridors in the Pacific Northwest. The Cannery is positioning itself as Salem's version of that story. And with 783 total residential units, 110,000 square feet of retail, a grocery anchor, a food hall, and riverfront dining all on a single 13-acre site, the gravitational pull on the surrounding blocks will be significant.

The City of Salem has already secured grant funding to plan transportation improvements along Front Street, which currently lacks sidewalks and lane markings. Infrastructure investment following major mixed-use development is a well-documented pattern — and those improvements will accelerate the corridor's broader redevelopment potential.

"The city's dying. It just needs to be re-energized."— Aaron Stickney

The Takeaway: Pay Attention Now

The Cannery has survived a developer transition, a complex land use process, and years of anticipation. What is different today is this: committed capital, a clear two-phase buildout plan, a grounded construction timeline, and a developer who has done this before in Oregon markets that looked exactly like Salem does right now — undervalued, under-built, and on the verge.

If you are a business owner, tenant, or investor looking at Salem with fresh eyes, this is the moment. Not after the ribbon cutting. Now — while the market still reflects yesterday's perception of Salem rather than tomorrow's reality.

At Constant Commercial Real Estate, we are actively working with clients across the Salem and Portland metro markets and tracking The Cannery and surrounding corridor opportunities closely. If you want to understand how this development may affect your real estate position — whether you're a prospective tenant, an investor, or a business owner considering a move — reach out. Let's talk.

Congress Just Passed the Biggest Housing Bill in a Decade — Here's What It Means for Oregon Real Estate

Fri, 13 Mar 2026 16:29:55 GMT

A Landmark Senate Vote on Housing Supply, Investor Limits, and Regulatory Reform — And What It Could Mean for Portland, Salem, and Oregon's Real Estate Market

For years, Oregon's housing market has been defined by one word: scarcity. Inventory has been tight, construction has lagged demand, and home prices in Portland and Salem have remained stubbornly out of reach for first-time buyers and growing families. That may be about to change — at least in part — thanks to landmark federal legislation passed yesterday in Washington, D.C.

On March 12, 2026, the U.S. Senate passed the 21st Century ROAD to Housing Act in an 89-10 bipartisan vote, marking the most significant housing legislation to clear the Senate in over a decade. Sponsored by Sen. Tim Scott (R-SC) and Sen. Elizabeth Warren (D-MA), the bill takes a multi-pronged approach to the national housing crisis: curbing large institutional investor activity in the single-family market, cutting regulatory red tape that inflates construction costs, and funding new housing supply programs. For Oregon brokers, investors, developers, and buyers, this bill deserves your attention.

What's Actually in the Bill

The 21st Century ROAD to Housing Act is a 303-page piece of legislation that touches nearly every corner of the housing ecosystem. Here are the provisions most relevant to Oregon's real estate market:

Restricting Institutional Investors in Single-Family Housing

The bill's most talked-about section, titled Homes Are for People, Not Corporations, would prohibit any institutional investor that owns 350 or more single-family homes from purchasing additional properties. There are limited exceptions — including homes requiring significant renovation and newly constructed build-to-rent properties — but the intent is clear: Washington wants to pump the brakes on large-scale corporate accumulation of single-family housing stock.

This matters in Oregon. While institutional investors own a relatively small share of single-family rentals nationally, their presence has been felt in high-demand suburban markets around Portland — particularly in areas like Beaverton, Hillsboro, and Gresham, where investors have competed directly with first-time homebuyers. The bill's restrictions wouldn't dismantle existing portfolios, but they would take a significant category of competition off the table for individual buyers going forward.

Cutting Regulatory Costs for Builders

One of the most consequential — and less-discussed — pieces of the bill is its focus on construction cost reduction. Outdated federal regulations currently account for an estimated 25% of the cost to build a single-family home and up to 40% of multi-family development costs. In a state like Oregon, where land costs in Portland and the Willamette Valley are already elevated, that regulatory burden is a major reason new housing supply has failed to keep pace with demand.

The bill creates new mechanisms to reduce those costs, streamlines environmental review processes, and encourages HUD and the USDA to jointly coordinate on rural housing development approvals — a provision that could have meaningful impact for housing projects in Oregon's smaller cities and rural counties, from the Gorge to the Coast.

New Grants and Pilot Programs for Housing Construction

The legislation establishes a series of federal grants and pilot programs aimed at incentivizing new housing construction across the country. For Oregon developers and municipalities, these programs represent potential access to federal capital that could help unlock stalled projects — particularly multi-family and mixed-use developments where financing gaps have been a persistent obstacle.

The Portland metro area, which has seen construction activity slow despite persistent demand, and Salem, where affordable housing remains a top city planning priority, would both be logical candidates to pursue funding under these programs if the bill becomes law.

Streamlining HUD Inspections

The bill also takes aim at HUD inspection backlogs, creating alternative pathways to satisfy inspection requirements. For investors and developers active in federally assisted housing — including properties that accept Section 8 vouchers — this could meaningfully accelerate timelines on renovation and lease-up, reducing holding costs and improving project economics.

What This Means for Portland's Commercial and Residential Markets

Portland has been navigating a prolonged period of market recalibration. Office vacancy downtown remains elevated, multifamily absorption has softened from its post-pandemic peak, and single-family inventory — while slightly improved — remains historically low. Against that backdrop, the 21st Century ROAD to Housing Act has several implications worth watching.

First, the investor restriction provision could modestly improve single-family inventory availability in Portland's suburban ring by redirecting institutional capital away from the owner-occupied housing stock. Whether that translates into meaningful price relief remains to be seen — researchers at Urban Institute and Freddie Mac have both found that institutional investors, while attention-grabbing, are not the primary driver of price appreciation. Limited new construction and population migration to high-cost metros play a larger role. But at the margin, removing a category of non-owner-occupied buyers from competition isn't nothing.

Second, the regulatory relief provisions are potentially significant for multi-family development in Portland. The city has been grappling with a housing production deficit for years. If federal deregulation reduces the cost basis for new multi-family projects — even modestly — it could make marginal development projects viable that aren't penciling today. That's relevant for investors, developers, and brokers active in the Portland apartment and mixed-use space.

Third, the rural housing provisions have implications for Oregon markets outside the metro. The USDA-HUD coordination language could streamline approvals for workforce housing projects in communities like Hood River, The Dalles, or Medford, where housing shortages are acute but regulatory complexity has slowed development.

What This Means for Salem and the Mid-Willamette Valley

Salem has quietly become one of Oregon's most active housing markets over the past several years. As Portland prices pushed buyers south down I-5, Salem absorbed significant demand — and prices followed. The city has made affordable housing a cornerstone of its planning agenda, and several mixed-use and multi-family projects have been in the pipeline, many of them constrained by financing and regulatory hurdles.

The 21st Century ROAD to Housing Act's grant programs and regulatory streamlining provisions align well with Salem's development priorities. If the bill becomes law, Salem and surrounding Marion County communities could be well-positioned to access federal housing construction funding, particularly for projects serving moderate-income households.

The investor restriction provision is also meaningful for Salem's single-family market, where corporate investor activity has been increasing as yields in the Portland metro compressed. Reducing institutional competition in Salem's entry-level and mid-tier single-family market would be a net positive for the individual buyers and local landlords that make up the backbone of the city's residential investment community.

Where the Bill Stands — and What Could Slow It Down

It's important to note that the 21st Century ROAD to Housing Act is not yet law. The Senate's 89-10 vote is a remarkable show of bipartisan support, but the legislation still faces a challenging path forward. The House passed its own version of the bill in February that includes several provisions not in the Senate version — including measures to deregulate community banks and a permanent ban on central bank digital currency. House Republicans have signaled they want to either conference the two bills or see dramatic changes before moving forward.

Additionally, President Trump has indicated he may withhold his signature on housing legislation until Congress passes the SAVE America Act, a separate voter ID bill. However, a bill passed by both chambers can become law without a presidential signature if the president takes no action within 10 days while Congress is in session.

Bottom line: this bill has real momentum, but it's not finished. We're watching it closely.

The Bigger Picture for Oregon Real Estate

The 21st Century ROAD to Housing Act reflects a growing national consensus that the housing shortage is a supply problem, a regulatory problem, and an investor-competition problem — all at once. For Oregon, a state with high land costs, a complex regulatory environment, and persistent affordability challenges in its two largest metro markets, the legislation's focus on supply-side solutions is directionally correct.

Whether it ultimately becomes law, and in what form, will shape Oregon's real estate landscape for years to come. At Constant Commercial Real Estate, we work across Portland, Salem, and the broader Oregon market every day — on investment sales, commercial leasing, and seller-financed transactions — and we're committed to keeping our clients ahead of the policy changes that affect their assets and decisions.

Have questions about what this legislation could mean for your portfolio, a deal you're working on, or your search for commercial or investment property in Oregon? Reach out anytime.

Understanding Commercial Lease Types: NNN, Gross and Modified Gross

Thu, 11 Sep 2025 20:31:11 GMT

Decoding Your Lease: NNN, Gross, and Modified Gross Leases Explained

When it comes to leasing commercial real estate, the type of lease you sign can have a significant impact on your bottom line. Understanding the different lease structures is crucial for both tenants and landlords. In this article, we'll break down three of the most common types of commercial leases: Triple Net (NNN), Gross, and Modified Gross.

Triple Net (NNN) Lease: The "Hands-Off" Approach for Landlords

A Triple Net lease, commonly referred to as a NNN lease, is a popular choice for commercial properties, especially single-tenant buildings. In this type of lease, the tenant is responsible for not only the base rent but also the three "nets":

Property Taxes: The tenant pays the real estate taxes.
Insurance: The tenant is responsible for the property's insurance premiums.
Common Area Maintenance (CAM): The tenant covers all costs associated with maintaining the property's common areas, such as landscaping, parking lot maintenance, and repairs.

Why Choose a NNN Lease?

For Landlords: NNN leases offer a predictable and stable income stream with minimal management responsibilities. Since the tenant is responsible for most of the property's operating expenses, landlords can enjoy a more passive investment.
For Tenants: While the tenant takes on more financial responsibility, NNN leases often come with a lower base rent. This can be an attractive option for businesses that want more control over their space and expenses.

Gross Lease: The "All-Inclusive" Option

A Gross lease, also known as a full-service lease, is the opposite of a NNN lease. In a Gross lease, the tenant pays a single, all-inclusive rental payment, and the landlord is responsible for all of the property's operating expenses, including:

Property Taxes
Insurance
Maintenance
Utilities

Why Choose a Gross Lease?

For Tenants: Gross leases are attractive to tenants because they offer predictable monthly payments, making it easier to budget. The landlord handles all of the property's operating expenses, so the tenant doesn't have to worry about unexpected costs.
For Landlords: While the landlord takes on more financial responsibility, they can charge a higher rental rate to cover the property's operating expenses. This can be a good option for landlords who want more control over the property's maintenance and appearance.

Modified Gross Lease: The "Best of Both Worlds"

A Modified Gross lease is a hybrid of a NNN lease and a Gross lease. In this type of lease, the landlord and tenant share the responsibility for the property's operating expenses. The specifics of a Modified Gross lease can vary, but typically the tenant is responsible for a portion of the operating expenses, such as utilities and janitorial services, while the landlord covers the rest.

Why Choose a Modified Gross Lease?

For Both Parties: Modified Gross leases offer a flexible and customizable option that can be tailored to the needs of both the landlord and the tenant. They provide a balance of risk and responsibility, making them a popular choice for multi-tenant office buildings and other commercial properties.

Which Lease is Right for You?

The right lease for you will depend on your specific needs and goals. If you're a landlord looking for a low-maintenance investment, a NNN lease might be the best option. If you're a tenant who wants predictable monthly payments, a Gross lease might be a better fit. And if you're looking for a flexible and customizable option, a Modified Gross lease could be the perfect solution.

No matter which type of lease you choose, it's important to carefully review the terms of the agreement and consult with a qualified real estate professional to ensure that it meets your needs. Constant Commercial Real Estate Inc offers tenant and landlord representation services which includes guidance and consulting on which structure is fitting for your currently owned investments and acquisitions.

Chase Yield, Not Cap Rates: A Guide for Oregon Real Estate Investors

Wed, 10 Sep 2025 22:38:53 GMT

Chase Yield, Not Cap Rates!

For anyone involved in commercial real estate, the term capitalization rate is everywhere. It’s often the first metric cited to quickly judge a property's value and potential return. And while it's an essential tool, an over-reliance on this single figure can be misleading. In competitive markets like Portland and the Willamette Valley, the savviest investors know a crucial secret: chase yield, not just cap rates.

A low capitalization rate doesn't always signal a bad deal, just as a high one doesn't guarantee a winner. The real story of a property’s potential is often found in the deeper financial metrics that reveal its true profitability. This guide will break down why a holistic approach is critical for a successful investment.

What is a Capitalization Rate? The 101

At its core, a cap rate is a simple, back-of-the-napkin calculation. It represents the potential rate of return on a real estate investment based on the income it is expected to generate. The formula is straightforward: Capitalization Rate = Current Market Value / Net Operating Income (NOI).

For example, a property with an NOI of $50,000 that is listed for $1,000,000 has a capitalization rate of 5%. It’s a quick way to compare the relative value of similar properties. A higher cap rate generally suggests higher potential returns (and often, higher risk), while a lower one implies lower risk (and lower returns). But what if those "returns" are based on outdated, below-market rents? Also note that capitalization rates are excluding debt - the purpose of this metric is to remove the variability of debt by analyzing properties values based on the yield if they were owned in call cash.

Where Cap Rates Can Steer You Wrong

The biggest flaw of the cap rate is that it’s a snapshot based on a property's current performance. It doesn't account for potential.

Consider a retail building in the Willamette Valley with long-term tenants paying rents that are 30% below the current market rate. Because the Net Operating Income is artificially low, the property might trade at a seemingly unattractive 4.5% cap rate. Many investors would pass on it. But the smart investor sees an opportunity. They understand that by bringing rents up to market levels, the NOI will significantly increase, creating a higher return on their initial investment than the capitalization rate ever suggested. This is the essence of a value-add opportunity. Properties with operational inefficiencies or untapped potential are often hidden gems disguised by a low cap rate.

The "Multiplier Effect" of Low Cap Rate Markets

While a low capitalization rate might seem less attractive on the surface, it creates a powerful "multiplier effect" when you successfully increase a property's income. Because value is calculated by dividing NOI by the cap rate ( Value = NOI / Capitalization Rate ), every dollar of new income you add is worth more in a low-cap market.

Let's look at a simple example. For every dollar you increase a property's annual NOI through rent increases or expense reductions, you create new value.

In a low-cap market like Portland, a property might trade at a 5.5% capitalization rate . For each $1,000 of NOI you add, you increase the property's value by $18,181 ($1,000 / 0.055).
In a fictitious Midwest market, a similar property might trade at a 9% capitalization rate . For each $1,000 of NOI you add, you increase the property's value by only $11,111 ($1 / 0.09).

For the exact same amount of work, the investor in the lower cap rate market sees a significantly higher return on their effort. This is a key reason why value-add strategies are so potent in competitive major markets.

The Subjective Nature of a Capitalization Rate

Beyond being just a snapshot in time, a capitalization rate can also be surprisingly subjective. The calculation hinges entirely on the Net Operating Income (NOI), and how the NOI is calculated can vary between appraisers, brokers, and underwriters. One party might calculate NOI without including a vacancy factor, while another might insist on a 5% vacancy reserve. Some may omit management fees if the property is self-managed, while a lender’s underwriter will almost certainly add them back in. Discrepancies in how operating expenses or future capital expenditures are factored in can also significantly alter the final NOI. These seemingly small adjustments can change a property's stated capitalization rate, making it crucial for investors to look past the headline number and scrutinize the underlying assumptions. Always ask how the NOI was calculated before accepting a cap rate at face value. This is especially true when looking at properties on residential platforms like Zillow, redfin, home.com and trulia. The stated capitalization rate is parsed from the brokers input into the MLS and oftentimes are omitting taxes and insurance. This is why it is important to do an independent review of the financials.

Better Metrics: Finding the Real Return

To truly underwrite a deal, you must look beyond the cap rate and focus on metrics that measure the performance of your actual invested capital.

Cash-on-Cash Return (Yield)

This is arguably the most important metric for an investor. Cash-on-cash return , or yield, measures the annual pre-tax cash flow you receive in relation to the amount of money you've actually invested and it accounts for debt service. The formula is: Annual Pre-tax Cash Flow / Total Cash Invested OR Equity [for currently held properties]. For example, if after all income, expenses and debt an investor cashflows $10,000 on an invested $200,000 the return would be 5% = $10,000 / $200,000.

Unlike the cap rate, which looks at the property’s value, this focuses on your specific deal structure, including financing. It answers the simple question: “How much am I getting back each year on the money I put in?” Chasing high yield is a direct path to building wealth.

Internal Rate of Return (IRR)

The IRR is a more advanced metric that calculates the total, long-term profitability of an investment. It considers all cash flows over the entire holding period (including the eventual sale) and accounts for the time value of money—the principle that a dollar today is worth more than a dollar tomorrow. While more complex to calculate, the IRR provides a far more complete picture of an investment's performance than a simple cap rate.

Tax Benefits

Commercial real estate offers significant tax advantages that are completely invisible to the capitalization rate. Through depreciation , investors can offset a property’s income, reducing their tax liability and increasing their net return. This is a powerful wealth-building tool that directly impacts your bottom line.

The Constant Commercial Philosophy: A Holistic Approach

In the dynamic Portland and Willamette Valley markets, opportunities are not always obvious. Relying solely on capitalization rates means you might overlook the most promising value-add deals. Our approach is to dig deeper. We analyze the potential for rent growth, identify operational efficiencies, and model returns based on a comprehensive set of metrics, including debt effects on yield, and long-term appreciation. A property is more than just its current NOI; it's a business with potential waiting to be unlocked. The capitalization rate is an important starting point for conversation, but it should never be the final word. The most successful investments come from understanding the complete financial picture and recognizing the hidden opportunities others miss.

Ready to look beyond the cap rate? Contact the team at Constant Commercial to analyze your next investment and uncover its true potential.

Meet The Team: Phil Morman

Wed, 30 Jul 2025 20:45:43 GMT

Welcome to the Team!

Phil Morman is the current Director of Leasing at Constant Commercial Real Estate Inc. With over a decade of experience in real estate, he specializes in commercial leasing. Early in his career, he worked alongside his father and the former lawyer for Rite Aid Pharmacy, Charles Slane. During this time, Phil helped locate, negotiate, and finalize real estate transactions predominantly for Rite Aid and supermarket operations. In 2015, he was hired by Lee and Associates in New York City as a supermarket consultant. There, Lee and Associates became the stalking horse bidder in the A&P auction. Phil played a key role in transacting six former A&P supermarkets, which later became Key Food, Super Fresh, and Super Associated supermarkets. Following this, he became a prominent figure in the supermarket and real estate business in the tri-state area.

In 2025, after Phil and his wife Melanie welcomed their first son, Mateo, they decided to move to Oregon, where Melanie is from. Phil will be playing a leading role in Constant Commercial Real Estate Inc's tenant and landlord representation. Phil is also a former athlete, having played college football at the University of Rhode Island and professional basketball in Brazil. In his free time, he enjoys volunteering as a coach for youth and high school athletes.

Contact

Phil Morman

Office: 503-303-8675

Cell: 347-346-3103

Email: Phil@constantcommercial.com

Trump's 'Big Beautiful Bill' - Impacts on Real Estate Investment

Sat, 05 Jul 2025 21:11:29 GMT

The "One Big Beautiful Bill Act" (OBBBA), signed into law by President Trump on July 4, 2025, has several significant implications for real estate investors. Here's a breakdown of the key impacts:

The legislative landscape is constantly shifting, and for Oregon real estate (CRE) investors, staying abreast of new policies is not just good practice—it’s essential for strategic planning and maximizing returns. The recently enacted “One Big Beautiful Bill Act” (OBBBA) introduces a series of significant tax code changes and programmatic revisions that have direct and profound implications for the national and Oregon states real estate market. This comprehensive guide will delve into the key provisions of the OBBBA, dissecting their impact on various facets of real estate investment and offering actionable insights for navigating this new environment.

Understanding the OBBBA: A New Era for Real Estate Taxation

The OBBBA, signed into law on July 4, 2025, is a Republican-backed budget reconciliation law designed to stimulate economic growth through tax reforms and spending adjustments. While its broader implications for the national debt and social safety nets have been widely debated, its specific provisions related to real estate ownership and operations are what truly matter for CRE professionals. The bill aims to alter the tax code to make CRE investments more attractive, providing both opportunities and challenges that demand careful consideration.

At its core, the OBBBA reinstates and makes permanent several favorable tax treatments that had either expired or were set to phase out. These include:

Restoration of 100% Bonus Depreciation: This is arguably one of the most impactful provisions for CRE investors. It allows businesses to deduct 100% of eligible capital investments in the year incurred, applicable to qualified property acquired after January 19, 2025.
Permanent 20% Qualified Business Income (QBI) Deduction (Section 199A): This deduction for pass-through entities, common in the real estate industry, is made permanent with an expanded phase-in range, potentially lowering effective tax rates for many real estate businesses.
Increased Section 179 Expensing Limits: The cap for Section 179 expensing has been raised to $2.5 million, with a phase-out threshold of $4 million, allowing businesses to immediately expense the full cost of qualifying equipment and property.
Permanent Opportunity Zones (OZs): Originally set to sunset in 2026, the OZ program is now a permanent feature of the tax code, with revised criteria for census tract eligibility and expanded authority for state-level designations.
Expansion of the Low-Income Housing Tax Credit (LIHTC): The bill permanently increases the allocation of the 9% LIHTC and reduces the required share of development costs financed with tax-exempt bonds to qualify for 4% LIHTCs from 50% to 25%.
Preservation of Section 1031 Like-Kind Exchanges: This critical provision, allowing investors to defer capital gains when selling and reinvesting in new properties, remains unchanged.
Business Interest Deduction: The bill restores a more favorable calculation of the business interest deduction limit (EBITDA-type calculation) for tax years beginning in 2025, increasing the amount of business interest expenses taxpayers can deduct.
Increased State and Local Tax (SALT) Deduction Cap: The cap on the SALT deduction is raised to $40,000, which could provide significant relief for property owners in high-tax states.
Higher Estate and Gift Tax Exemption: Starting in 2026, the lifetime estate and gift tax exemption is raised to $15 million per person, adjusted for inflation, benefiting high-net-worth individuals with extensive real estate holdings.

These provisions collectively create a new framework that demands a fresh look at investment strategies, financial planning, and operational efficiencies within the commercial real estate sector.

1. The Resurgence of 100% Bonus Depreciation: A Cash Flow Catalyst

The permanent restoration of 100% bonus depreciation is a game-changer for many CRE investors. This provision allows for the immediate deduction of the entire cost of qualifying property components in the year they are placed in service, rather than depreciating them over decades.

How it Works: To fully leverage this, investors should strongly consider conducting cost segregation studies . These specialized studies break down a commercial property into its individual components, reclassifying certain elements (e.g., carpeting, appliances, decorative lighting, specialized plumbing, land improvements like parking lots and landscaping) from long-lived real property (39 years) to shorter-lived personal property (5, 7, or 15 years). By doing so, a significant portion of a property's cost can become eligible for 100% bonus depreciation in the first year.

Impact for Investors:

Immediate Tax Savings: This can lead to substantial tax savings in the acquisition or renovation year, significantly improving cash flow.
Enhanced Investment Returns: The accelerated tax savings can be reinvested, potentially boosting overall returns on investment.
Offsetting Other Income: For those who qualify as real estate professionals, these deductions can offset not only rental income but also other active income sources, providing a powerful tax planning tool.
Stimulus for Renovation and Development: The ability to immediately deduct renovation and improvement costs incentivizes property upgrades and new development, particularly for qualified improvement property (QIP) within non-residential buildings.

Important Note: While incredibly beneficial, it’s crucial to remember that bonus depreciation generally applies to personal property and qualified improvement property, not the entire building structure itself. Also, upon sale of the property, previously claimed depreciation may be subject to recapture , leading to potential tax liabilities if not deferred.

2. Opportunity Zones Made Permanent: Long-Term Certainty for Impact Investing

The permanence of the Opportunity Zone (OZ) program offers long-term certainty for investors looking to defer capital gains and invest in economically distressed communities. This stability is critical for strategic, long-hold investments.

Key Enhancements:

Revised Eligibility Criteria: The OBBBA includes revised criteria for identifying eligible low-income communities for future designations, potentially altering the geography of future OZ investments.
Emphasis on Rural and Tribal Areas: The bill introduces bonuses for OZ investments in rural and tribal areas, including a 30% capital gains exclusion for investments held at least five years in Qualified Opportunity Funds (QOFs) heavily invested in these zones. This could drive significant capital into previously underserved markets.
Lowered Substantial Improvement Threshold: For existing properties in rural and tribal OZs, the substantial improvement threshold is lowered, making it easier to qualify for OZ benefits.
Ordinary Income Eligibility: The bill expands eligibility to include ordinary income (up to $10,000 annually) for tax deferral, potentially opening the program to a broader range of smaller investors.
Increased Transparency: New reporting requirements for QOFs aim to provide more transparency and data, which can help investors assess the program's effectiveness and impact.

Impact for CRE Investors:

Long-Term Capital Gains Deferral: Investors can continue to defer capital gains by reinvesting them into QOFs, with the potential for partial exclusion of the deferred gain and full exclusion of post-investment appreciation if held for at least 10 years.
Focus on Specific CRE Sectors: OZs are particularly well-suited for ground-up development or significant rehabilitation projects in sectors like multifamily, mixed-use, industrial, and even certain retail properties within designated zones.
Social Impact Investing: The permanence of OZs reinforces their role as a tool for both financial return and community development, appealing to investors with a social impact focus.

3. Low-Income Housing Tax Credit (LIHTC) Expansion: A Boost for Affordable Housing Developers

The OBBBA’s enhancements to the LIHTC program are a significant win for affordable housing developers. LIHTC is the largest federal program for encouraging private equity investment in affordable rental housing.

Key Changes:

Increased 9% LIHTC Allocations: The bill permanently increases the allocation of the highly sought-after 9% LIHTC by 12.5%. This means more tax credits will be available to finance affordable housing projects.
Reduced 4% LIHTC Bond Financing Threshold: The required share of development costs financed with tax-exempt bonds to qualify for 4% LIHTCs is reduced from 50% to 25%. This makes it easier for affordable housing developers to access these credits, potentially enabling more projects to reach feasibility.

Impact for Developers:

Increased Project Feasibility: The changes make it easier and more financially viable to develop affordable housing, addressing a critical national need.
Stable Investment Stream: LIHTC projects often come with long-term commitments and a stable tenant base, offering a predictable return for investors.
Attracting Capital: The enhanced credits make LIHTC projects more attractive to institutional and private investors seeking tax advantages and socially responsible investments.

4. Section 179 Expensing: A Tool for Business-Owned CRE

The increased Section 179 expensing limits (to $2.5 million with a $4 million phase-out threshold) allow businesses to immediately deduct the full cost of qualifying equipment and certain other assets.

Impact for CRE Owners/Occupiers:

Tenant Improvements: While Section 179 generally applies to tangible personal property, it can be utilized for certain qualified real property improvements, particularly for businesses that own and occupy their commercial space and make eligible upgrades.
Equipment Purchases: For businesses operating within commercial properties, this provision can significantly reduce the tax burden associated with purchasing new machinery, office equipment, or other qualifying assets.

Important Distinction: It's crucial to differentiate Section 179 from bonus depreciation. While both offer accelerated deductions, Section 179 has annual dollar limits and phase-outs, and it generally does not apply to residential rental properties.

5. Preservation of Section 1031 Like-Kind Exchanges: Maintaining a Core CRE Strategy

The OBBBA maintains the ability to roll over gains on property sales into Qualified Opportunity Zones and other structures, and crucially, preserves Section 1031 like-kind exchanges without changes.

Impact for Investors:

Capital Gains Deferral: This allows investors to continue deferring capital gains taxes when they sell one investment property and reinvest the proceeds into a "like-kind" property, which is fundamental to many wealth-building strategies in CRE.
Portfolio Scaling: The preservation of 1031 exchanges enables investors to scale their portfolios and reallocate capital strategically without immediate tax implications.
Liquidity and Market Activity: This provision supports liquidity in the market by encouraging reinvestment rather than simply cashing out.

6. Business Interest Deduction and SALT Cap Increase: Broader Tax Relief

The OBBBA’s adjustments to the business interest deduction calculation (restoring the EBITDA-based limit) and the increased SALT deduction cap provide broader tax relief that can indirectly benefit CRE investors.

Impact for Investors:

Lower Cost of Capital: A more favorable business interest deduction can reduce the effective cost of borrowing for real estate businesses, especially in a higher interest rate environment.
Increased Disposable Income: The higher SALT cap can lead to increased disposable income for high-income homeowners and property owners, potentially stimulating demand in certain housing markets and, by extension, commercial sectors that serve those residents.

Navigating the New Landscape: Actionable Advice for CRE Investors

The OBBBA presents a complex mix of incentives and potential challenges. Here’s how commercial real estate investors can strategically navigate this new environment:

Re-evaluate Your Depreciation Strategy: With 100% bonus depreciation permanently restored, if you haven't already, now is the time to engage a qualified cost segregation specialist. This can unlock significant tax savings on recent and future property acquisitions and renovations.
Explore Opportunity Zone Investments: Given the permanence and expanded benefits for rural and tribal areas, reassess your investment criteria to include potential OZ opportunities. Research designated zones and consider projects that align with the program's long-term vision. Be mindful of the new reporting requirements.
Consider Affordable Housing Development: For developers, the enhanced LIHTC program offers a compelling incentive to enter or expand into the affordable housing sector. The increased allocations and reduced bond financing threshold make these projects more financially attractive.
Optimize Financing Structures: While the OBBBA provides some relief on business interest deductions, the broader macroeconomic environment still points to upward pressure on interest rates. Focus on properties with strong, predictable cash flows that can absorb higher financing costs. Explore fixed-rate options or hybrid structures to mitigate interest rate risk.
Prioritize Value-Add Strategies: In a market with potentially higher costs of capital and a widening bid-ask spread, value-add strategies become even more critical. Look for opportunities to acquire underperforming assets and create value through strategic renovations, repositioning, or operational efficiencies.
Diversify Your Portfolio: Consider diversifying across different CRE asset classes and geographies. While some sectors might benefit more directly from certain OBBBA provisions (e.g., industrial from bonus depreciation for equipment), others might face headwinds. A diversified portfolio can help mitigate risk.
Focus on Tenant Demand Drivers: The OBBBA is expected to provide a general boost in GDP and job growth, which should translate to increased tenant demand across various CRE sectors. Focus on properties in markets and submarkets with strong demographic trends and economic fundamentals.
Conduct Thorough Due Diligence: As always, comprehensive due diligence is paramount. Understand the specific tax implications of each investment, factoring in both federal and state tax rules, as some states may not conform to all federal changes.
Seek Expert Guidance: The OBBBA is complex, with numerous nuances that can significantly impact your investment outcomes. It is absolutely essential to consult with experienced tax advisors, CPAs, and real estate attorneys. They can provide tailored advice, ensure compliance, and help you maximize the benefits while minimizing potential risks. Do not rely solely on generalized information.

Macroeconomic Outlook and Potential Challenges

While the OBBBA offers significant tax wins for CRE, it’s crucial to consider the broader macroeconomic context. The bill is projected to add several trillion dollars to the national debt over the next decade. This deficit expansion, while potentially boosting GDP in the short term, also puts upward pressure on interest rates. The government's need to issue more debt to finance the deficit, combined with the Federal Reserve's efforts to stabilize inflation, could lead to a continued drift upwards in the long end of the yield curve.

Regional and Income Disparities: The bill's impact is unlikely to be uniform across all regions and income groups. While higher-income buyers and real estate investors may benefit significantly from certain tax provisions, lower-income renters and first-time homebuyers might not see immediate relief, especially in high-cost cities where affordability challenges persist.

Energy Policy Shifts: The OBBBA also includes provisions that largely terminate numerous tax incentives from the 2022 Inflation Reduction Act for clean energy, electric vehicles, and energy efficiency programs. This could impact the underwriting complexity for certain green or energy-efficient commercial buildings, as some previous deductions (like Section 179D for energy-efficient commercial buildings) are set to terminate.

Conclusion: A Strategic Imperative

The "One Big Beautiful Bill Act" marks a pivotal moment for commercial real estate. Its permanent tax code changes, particularly the restoration of 100% bonus depreciation and the permanence of Opportunity Zones, offer powerful incentives for investment and development. However, these benefits must be weighed against the potential for higher interest rates and evolving market dynamics.

For commercial real estate investors, the imperative is clear: understand the nuances of the OBBBA, strategically leverage its benefits through meticulous tax planning and cost segregation, and adapt your investment strategies to the evolving macroeconomic landscape. By staying informed, seeking expert counsel, and focusing on sound fundamentals, you can position your portfolio for continued success in this new era of commercial real estate.

Disclaimer: This article is intended for informational purposes only and does not constitute tax, legal, or investment advice. Commercial real estate investment involves risks, and individual circumstances vary. Always consult with qualified tax advisors, legal professionals, and financial experts to discuss your specific situation and make informed decisions.

Oregon's HB2138 - Improving Middle Housing

Fri, 27 Jun 2025 22:15:09 GMT

Oregon's 'middle housing' bill passes legislation.

House Bill 2138 (HB 2138) introduces significant changes to land use regulations in Oregon, primarily focusing on expanding middle housing options and streamlining land division processes. It builds upon previous legislation, notably House Bill 2001, by further promoting housing density and affordability.

Key Changes and Expansions:

Expanded Middle Housing and Urban Unincorporated Lands: HB 2138 expands the allowance of middle housing types (duplexes, triplexes, quadplexes, cottage clusters, and townhouses) to include urban unincorporated lands. This is a notable extension from previous requirements that primarily focused on incorporated cities.
Definition of Middle Housing: The bill refines the definition of "cottage cluster" to mean a grouping of detached or attached units (up to four per subgrouping) with a common courtyard and small footprint/floor area. It also clarifies definitions for duplexes, quadplexes, and triplexes as attached or detached dwellings on a lot not created by a middle housing land division.
Allowance for Additional Units: A significant new provision allows for additional dwelling units if one or more units of middle housing are accessible or affordable. This incentivizes the creation of housing that meets specific accessibility and affordability criteria. Cities must allow commensurate increases to developable area, floor area, height, or density to accommodate these additional units.
Retroactive Prohibition on Private Restrictions: HB 2138 makes the prohibition on private restrictions, including those in planned community governing documents, that limit middle housing, accessory dwelling units, or housing density, retroactive. This is a major shift, invalidating existing restrictive covenants that would otherwise hinder denser housing development.
Expedited Land Division Reforms: The bill reforms expedited land division provisions, making such divisions land use decisions that are exempt from hearing requirements and appeals by opponents. This is a significant change aimed at accelerating housing development by reducing potential delays from appeals.
Consolidated Plats and Review Timelines: It allows for plats that consolidate a land division and a middle housing land division, requiring review within 120 days for counties and cities.
Land Conservation and Development Commission (LCDC) Rules: The LCDC is mandated to adopt new rules by January 1, 2028, to promote housing development. These rules will address siting and design standards for manufactured, site-built, or prefabricated middle housing, establish parameters for unreasonable costs or delays for ADUs and single room occupancies, regulate cottage clusters, and amend discretionary criteria for evaluating housing.
Increased Appropriations: The bill increases appropriations for rulemaking and technical assistance grants to support the implementation of these changes .
Operative Date: The main provisions of the bill become operative on January 1, 2027.

Major Changes from HB 2001 (Oregon Middle Housing Bill):

While HB 2001 (Oregon Laws 2019, chapter 639) introduced the concept of allowing middle housing in areas previously zoned for single-family homes, HB 2138 significantly expands upon its predecessor by:

Broadening Geographic Scope: HB 2001 primarily focused on cities of a certain population size. HB 2138 extends middle housing requirements to include "urban unincorporated lands," meaning areas within urban growth boundaries that are not within a city but are zoned for urban development and have urban services. This greatly increases the land area where middle housing must be permitted.
Addressing Existing Restrictions: HB 2001 mandated that local governments allow middle housing. HB 2138 goes further by retroactively voiding private restrictions (like HOA covenants) that would limit middle housing, ADUs, or housing density. This directly tackles a significant barrier to middle housing development that HB 2001 did not explicitly cover with retroactive effect.
Incentivizing Affordable and Accessible Units: HB 2138 introduces specific incentives for developing accessible or affordable middle housing units by allowing additional units ¹⁷ . This was not a direct provision of HB 2001.
Streamlining Land Divisions and Limiting Appeals: HB 2138 explicitly exempts expedited land divisions from hearing requirements and appeals by opponents. This is a critical procedural change that aims to prevent delays in development, which was a common challenge even after HB 2001. HB 2001 required local governments to adopt land use regulations by certain dates but did not explicitly remove appeal mechanisms in this way.
Refined Definitions and Rulemaking Mandates: HB 2138 provides more detailed definitions for middle housing types like "cottage clusters". It also gives the LCDC a more extensive mandate for rulemaking to address implementation challenges and encourage various housing types, including manufactured and prefabricated housing.

In essence, HB 2138 acts as a stronger enforcement and expansion mechanism for the principles introduced in HB 2001, aiming to accelerate housing production and affordability by addressing persistent barriers and broadening the scope of middle housing implementation.

Scaling from 1-4 Units to Apartments in Oregon

Fri, 27 Jun 2025 18:30:54 GMT

Refinance, exchange or do nothing with your underperforming Oregon residential real estate?

Scaling your Oregon real estate portfolio requires careful planning, accurate underwriting and a palatable master plan. Are you an Oregon real estate investor considering the strategic choice to hold, refinance or sell/exchange appreciated 1-4 units properties? We help investors move into larger assets (Commercial & 5+ units) via a 1031 exchange by executing the sale, acquisition and financing as your trusted advisor. This article will delve into the technical underpinnings of this strategy, elucidating the factors that contribute to enhanced returns in larger multifamily assets.

Addressing Underperformance in Smaller Residential Assets in the Portland and Salem markets

Do not get me wrong - these are great assets to get started and investors need to start somewhere. Investors who have a small-medium portfolio comprised of these assets do reach a point with enough equity where scaling has its benefits. Single-family and 2-4 unit buildings, while often representing an initial foray into real estate investment, can suffer from inherent limitations that constrain the yield potential:

Limited Economies of Scale: Managing multiple individual units incurs proportionally higher costs per unit compared to managing a larger apartment complex. Expenses such as property management fees, maintenance, repairs, and marketing are less efficiently distributed across a smaller asset base.
Higher Vacancy Risk: A vacancy in a single-family or duplex represents a complete loss of income for that unit. In contrast, a vacancy in a larger apartment building has a less drastic impact on the overall income stream due to the diversification of rental units.
Lower Rent Multipliers: The rent-to-value ratio, a key metric for assessing investment efficiency, tends to be lower for smaller residential properties compared to larger multifamily assets in comparable locations. This is often attributed to the perceived higher desirability of single-family living and the competitive pricing pressures in the smaller rental market.
Management Intensive: Managing scattered single-family rentals or even a small plex can be time-consuming and require significant individual attention to tenant relations, maintenance requests, and lease administration.
Convoluted Valuations: Determining the market value of these assets is usually done by comparable sales and price per square foot multiples. This is taking what has sold nearby into higher consideration than the actual performance of the investment (income-approach).
Competition: The highest and best use of residential real estate has always been designed for the home owner. Competing with retail buyers when seeking yield translates to inflated pricing.

Unlocking Higher Yields Through Apartment Buildings

Transitioning into apartment or commercial buildings with a 1031 exchange offers a pathway to overcome these limitations and realize higher return on your equity through several key mechanisms:

Enhanced Economies of Scale: Larger apartment complexes benefit from significant economies of scale. A single property management team can oversee numerous units, reducing the per-unit management cost. Maintenance and repair expenses can be streamlined through bulk purchasing of supplies and the utilization of in-house maintenance staff. Marketing costs are also distributed across a larger tenant base, improving efficiency.
Diversified Income Streams and Lower Vacancy Risk: With a greater number of units, the impact of a single vacancy on the overall rental income is significantly diminished. This inherent diversification provides a more stable and predictable cash flow, reducing the overall risk profile and contributing to higher effective yields. The law of large numbers dictates that vacancy rates in larger buildings tend to be more stable and predictable.
Higher Rent Multipliers and Net Operating Income (NOI): Apartment buildings often command higher rent multipliers compared to smaller residential properties in the same market. This is driven by factors such as professional management, shared amenities (e.g., fitness centers, pools, community rooms), and a greater sense of community. The higher gross rental income, coupled with the aforementioned economies of scale in operating expenses, directly translates to a higher Net Operating Income (NOI). The NOI, calculated as Gross Rental Income minus Operating Expenses, is a fundamental driver of property valuation and investment returns. NOI=Gross Rental Income−Operating Expenses
Potential for Value Add Strategies: Larger apartment complexes often present more significant opportunities for value-add strategies that can further enhance income and wealth growth. These strategies can include renovating units to command higher rents, upgrading common areas to attract a higher caliber of tenant, implementing more efficient management practices, or adding amenities that increase tenant satisfaction and retention. These improvements directly impact the NOI and, consequently, the property's value.
Sophisticated Management and Operational Efficiencies: The scale of apartment buildings necessitates more sophisticated management practices and systems. Professional property management companies specializing in multifamily assets bring expertise in tenant acquisition, rent collection, maintenance scheduling, and financial reporting, leading to more efficient operations and optimized profitability.

The Mechanics of a 1031 Exchange

At its core, Section 1031 of the Internal Revenue Code allows investors to exchange "like-kind" properties without triggering immediate capital gains tax liability. This means the proceeds from the sale of the relinquished property are reinvested into a replacement property of equal or greater value, effectively deferring the tax obligation. The "like-kind" designation is broadly interpreted in real estate, encompassing most investment properties, including the exchange of land and smaller residential units for larger apartment or commercial buildings. Constant Commercial Real Estate Inc. guides real estate investors through 1031 exchanges.

Step 1 - Quantify Currently Owned Oregon Properties

Step 4 - Conclusion... Consult with CCRE!

For investors seeking to optimize their real estate portfolios and escape the limitations of underperforming single-family and 2-4 unit buildings, a 1031 exchange into a larger better performing assets is a compelling strategy. The inherent advantages of economies of scale, diversified income streams, higher rent multipliers, and the potential for value-add initiatives contribute to significantly enhanced yields and a more robust investment profile. By strategically leveraging the tax deferral benefits of a 1031 exchange, investors can effectively trade up into assets with greater income-generating potential, accelerating their financial goals in the real estate market. The technical advantages outlined underscore the financial prudence of considering this transition for those seeking higher returns in their real estate investments.

Constant Commercial Real Estate Inc is an Oregon based firm that specializes in residential, commercial and apartment sales. We advise and consult investors through the entire process and have a track record of doing it. We can arrange and shop for commercial & apartment financing on your behalf. Contact us to have a no obligation consult and see if we can help you achieve new heightened financial milestones.

Where Oregon Investors Search Real Estate Listings

Fri, 27 Jun 2025 14:59:40 GMT

Navigating Online Commercial Real Estate Listings in Portland & Salem, Oregon

For commercial real estate investors in the dynamic Pacific Northwest market , finding prime investment properties for sale requires a savvy approach to online listing platforms. At Constant Commercial Real Estate Inc., we empower our clients to identify both on-market and crucial off-market opportunities across Oregon . This guide provides an overview of essential online resources for commercial properties , multifamily investments , and land for sale in Portland and Salem , alongside highlighting the invaluable role of a dedicated commercial real estate broker .

The Foundation: Multiple Listing Service (MLS) for Oregon Commercial Properties

The Multiple Listing Service (MLS) is the backbone of traditional real estate transactions, a private platform where licensed real estate brokers and commercial agents share property listings . This cooperative network offers high exposure for listed properties , channeling them to brokers with qualified buyer clients and defined criteria. For smaller commercial real real estate firms , the MLS levels the playing field against larger national entities. While primarily a private database maintained by Oregon real estate professionals , its data ultimately funnels to many public listing sites.

Key takeaway for investors: Not all commercial property listings or apartment buildings for sale make it to the MLS. Collaborating with a Portland commercial real estate broker or Salem commercial real estate agent from Constant Commercial Real Estate Inc. allows you to fully leverage this powerful tool.

Public Portals: Your Gateway to Oregon Investment Properties

The MLS feeds into several user-friendly public online listing platforms. While many share similarities, personal preference often dictates which ones you frequent.

Commercial Real Estate Platforms: Dominant Players in Oregon

CoStar: As the nation's largest commercial real estate information and analytics provider , CoStar is a data powerhouse, owning platforms like LoopNet, Apartments.com, and Homes.com. It offers extensive tools for commercial real estate professionals and investors covering all commercial property types in Oregon . A subscription is required, but a Constant Commercial Real Estate Inc. broker can share valuable, subscriber-only commercial listings . CoStar is essential for rent studies , comparable sales analysis , and identifying commercial land for sale in Portland or Salem .
LoopNet: Owned by CoStar, LoopNet is a premier marketplace for income-producing real estate , including commercial buildings , multifamily properties , and development land across Oregon . We utilize LoopNet to set up targeted search notifications for investment property types that align with our clients' needs.
Crexi: A rapidly growing commercial real estate marketplace and technology company, Crexi offers free listings for brokers, making it a common platform for properties that may not appear on larger, more expensive sites. We recommend setting up searches on Crexi similar to CoStar and LoopNet to capture all potential commercial investment opportunities in Portland and Salem, Oregon .

Residential-Focused Platforms (with Commercial Crossover)

While primarily focused on residential real estate , these platforms can occasionally feature small commercial properties , land parcels , or 2-4 unit multifamily investments .

Redfin: A user-friendly platform that is popular for exploring currently listed properties.
Zillow: Another highly trafficked website for viewing residential listings and rentals, often used by clients seeking land for sale or smaller multifamily properties .
Realtor.com: A valuable resource for brokers, linking to the MLS to provide insights into recently closed sales, which can inform commercial property valuations .
Trulia: Also owned by Zillow, offering a similar user experience.

Beyond these, smaller marketplaces like RealNex, BiggerPockets, Facebook Marketplace, and Craigslist offer accessible, often free avenues to market specialty investment properties to a broader audience.

Important Note: When using residential platforms, exercise caution with advertisements if you already have an agency relationship with a commercial real estate broker from our firm. Not all commercial real estate opportunities will be listed on these sites. For a comprehensive market understanding and proactive property search , consult with one of our Oregon commercial real estate brokers . We can establish tailored searches across various platforms to ensure you receive timely notifications for properties that fit your investment criteria .

Unlocking Off-Market Commercial Real Estate Opportunities

The true advantage in a competitive market lies in identifying off-market listings . Our Portland and Salem commercial real estate brokers possess deep local market expertise and a robust network of relationships with other brokers , investors , and property owners . This allows us to uncover "coming soon" or "pocket listings" – commercial properties that may not be publicly listed.

As our clients' investment needs evolve, we actively network with our sphere of influence to identify these exclusive commercial real estate opportunities early. This collaborative approach extends both ways: we regularly share off-market properties with our valued clients and network partners. Through our proactive commercial real estate prospecting , we frequently encounter investors willing to sell their commercial properties discreetly, avoiding the public listing process. This enables Constant Commercial Real Estate Inc. to facilitate direct, mutually beneficial transactions that perfectly align with a client's investment profile .

Constant Commercial Real Estate Inc. is a leading investment real estate and commercial mortgage brokerage firm dedicated to serving private investor clients throughout Oregon . We specialize in connecting investors with strategic capital and providing expert real estate portfolio advising . Our consultative and analytical approach guides clients through income-producing real estate acquisitions , dispositions , commercial financing , and comprehensive portfolio capital/equity management in the Portland and Salem, Oregon markets.

Navigating the Shifting Sands: Short-Term-Rentals

Sat, 21 Jun 2025 20:58:28 GMT

Navigating the Shifting Sands: A Realistic Look at Short-Term Rental Investments in Oregon

The allure of short-term rentals (STRs) has captivated many real estate investors, promising attractive returns and flexible income streams. However, as we look ahead to 2025 and beyond, it's crucial for prospective investors to approach this market with realistic expectations. The landscape is evolving, presenting both opportunities and challenges. This article will provide insights to help you make informed decisions when considering STR investments in Oregon.

The Evolving Landscape: A Trend Towards Moderation

For several years, the short-term rental market experienced a boom, fueled by platforms like Airbnb and Vrbo, and a surge in travel demand. However, recent data suggests a shift, indicating a trending down in key performance indicators for many STR markets.

Occupancy Rates and Nightly Rates:

While specific data varies by location within Oregon, a general trend shows that the inflated occupancy rates and nightly rates seen during the pandemic and immediate post-pandemic travel surge are normalizing. We are seeing:

Decreasing Occupancy: As more STRs enter the market and traditional hotels regain their footing, the overall occupancy rates for short-term rentals are experiencing a moderate decline. This means your property might sit vacant for more nights than it would have a year or two ago and using historical occupancy figures for underwriting may not be conservative enough.
Stabilizing/Decreasing Nightly Rates: The intense competition and increased supply are also putting downward pressure on average nightly rates. While prime locations and unique properties may still command premium pricing, the days of consistently high rates across the board are becoming less common.

Battling High Valuations, Interest Rates and Compounding the challenge are the current economic conditions:

High Residential Valuations: Property values across Oregon remain elevated, making the initial acquisition cost for potential STRs significant. This high barrier to entry can make it harder to achieve attractive cash-on-cash returns, especially when factoring in other costs. Properties with existing STR permits that are transferrable are demanding a premium, regardless of investment performance.
Elevated Interest Rates: The current interest rate environment directly impacts borrowing costs. Higher interest rates translate to larger monthly mortgage payments, further squeezing potential profits and extending the time it takes to recoup your initial investment.

These factors combine to create a more challenging environment than what many investors experienced in the recent past. It's no longer a "set it and forget it" market; careful planning, diligent management, and a deep understanding of market nuances are paramount.

Strategic Recommendations for Oregon STR Investors

Despite the shifting landscape, short-term rentals can still be a viable investment in Oregon for those who approach it strategically. Here are our key recommendations:

1. Moderate Leverage is Key

In a market with increasing costs and potentially softer returns, relying heavily on debt can amplify risk. We strongly advise investors to consider moderate leverage . This means aiming for a higher down payment than might have been common in a more aggressive market.

Reduced Monthly Payments: A larger down payment directly translates to smaller monthly mortgage obligations, providing more breathing room in your cash flow, especially during periods of lower occupancy or reduced nightly rates.
Increased Equity Buffer: Higher equity provides a stronger financial cushion against market fluctuations and unexpected expenses. If the market experiences a downturn, you have more equity to absorb potential losses before facing significant financial strain.
Greater Financial Stability: Moderate leverage enhances your overall financial stability, making your investment less susceptible to interest rate hikes or shifts in rental income. It allows you to weather economic storms more comfortably.

2. Understanding Area Restrictions: Especially True in Oregon

Oregon has a diverse regulatory landscape for short-term rentals, and understanding local area restrictions is absolutely critical before you even consider purchasing a property. Unlike some states with broad, uniform STR laws, Oregon's regulations are often determined at the county and city level, leading to significant variations.

Varying Definitions and Permitting: What constitutes a "short-term rental" can differ, as can the requirements for permits and licenses. Some cities may require you to be a primary resident to operate an STR, while others allow non-owner-occupied units. For example, Portland has strict regulations, often requiring the STR to be in your primary residence, while other coastal towns may have different rules. Bend has two types of permits, (Type I & II) but Deschutes county outside of the city limits is fairly easy to get up and running.
Zoning and Usage Limitations: Many municipalities have specific zoning laws that dictate where STRs are permitted. Some areas may restrict STRs to commercial zones, while others may allow them in residential areas with specific conditions (e.g., limits on the number of guests or nights rented). The coast has some exceptions for properties in commercial zones, allowing operators to skip the lengthy wait for applications.
Occupancy and Nuisance Rules: Beyond permits, be aware of rules regarding maximum occupancy, parking, noise, and trash. Neighbor complaints can quickly lead to fines or even revocation of your operating license. Cities like Portland have non-emergency hotlines for STR complaints and may audit booking records.
Taxes: Beyond state lodging taxes, many Oregon cities and counties levy their own transient lodging taxes. Ensure you understand all applicable taxes and how to remit them, as failure to do so can result in penalties. For example, Deschutes County has an 8% transient tax that is passed onto guests but may need to be reflected in a lower nightly rate to remain competitive.
Evolving Regulations: The regulatory environment for STRs is dynamic. What is allowed today might change tomorrow due to community pressure or new legislation. Stay informed about proposed changes in your target areas.

Our Recommendation: Before making any commitments, thoroughly research the specific STR regulations for the exact city and county where you intend to purchase. Contact the local planning or community development department to confirm current requirements and any pending changes. This due diligence can save you from significant legal and financial headaches down the line.

3. Understanding Financing: Second Home vs. DSCR Financing

The type of financing you secure can profoundly impact the profitability and viability of your short-term rental investment. For STRs, you'll generally encounter two primary categories: second home financing and DSCR (Debt Service Coverage Ratio) financing .

Second Home Financing: This type of loan is for a property that is not your primary residence but is intended for your personal use for a portion of the year, in addition to being rented out. The IRS has specific guidelines for what qualifies as a second home (e.g., used for personal purposes for more than 14 days a year or 10% of the days it's rented).
Pros: Generally offers lower interest rates and lower down payment requirements (often starting around 10%) compared to pure investment property loans. The qualification process is similar to a primary residence mortgage, focusing on your personal income and debt-to-income (DTI) ratio.
Cons: Comes with limitations on personal use and rental days (e.g., cannot be rented out for more than 180 days a year by some lenders). If you primarily intend to use the property as a full-time rental income generator, it may not qualify, or you could face issues if you exceed personal use limits.
DSCR (Debt Service Coverage Ratio) Financing: Specifically designed for investment properties and assess the property's ability to generate enough income to cover its debt obligations. The key metric is the DSCR ratio, which compares the property's net operating income to its debt service (mortgage payments). A DSCR of 1.0 means the income just covers the debt; lenders typically prefer ratios of 1.25 or higher.
Pros: Does not rely on your personal income or DTI for qualification, making them ideal for investors with multiple properties or non-traditional income streams. Lenders evaluate the property's projected rental income. Crucially, many DSCR lenders will consider projected short-term rental income based on market data (e.g., AirDNA reports) rather than requiring a long-term tenant history. They often have no limit on the number of financed properties.
Cons: Typically come with higher interest rates and higher down payment requirements (often 20-30% or more) compared to second home loans. The focus is purely on the property's income potential, so if a property isn't projected to cash flow well, it may not qualify. These are generally non-qualified mortgages (non-QM) and can be less regulated. To acquire a DSCR loan most lenders will require the property has 2 years of profitable operating history.

Our Recommendation: For investors whose primary goal is yield and who plan minimal personal use, DSCR financing for an existing or strong projected STR is often the more suitable and scalable option, despite the higher rates. If you genuinely intend to use the property regularly as a vacation home with some rental income to offset costs, second home financing might be more appropriate. Always work with a lender experienced in investment properties and STRs to ensure you choose the right product for your specific goals.

4. Management: Important and Expensive, or Energy Intensive for Owner-Managers

Effective property management is the backbone of a successful short-term rental, yet it comes with significant considerations.

Professional Management (Expensive): Hiring a professional short-term rental management company can be a game-changer, especially for out-of-state investors or those with limited time. These companies handle everything from marketing, booking, guest communication, cleaning coordination, maintenance, and even dynamic pricing strategies.
Cost: Expect professional management fees to range anywhere from 20% to 30% of the effective gross income . This percentage can vary based on the level of service, the property's location (e.g., highly seasonal areas might charge more), and the amenities offered. While 25-30% is a common high-end figure, some companies like Evolve may offer services starting as low as 10% for more limited offerings. Be sure to understand what services are included (e.g., is cleaning separate?).
Benefits: Frees up your time, leverages their expertise in pricing and marketing, ensures consistent guest experiences, and can handle emergencies.
Owner-Managed (Energy Intensive): Many investors initially consider managing their own STRs to save on fees. While this can save money, it is incredibly energy intensive .
Responsibilities: This includes 24/7 guest communication, managing booking calendars across multiple platforms, coordinating cleaning and maintenance, handling emergencies (often at odd hours), addressing guest complaints, ensuring compliance with local regulations, restocking supplies, and actively marketing your property.
Time Commitment: This is essentially running a small hospitality business. The time commitment can be substantial, especially during peak seasons or if you have multiple properties. Burnout is a real risk.
Opportunity Cost: The time spent managing could be time spent on other income-generating activities or simply enjoying your life.

Our Recommendation: Factor management costs into your financial projections from the outset. For most serious investors seeking yield, professional management is often a necessary expense to ensure optimal performance and protect your peace of mind. For those considering owner-management, be realistic about the significant time and effort required.

5. Deciding Your Purpose: Personal Use vs. Investment Yield

Before diving into the STR market, clarify your primary objective for owning the asset:

Personal Use (A Property That Pays for Most of Itself): Your primary goal is to own a vacation home or a retreat in a desirable Oregon location (e.g., the coast, Bend, Wine country) that you and your family can enjoy regularly. The rental income is a secondary benefit, aimed at offsetting mortgage payments, property taxes, insurance, and maintenance costs.
Considerations: Your personal preferences for location, amenities, and aesthetic will heavily influence your purchase decision. You'll likely prioritize proximity to your favorite activities or natural attractions. Tax implications also differ for second homes (see financing section). The property will likely have periods of personal use, reducing its income-generating potential.
Investment (Seeking Yield): Your sole or primary objective is to generate significant passive income and achieve a strong return on investment (ROI). Personal use is minimal or non-existent, and every decision is driven by maximizing rental revenue and profitability.
Considerations: Location selection will be driven by market demand, average daily rates, and occupancy projections, not personal preference. Property amenities will be chosen based on what attracts the most guests and commands the highest rates. You'll focus heavily on financial metrics like cash flow, principal reduction and potential appreciation. DSCR financing is often more suitable here.

Our Recommendation: Be honest with yourself about your true motivation. A property purchased primarily for personal enjoyment may not always be the most financially optimized investment, and vice-versa. Understanding your goal will guide your property selection, financing strategy, and management approach. Constant Commercial Real Estate Inc can quantify the return projections with real analysis from actual short term rentals for sale over the years. Our stance comes from underwriting 100's of them and owning them ourselves. We see the social media experts and owners in other markets touting high income and specialized properties - we are not here to state its not possible, but the vast majority of them struggle with high yield due to the above factors.

Conclusion

The short-term rental market in Oregon, while still offering opportunities, is maturing and demanding a more sophisticated approach from investors. The days of easily achieving outsized returns are likely behind us, replaced by a need for diligent research, realistic financial projections, and strategic execution. By embracing moderate leverage, meticulously understanding local regulations, selecting the right financing, budgeting for professional management (or committing to the intensive work of self-management), and clearly defining your investment goals, you can still find success in the evolving Oregon short-term rental landscape. As always, consulting with experienced real estate professionals and financial advisors is paramount to making informed decisions that align with your individual investment objectives.

Oregon Property Wholesaling - A Law and Rule Overview

Tue, 29 Apr 2025 16:13:46 GMT

Wholesaling in Oregon - Ask about partnering with us!

December 2024 House Bill 4058 (Chapter 3, 2024 Laws) will require the registration of residential property wholesalers beginning July 1, 2025. Additionally, wholesalers will be required to provide a written disclosure to parties to the transaction and in advertising.

Registration

“Residential property wholesaling" is defined as the marketing of residential property where the marketer has only an equitable interest or an option to purchase and, at the time of marketing, the marketer has held such interest or option for fewer than 90 days and invested less than $10,000 in land development or improvement costs associated with the residential property.

With the exception of licensed brokers and principal brokers (see below), individuals wishing to conduct residential property wholesaling must register with the Oregon Real Estate Agency (OREA). Registration includes:

Submitting an online application.
Providing the name or names under which wholesaling will be conducted.
Passing a criminal records check.
Paying the registration fee of $300.

Registered wholesalers must renew their registration by June 30 of each year for a fee of $300.

Written Disclosure

Residential property wholesalers must provide a written disclosure:

To potential buyers before entering into a contract for a wholesale transaction.
To potential sellers before entering into a contract for a wholesale transaction.
To any broker or principal broker assisting the wholesaler in marketing or listing the property.
To any broker or principal broker assisting a potential buyer in purchasing the property.
In any advertising related to the property. Advertising on social media is exempt if it links to a separate page with the required disclosure.

The disclosure must be in at least 10-point bold type and must include:

A statement that the wholesaler, or the business name under which the wholesaler conducts wholesaling, is a residential property wholesaler and:
Will have or has only an equitable interest in the property being sold.
Will not have or does not have legal title to the property and therefore, may not be able to directly transfer title to the buyer.
Might not be a licensed real estate broker or principal broker and, therefore, might not be permitted to engage in professional real estate activity.
Might not be a licensed appraisal specialist and, therefore, might not be permitted to provide an opinion as to the value of the property.
The following plain language definition of equitable interest: A person who has an "Equitable interest" in a property means someone that has contracted with the current owner for the right to buy the property at a later date even though they don't have legal title. The contract may allow the equitable interest holder to sell or transfer the right to purchase the property to someone else prior to close of escrow.
The following statements:
A wholesaler may assign equitable interest to another party prior to closing for profit.
A seller or buyer who enters into a written contract for a residential property wholesale transaction may cancel the contract without penalty by delivery of a written notice of cancellation any time before 12 midnight at the end of the third business day after the receipt of the residential property wholesaler written disclosure. The right of cancellation may not be waived. Upon cancellation, all earnest money or deposits shall be returned to the person who provided the earnest money or deposit.
If the residential property wholesaler fails to provide a residential property wholesaler written disclosure to the seller before entering into a written contract for a residential property wholesale transaction, the seller may terminate the contract at any time without penalty and retain any earnest money or deposit paid to the seller or deposited in escrow by the residential property wholesaler. An escrow agent may disburse the earnest money or deposit to the seller without the need for separate written instructions from the residential property wholesaler if the seller in writing asserts that the residential property wholesaler written disclosure was not provided to the seller before entering into the written contract for the residential property wholesale transaction and demands disbursement to the seller of all deposits held by the escrow agent and the seller has provided the escrow agent with a written release and indemnification against all liability arising from the disbursement of the earnest money and deposits to the seller.
If the residential property wholesaler fails to provide a residential property wholesaler written disclosure to the seller or buyer, and if the purchase and sale agreement is terminated as a result, the wholesaler shall be liable for damages incurred by seller and buyer.
In any mediation or arbitration proceeding or civil action between buyer and seller, between buyer and residential property wholesaler or between seller and residential property wholesaler that arises due to the residential property wholesaler's failure to provide a residential property wholesaler written disclosure before entering into a written contract for a residential property wholesale transaction as prescribed under this section, the prevailing party is entitled to recover all reasonable attorney fees, costs and expenses incurred at trial, on appeal, at mediation, and at arbitration from the residential property wholesaler.
How to file a complaint: If you believe a real estate licensee or a residential property wholesaler has violated any governing statute or rule, you may file a complaint with the Oregon Real Estate Agency (OREA). OREA will review the complaint. In most cases, other people involved in the case, including the respondent, will be contacted. Based on the information received, OREA will determine whether to start an investigation.

OREA will make a written disclosure available for use by residential property wholesalers by July 1, 2025.

Wholesaling by Brokers and Principal Brokers

If you are a licensed broker or principal broker who conducts residential property wholesaling, you are not required to be registered as a wholesaler. However, you are required to provide a written disclosure:

To potential buyers before entering into a contract for a wholesale transaction.
To potential sellers before entering into a contract for a wholesale transaction.
To any broker or principal broker assisting a potential buyer in purchasing the property.
In any advertising related to the property. Advertising on social media is exempt if it links to a separate page with the required disclosure.

The disclosure must be in at least 10-point bold type and must include:

A statement that the broker or principal broker is licensed and:
Will only have or has an equitable interest in the property being sold.
Will not have or does not have legal title to the property and therefore may not be able to directly transfer title to the buyer.
Might not be a licensed appraisal specialist and, therefore, might not be permitted to provide an opinion as to the value of the property.
The following plain language definition of equitable interest: A person who has an "Equitable interest" in a property means someone that has contracted with the current owner for the right to buy the property at a later date even though they don't have legal title. The contract may allow the equitable interest holder to sell or transfer the right to purchase the property to someone else prior to close of escrow.
The following statements:
The broker or principal broker may assign equitable interest to another party prior to closing for profit.
A seller or buyer who enters into a written contract for a residential property wholesale transaction may cancel the contract without penalty by delivery of a written notice of cancellation any time before 12 midnight at the end of the third business day after the receipt of the residential property wholesaling written disclosure. This right of cancellation may not be waived. Upon cancellation, all earnest money or deposits shall be returned to the person who provided the earnest money or deposit.
If the broker or principal broker fails to provide a residential property wholesaling written disclosure to the seller before entering into a written contract for a residential property wholesale transaction, the seller may terminate the contract at any time without penalty and retain any earnest money or deposit paid to the seller or deposited in escrow by the broker or principal broker. An escrow agent may disburse the earnest money or deposit to the seller without the need for separate written instructions from the broker or principal broker if the seller in writing asserts that the residential property wholesaling written disclosure was not provided to the seller before entering into the written contract for the residential property wholesale transaction and demands disbursement to the seller of all deposits held by the escrow agent, and the seller has provided the escrow agent with a written release and indemnification against all liability arising from the disbursement of the earnest money and deposits to the seller.
If the broker or principal broker fails to provide a residential property wholesaler written disclosure to the seller or buyer, and if the purchase and sale agreement is terminated as a result, the broker or principal broker shall be liable for damages incurred by seller and buyer.
In any mediation or arbitration proceeding or civil action between buyer and seller, between buyer and broker or principal broker, or between seller and broker or principal broker that arises due to the broker's or principal broker's failure to provide a residential property wholesaling written disclosure before entering into a written contract for a residential property wholesale transaction as prescribed under this section, the prevailing party is entitled to recover all reasonable attorney fees, costs and expenses incurred at trial, on appeal, at mediation and at arbitration from the broker or principal broker.
How to file a complaint. If you believe a real estate licensee or a residential property wholesaler has violated any governing statute or rule, you may file a complaint with the Oregon Real Estate Agency (OREA). OREA will review the complaint. In most cases, other people involved in the case, including the respondent, will be contacted. Based on the information received, OREA will determine whether to start an investigation.

OREA will create a written disclosure available for use by brokers and principal brokers who wholesale residential property.

Fix & Flip Listing Services

Wed, 12 Mar 2025 21:02:22 GMT

Maximizing Profits with Constant Commercial Real Estate’s List-Back Services

At Constant Commercial Real Estate, we specialize in helping real estate investors maximize their returns through strategic property transactions. One of the key services we offer is our list-back program for fix-and-flip investors. By leveraging our deep market expertise and analytical approach, we provide investors with a seamless experience from acquisition to disposition, ensuring they achieve the best possible sale price upon project completion.

Understanding the Fix-and-Flip Investor

Our common client profile consists of savvy real estate investors who specialize in fix-and-flip projects across various property types. These investors rely on accurate underwriting, market analysis, and strategic positioning to ensure their investments yield strong returns. At Constant Commercial Real Estate, we recognize the challenges and opportunities within the fix-and-flip space and work closely with our clients to ensure they achieve success.

Whether you’re flipping a single-family home, multi-family property, mixed-use asset, or even light commercial real estate , our team has the expertise to support you. We understand the unique dynamics of each property type and tailor our strategies to fit the investor’s goals.

Why Choose Our List-Back Services?

1. Expertise in Fix-and-Flip Underwriting

Our team is highly analytical and understands the numbers behind a successful fix-and-flip. We assist investors in evaluating potential acquisitions by analyzing comparable sales, construction costs, financing options, and projected after-repair values (ARV). This ensures that when it’s time to list the property, we have already built a strong foundation for a profitable sale.

2. Seamless Coordination with Wholesalers

We frequently collaborate with wholesalers who source off-market deals for our investor clients. Many wholesalers prefer working with a trusted brokerage like Constant Commercial Real Estate because we help facilitate smooth transactions and ensure investors have a clear exit strategy. Our list-back services provide a structured, end-to-end solution for investors acquiring properties through wholesalers.

3. Strategic Market Positioning

Selling a flipped property is more than just listing it on the MLS. It requires careful pricing, compelling marketing, and expert negotiation. Our team employs comprehensive market analysis to determine the most competitive listing price while maximizing investor profit. We also provide insights on buyer demand, financing considerations, and potential appraisal risks to ensure a smooth closing process.

4. Targeted Marketing and Buyer Outreach

Through professional photography, virtual tours, and digital marketing strategies, we ensure that each listing reaches the right audience. Our extensive network of real estate buyers, including first-time homeowners, move-up buyers, and other investors, allows us to generate interest quickly and create competitive offer situations that drive prices higher.

5. Quick, Efficient Sales Process

We know that time is money for fix-and-flip investors. Holding costs, loan interest, and opportunity costs all add up quickly. That’s why we focus on expedited listing strategies , leveraging pre-market buzz and aggressive buyer outreach to reduce days on the market and maximize return on investment.

A Partnership Built for Success

At Constant Commercial Real Estate, we don’t just list properties—we create investment success stories . Our deep knowledge of fix-and-flip investing, combined with our strategic marketing and negotiation expertise, makes us the ideal partner for investors looking to scale their business.

If you’re an investor or wholesaler looking to streamline your process and maximize returns, our list-back services are the perfect solution. Contact us today to learn how we can help you achieve your real estate investment goals with a proven, data-driven approach.

Reach out to info@constantcommercial.com for more information or call our office at (503)222-0282 .

Delaware Statutory Trusts (DSTs): A Comprehensive Guide for Real Estate Investors

Wed, 12 Mar 2025 15:40:10 GMT

Delaware Statutory Trusts (DSTs) have gained significant popularity among real estate investors, particularly those looking to defer capital gains taxes while maintaining passive income from real estate holdings. A DST is a legal entity that allows multiple investors to own fractional interests in high-quality, institutional-grade properties. It provides a hands-off approach to real estate investment while offering potential tax advantages under the IRS 1031 Exchange guidelines.

This article will explore the profile of an ideal DST investor, the tax treatment of these investments, a step-by-step guide on how to execute a DST exchange, and the critical role of an experienced real estate broker in facilitating the transaction.

Who Should Consider a Delaware Statutory Trust?

DSTs are not a one-size-fits-all investment. They are best suited for a specific type of investor, typically those who:

Are Nearing Retirement or Seeking Passive Income: Investors who want to step away from active property management but still earn rental income find DSTs an attractive option.
Have Highly Appreciated Investment Properties: Those looking to sell a property that has appreciated significantly and want to defer capital gains taxes through a 1031 Exchange.
Seek Portfolio Diversification: DSTs offer access to diversified, professionally managed commercial properties, including multifamily apartments, medical offices, retail centers, and industrial facilities.
Want to Avoid the Hassles of Property Management: DSTs eliminate the burden of dealing with tenants, repairs, and ongoing property oversight.
Are Looking for Predictable Income: Many DSTs offer stable, projected distributions, making them an appealing choice for income-focused investors.
Have a Low Risk Tolerance for Real Estate Investments: Institutional-grade properties with professional management often provide a more secure, stable investment compared to direct ownership of real estate.

Tax Treatment of DSTs

One of the main attractions of investing in a DST is the ability to defer capital gains taxes via a 1031 Exchange. Here’s how DSTs are treated from a tax perspective:

1031 Exchange Eligibility: The IRS recognizes DST interests as “like-kind” property, meaning investors can exchange their real estate holdings into a DST without triggering immediate tax liability.
Tax Deferral: By utilizing a 1031 Exchange, investors can defer capital gains, depreciation recapture, and state taxes on the sale of a relinquished property.
Potential for Step-Up in Basis: Upon the investor’s passing, heirs can receive a step-up in basis, potentially eliminating deferred taxes altogether.
Depreciation Benefits: Investors receive depreciation pass-through benefits, which can offset taxable income from distributions.
Passive Income Taxation: Income generated from the DST is reported on Schedule E, and depreciation deductions may help reduce taxable income.

How to Execute a DST 1031 Exchange

A 1031 Exchange into a DST follows a structured process. Below is a step-by-step guide:

Step 1: Sell the Relinquished Property

The first step is to sell the property that you intend to exchange. The sale proceeds must be handled by a Qualified Intermediary (QI) to maintain 1031 Exchange compliance. Do NOT list the real estate until you have FIRST communicated with a QI.

Step 2: Identify the DST Investment

Within 45 days of selling the relinquished property, you must identify potential replacement properties. Investors typically work with a an experienced real estate broker specializing in DSTs and 1031 exchanges to review available options.

Step 3: Conduct Due Diligence

Before committing to a DST investment, it’s crucial to analyze:

The quality and location of the underlying real estate.
The financial strength and reputation of the DST sponsor.
The projected income and risk factors.
The loan structure, if any.

Step 4: Work with a Qualified Intermediary (QI)

The QI facilitates the transaction, ensuring the funds are properly transferred and that all IRS regulations are met. The investor never takes possession of the sales proceeds directly from the relinquished properties. A QI needs to be involved early in the engagement to ensure title and escrow is set up to remain compliant.

Step 5: Close on the DST Investment

Once the due diligence is complete and the paperwork is finalized, the investor formally acquires a fractional interest in the DST property. The transaction must be completed within 180 days from the sale of the relinquished real estate. Constant Commercial Real Estate can assist in multiple property dispositions if it pertains.

Step 6: Receive Passive Income and Tax Benefits

After the exchange is finalized, the investor begins receiving distributions, typically on a monthly or quarterly basis. They also continue to defer taxes as long as they remain invested in the DST.

Why an Experienced Real Estate Broker is Essential

A real estate broker with experience in DSTs plays a vital role in ensuring a smooth and successful exchange. Here’s why their expertise matters:

Navigating the Complexity of 1031 Exchanges: A broker familiar with 1031 rules helps investors avoid costly mistakes that could disqualify their tax deferral benefits.
Access to Institutional-Quality DST Offerings: Brokers have relationships with reputable DST sponsors, giving investors access to high-quality properties not easily found on the open market.
Objective Investment Guidance: An experienced broker helps evaluate DST options, considering factors such as market trends, sponsor track record, and risk assessment.
Tailored Investment Strategy: Brokers work with investors to align their DST choices with long-term financial goals, ensuring a suitable fit for their portfolio.
Streamlining the Identification Process: Given the strict 45-day identification window, a broker can expedite the selection process, helping investors make informed decisions under time constraints.
Compliance with IRS Regulations: Working with a knowledgeable broker reduces the risk of missteps that could jeopardize the exchange.

Conclusion

Delaware Statutory Trusts provide a compelling investment vehicle for real estate owners seeking tax deferral, passive income, and diversification. However, executing a 1031 Exchange into a DST requires careful planning, thorough due diligence, and strict adherence to IRS rules.

For investors looking to transition from active property management to a passive investment structure while preserving wealth, DSTs can be an excellent solution. Engaging an experienced real estate broker is key to identifying quality DST opportunities, navigating the 1031 Exchange process, and ensuring compliance with all regulatory requirements. With the right guidance, investors can leverage DSTs to optimize their real estate portfolios while enjoying long-term financial benefits.

Navigating Multifamily Transactions

Thu, 23 Jan 2025 18:30:26 GMT

A Comparison with Single-Family Homes

When it comes to real estate transactions, single-family homes and multifamily properties provide their own nuances and processes despite being marketed similarly and featuring similar contracts to purchase. For real estate investors, understanding the differences between these two asset types is critical in getting transactions done. Unlike single-family home sales, multifamily transactions require a deeper level of due diligence, involving unique contingencies and procedural elements that are vital to ensuring a successful transaction. This article explores the distinctions between single-family and multifamily transactions, with a particular emphasis on the personal walkthrough contingency, the role of due diligence, and how earnest money is handled. By understanding these differences, buyers and sellers can approach multifamily transactions with confidence, clarity and with realistic expectations.

The Tenant-Occupied Nature of Multifamily Properties

One of the most significant distinctions between single-family and multifamily sales is the tenant-occupied nature of multifamily properties. Single-family homes are often sold vacant or are occupied by the sellers themselves making it easier for buyers to view the space prior to writing offers or being under contract. In contrast, multifamily properties are typically sold with existing tenants in place. This tenant-occupied dynamic introduces complexities that require careful management.

The Personal Walkthrough Contingency

A hallmark of multifamily transactions is the personal walkthrough contingency. This contingency gives buyers the opportunity to physically view the property and assess its condition after writing an offer and it being accepted. The personal walkthrough contingency must occur moving forward with the sale before and other important timelines start. Unlike single-family homes, where the inspection process often occurs after an offer is accepted, the personal walkthrough in multifamily transactions occurs once an offer is accepted. Yes, it is normal for buyers of multifamily buildings to submit offers without seeing the interiors. The personal walkthrough contingency allows the buyers to size-up the deal after price and terms are initially agreed upon.

Why Is the Personal Walkthrough Contingency Important?

Buyers can evaluate the physical state of the property, identifying any deferred maintenance or capital expenditures that may affect the property's value.
A walkthrough provides insight into tenant behavior and the overall atmosphere of the property, which can impact future management decisions.
Once the buyer completes the walkthrough and is satisfied with the property's condition, they can choose to remove the contingency. This action signals their intent to proceed with the transaction and triggers the next phase: due diligence.
Generally Constant Commercial Real Estate Inc. provides a clause in the Purchase and Sale Agreement that provides a walkthrough of all or a certain number of units within X amount of days of a fully executed contract. The buyer then has 24-48 hours to remove the personal walkthrough contingency or the transaction shall terminate automatically. This walkthrough is to get a feel for the property condition and do your first walkthrough - Yes, oftentimes it is required to be under contract first before viewing the units. If the property is not what was anticipated - it is easy to terminate the transaction at no cost to the buyer or seller and continue your search.

Due Diligence in Multifamily Transactions

Due diligence is a critical component of multifamily transactions, requiring a comprehensive examination of the property's financial, legal, and physical aspects. While single-family transactions also involve inspections and appraisals, the scope of due diligence in multifamily deals has a few extra steps. These steps occur following the removal of the personal walkthrough contingency removal.

Inspection:

Conduct a thorough inspection of all units and common areas to identify potential issues such as plumbing, electrical, or structural concerns.
Evaluate the condition of major systems, including HVAC, roofing, and parking facilities.

Investment Property Addendum:

This document outlines specific terms related to the property's use as an income-generating asset, including details about tenant leases, rent increases, and management.
This provides the buyer a review period of the financials, insurance loss/run, and requested information
Ensure the property complies with zoning laws, building codes, and local rental regulations.
Review any pending legal actions or code violations that may affect the property's value.

Title and Insurance:

Conduct a title search to identify any liens or encumbrances on the property.
Secure appropriate insurance coverage, including liability and loss-of-rent policies.

Tenant Rights and Leases:

Buyers must review all active lease agreements to understand the terms, rental income, and tenant obligations.
Local and state laws often grant tenants certain protections that may impact the timing and terms of the sale.
Upon purchase, the buyer inherits the existing tenant relationships, including any security deposit liabilities, ongoing lease agreements, and property management responsibilities.

Operational Disruptions:

Showing tenant-occupied units can be logistically challenging, as tenants must be given proper notice and may resist disruptions.
Buyers and sellers must communicate clearly to ensure cooperation from tenants during the sale process.

Earnest Money and Its Role in Multifamily Transactions

Earnest money is a deposit made by the buyer to demonstrate their commitment to the transaction. In multifamily deals, the handling of earnest money can be tied to the personal walkthrough contingency removal.

Initial Deposit:

Once the buyer and seller agree on terms, the buyer places an initial earnest money deposit into escrow within X amount of days AFTER removal of the personal walkthrough contingency. This deposit signals the buyer's intent but remains refundable until contingencies are removed. In a standard residential transaction this is due usually 3 days following the fully executed contract.

Finalization:

If the buyer successfully completes due diligence and proceeds to closing, the earnest money is applied toward their down payment and/or closing costs. Should the transaction fall through due to the buyer's fault after contingencies are waived, the seller typically retains the earnest money unless they have written it to be non-refundable.

Final Thoughts

Multifamily transactions represent a unique and rewarding opportunity for investors, but they require a higher level of expertise and attention to detail compared to single-family sales. By understanding the tenant-occupied nature of these properties, prioritizing the personal walkthrough contingency, and conducting thorough due diligence, buyers can mitigate risks and make informed decisions.

Whether you're a seasoned investor or new to the multifamily space, partnering with a knowledgeable real estate broker experienced in working with income-property can make all the difference. At Constant Commercial Real Estate, we specialize in guiding clients through the complexities of multifamily transactions, ensuring that every step of the process is handled with precision and care. Contact us today to learn more about how we can help you achieve your investment goals.

The 101 on the Section 121 Exclusion

Tue, 05 Nov 2024 19:52:06 GMT

Section 121 Exclusion: Rules, Eligibility, and Planning Strategies

1. What is the Section 121 Exclusion?

Section 121 of the Internal Revenue Code allows taxpayers to exclude capital gains on the sale of a personal residence. For many homeowners, this exclusion offers a significant tax savings, often entirely eliminating the tax liability associated with selling a home at a profit. It is particularly beneficial for homeowners in regions with high real estate appreciation, as it permits the exclusion of up to:

- $250,000 of capital gains for single filers, or

- $500,000 of capital gains for married couples filing jointly.

However, Section 121 is strictly for primary residences. Gains from the sale of *personal property* other than the residence—such as vehicles, boats, or furnishings—are not eligible for this exclusion and may be subject to different tax rules depending on the nature of the property and use.

2. Eligibility Requirements for the Section 121 Exclusion

To qualify for the Section 121 Exclusion, the property being sold must be the taxpayer's primary residence, and the taxpayer must meet specific ownership, use, and timing criteria:

- Ownership Requirement: The taxpayer must have owned the home for at least two years during the five-year period ending on the date of sale.

- Use Requirement: The taxpayer must have lived in the home as their principal residence for at least two of the five years preceding the sale. Importantly, the use does not need to be continuous. For example, a homeowner who lived in the property for a year, rented it out for two years, and then returned for a final year would satisfy the two-year use requirement.

- Frequency Limitation: The exclusion can only be used once every two years, meaning homeowners who frequently buy and sell homes may not be able to claim the exclusion each time.

3. Impact of Section 121 on Personal Property Sales

While Section 121 applies to the sale of a primary residence, it explicitly does not cover gains from personal property sold alongside the home. Any personal property included in the sale—such as appliances, furnishings, or fixtures that are not permanently attached to the structure—must be separately considered.

- Separately Priced Personal Property: If a seller includes personal property in the sale of the home and assigns a separate value to these items, that amount may be considered taxable as a separate transaction. For instance, if a seller includes a car, boat, or any other high-value item in the home sale, the gain from those items would not be eligible for the Section 121 Exclusion.

- Fixtures vs. Personal Property: Fixtures that are permanently attached and part of the home—such as cabinetry, lighting fixtures, and certain built-in appliances—are generally considered part of the real property. These items may be included in the sale without requiring a separate valuation. However, items that are not permanently affixed, such as standalone furniture or unattached appliances, remain personal property.

The distinction between real and personal property can affect both the sale price and the applicable tax implications, making it crucial to clarify the classification of all included items with a tax professional.

4. Calculating Excludable Gain

When selling a primary residence, the taxable gain is calculated by determining the difference between the home's adjusted basis and its selling price. The adjusted basis generally includes the initial purchase price plus any qualifying capital improvements made to the property.

- Capital Improvements: Qualifying improvements can increase the property's basis, which in turn lowers the amount of capital gains. Examples of capital improvements include adding a new roof, constructing an addition, or upgrading major systems like HVAC. However, repairs and maintenance do not qualify as capital improvements.

- Calculating Gain: Suppose a married couple bought a home 10 years ago for $300,000, invested $50,000 in improvements, and sold it for $700,000. Their adjusted basis is $350,000 ($300,000 + $50,000). The gain on the sale would be $350,000 ($700,000 - $350,000). Because the exclusion for married couples is up to $500,000, they would owe no capital gains tax on this sale.

5. Partial Exclusion in Certain Circumstances

In specific situations, taxpayers who do not meet the full two-year ownership or use requirements may still qualify for a *partial exclusion*. This can occur if the sale of the home was due to certain unforeseen circumstances, such as:

- A change in employment that required relocation,

- Health-related moves or the need for medical care, or

- Other unforeseen events deemed eligible by the IRS.

The partial exclusion is calculated proportionally, based on the time the homeowner met the ownership and use requirements.

6. Rental and Mixed-Use Properties

For homeowners who rented out their property for a portion of the ownership period, the Section 121 Exclusion may still be partially applicable, but there are additional considerations:

- Depreciation Recapture: For properties that were used for rental purposes, the IRS requires depreciation recapture on any portion of the gain attributable to depreciation taken during the rental period. Depreciation recapture is taxed at a maximum rate of 25%.

- Allocating Ownership and Use: If the property was used as a primary residence for at least two out of the five years before the sale, a prorated exclusion can apply. However, any gain attributable to the rental period beyond the five-year lookback window is typically ineligible for the exclusion.

7. Exclusion Planning Strategies

Maximizing the Section 121 Exclusion may require strategic planning, especially for those with high-value homes or those who own multiple properties. Here are a few strategies:

- Timing the Sale: Ensuring the property meets both the ownership and use requirements can be crucial, especially for homeowners with changing work or family circumstances. Staying in the home for at least two years may allow for full exclusion benefits.

- Converting a Rental to a Primary Residence: If a taxpayer converts a rental property into their primary residence and lives there for two out of the five years before the sale, they may qualify for a partial Section 121 Exclusion. However, depreciation recapture rules will still apply to the rental period.

- Separate Valuation of Personal Property: When including personal property in a home sale, it’s wise to negotiate a separate value for these items. By doing so, homeowners can clearly delineate gains from real property (eligible for exclusion) and gains from personal property (typically taxable).

8. Key Takeaways and Cautions

- The Section 121 Exclusion is an invaluable tax benefit, especially for primary residence sales in high-appreciation areas.

- Taxpayers should carefully review the eligibility requirements and exclusions for personal property.

- For mixed-use properties, depreciation recapture and rental period allocations must be factored into the calculation.

- It’s often advisable to consult a tax professional when dealing with complex real estate transactions, particularly those involving mixed use or additional personal property items.

The Section 121 Exclusion is a powerful tool in the U.S. tax code, designed to incentivize home ownership by providing tax relief on one of the largest financial assets many individuals and families hold—their homes. By understanding its provisions and planning ahead, homeowners can maximize the potential tax benefits, ensuring that their home sale provides both financial security and tax efficiency.

© Constant Commercial Real Estate Inc 2022. Disclaimer: This is for informational use only. Such information shall not be construed as legal, tax, investment, solicitation, recommendation, or endorsement. Users and viewers shall solely rely on their own knowledge. Any inputs in this analysis by Constant Commercial Real Estate Inc is deemed reliable, but is not guaranteed and should be independently verified. This is property of Constant Commercial Real Estate Inc and is not to be altered, sold or used for profit by unaffiliated persons.

The 101 on the 1031 Exchange

Wed, 30 Oct 2024 16:24:33 GMT

The 101 on the Internal Revenue Code 1031 Exchange

A Section 1031 exchange is a tax-deferred strategy under the Internal Revenue Code, allows real estate investors to defer capital gains taxes by exchanging investment property for another of equal or greater value. This strategy is particularly advantageous for those seeking to optimize their long-term wealth and defer tax liabilities.

Key Considerations and Timelines

Qualified Property: Both the relinquished property (sold) and replacement property (purchased) must be held for investment or business use. This typically excludes personal residences, inventory, and certain personal property.

Qualified Intermediary: A neutral third party, such as a Qualified Intermediary (QI), facilitates the exchange by holding the sale proceeds and acquiring the replacement property.

Identification Period: Within 45 days of selling the relinquished property, the investor must identify potential replacement properties. This can be done by:

3-Property Identification: Identifying up to three properties, regardless of value.
200% Identification: Identifying any number of properties, but their total value cannot exceed 200% of the relinquished property's value.

Funds from the sale of the relinquished property need to be disbursed to the QI. THEY CANNOT FUND A PERSONAL ACCCOUNT. This is a very costly error, get the details of the exchange ironed out early in the engagement.

Title Considerations: Clear and marketable title is essential for both properties. Title issues can delay the exchange and potentially compromise its tax-deferred status.

Escrow and Closing: Escrow ensures the secure holding and timely disbursement of funds. The closing process for a 1031 exchange is more complex than a traditional sale, requiring careful coordination between the QI, escrow agent, and title company. Disclose the desire to change entities or move from personal to an entity early in the engagement before the funds are disbursed to the escrow companies.

Basis and Capital Gains Exposure

A crucial aspect of a 1031 exchange is the basis of the replacement property. The basis of the relinquished property, including any depreciation taken, generally carries over to the replacement property. This is called depreciation recapture. This can significantly impact future capital gains tax liability when the replacement property is eventually sold. By deferring capital gains, investors can potentially reinvest their funds into more valuable properties, allowing their wealth to compound over time. We advise to discuss with your CPA and QI the projected tax exposure upon a sale or if any proceeds are taken for personal use.

Investor Considerations

Timing: Strict adherence to the 45-day identification and 180-day exchange periods is crucial. An investor must submit their 3 potential replacement properties by midnight on the 45th day.
Market Conditions: Market fluctuations can impact the availability and valuation of replacement properties.
Risk Tolerance: 1031 exchanges involve inherent risks, including market volatility, title issues, and operational complexities.
Legal and Tax Implications: Consulting with qualified tax advisors and real estate attorneys is essential to ensure compliance with IRS regulations.
Strategy: A 1031 is part of a bigger picture strategy. Planning an exchange and finding an ideal replacement property takes planning. For example, fielding offers from buyers with flexible timelines and understanding when concessions for contingencies are worth executing the bigger picture strategy.

Conclusion

A well-executed 1031 exchange can be a powerful tool for real estate investors seeking to defer capital gains taxes, optimize their investment portfolios, and achieve long-term financial goals. However, it requires careful planning, adherence to strict timelines, and the expertise of qualified professionals. By understanding the technical nuances and strategic considerations involved, investors can maximize the benefits of this tax-deferred strategy.

Constant Commercial Real Estate Inc has helped clients perform single and multiple property 1031 exchanges throughout the state of Oregon.

Apartment (5+ Units) & Commercial Financing

Wed, 02 Oct 2024 16:21:53 GMT

Commercial & Apartment Mortgage Brokerage - We represent you in sourcing, securing and negotiating your loan.

In addition to Real Estate Brokerage, we offer Mortgage Brokerage services too. We can arrange financing for your acquisition and refinance on commercial and apartment buildings. Leverage our relationships with national, regional and local institutions. Commercial financing is different than residential (1-4 unit) financing and the unique nature of real estate investments brings specific considerations into play. Commercial loans have some negotiation factors and we can play with the levers to structure a loan that fits your specific needs and strategy.

Underwriting -

Commercial/multifamily financing is usually an asset-based loan product. The lender underwrites the borrower based on their net worth, experience and the performance of the property. For instance, if a borrower is looking to secure a $2,000,000 loan they must show that their net worth is equal to or higher than the desired loan amount. This will be shown on a Personal Financial Statement (PFS) outlining all cash, savings, equity in real estate, retirement funds and personal property. Usually banks will apply a percentage of the total value to illiquid assets such as retirement. For example, if a million dollars is in your IRA, the bank may apply 70% to its value and it will contribute $700,000 towards your total net worth. We have a Personal Financial Statement template that we can provide you.

A schedule of real estate owned (SREO) is also requested early in our engagement. This outlines the properties already owned, their financing and general outline of income and expense items. We can provide a schedule of real estate owned template. These are available on our website.

Debt service coverage ratio (DSCR) is how lenders are determining the max loan amount. They take the annual mortgage principal and interest and multiply by their DSCR. This is usually 1.2-1.25. For example, if the annual debt service is $100,000 the property must show a net operating income of $120,000 (1.2x the debt service). Net operating income (NOI) includes vacancy, taxes, insurance, repair/maintenance/turnover, management, utilities, reserves, and other operating expenses. The lender will back into and stress test a max loan amount by adjusting the loan amount up to where the DSCR equals the NOI. Sometimes lenders have other overlays or special underwriting considerations that can skew max loan amounts.

Recourse vs. Nonrecourse -

Recourse or nonrecourse loans often involve different types of collateral. Recourse loans may require personal guarantees from the borrower, while nonrecourse loans are typically secured by the specific property being financed. The choice between recourse and nonrecourse financing depends on factors such as the borrower's risk tolerance, the property's value, and the lender's requirements. Generally the lender will apply a small premium to interest rate for nonrecourse products. This can range from 5-15 basis points.

Fixed Rate Periods & Amortization -

Commercial loans usually a fixed rate period where the rate is locked for a certain amount of years before it starts to adjust. The available fixed rate periods are loan type depending. For example, SBA loans offer fixed rate and amortization schedules than an apartment loan. Apartment loans generally have a 3, 5, 7, or 10 year fixed rate period and 25 or 30 year amortization. Commercial loans oftentimes have a 25-year amortization. When a loans fixed rate period is over and begins adjusting, most borrowers refinance, 1031 exchange or depending on the market let it adjust. Sometimes the loan would adjust ever 6 months, and if pricing is similar or lower the monthly mortgage will adjust accordingly.

Pre-payment Penalties -

Pre-payment penalties are the costs associated with paying off or refinancing a loan product within the first X amount of years of origination. This is usually described in step-down basis; For example, a 5,4,3,2,1. This means if you were to sell the property or refinance in the first year a 5% cost of the loan amount would be applied. Year 2 it would be 4%, year 3, 3% and so on. This is negotiable to some extent, and can be front loaded if the strategy points towards a sale in year 3. Also it is possible to negotiate the fee away towards the end if you refinance with the same lender. We can discuss the pro's/con's and help negotiate the pre-payment penalties.

Origination & Other Fees -

Origination fees are calculated as a percentage of the loan amount and generally range from 1%-2% including Constant Commercial's fee. Sometimes lenders will waive or lower their origination fees and we can just charge our fee. Other fees incurred during the transaction can be appraisal, credit checks and underwriting fees. The lender will provide a few appraiser options with different costs and timelines.

Process & Timeline

The process starts with gathering the documents needed to submit to the lenders that best match your loan criteria. The documents include your personal financial statement, schedule of real estate owned, borrower letter (brief description profiling borrower & experience), property financials and CCRE's quick underwrite. This loan package is presented to the potential lenders that we deem fit.

We are now waiting for them to send a term sheet. Sometimes this just comes in an email with the general rate and terms offered. Here is where CCRE can leverage the price and terms provided to see if lenders are willing to compete. The next step would be a formal term sheet that is a summary of the intentions of the lender and borrower and includes more details. Term sheets are not a commitment to provide funding nor provide a binding agreement. After term sheets are reviewed and a lender is picked, a borrower has the option to rate lock. Generally rate locks are for 60 days and they protect against the downside of rising rates, but do not protect borrowers of the upside of rates going down.

The lender will provide a loan application that requests borrower information. The previously submitted personal financial statement and schedule of real estate owned can be used if the loans applications are asking for that information again. Part of our job is to save you time and fill out the known information on your behalf (if so desired).

Following the loan application and property information the loan will go into underwriting. Here the underwriter will ask for bank statements to verify the personal financial statement and borrower liquidity. The appraisal is ordered and usually takes a few weeks to be completed. The complete loan process can range depending on the loan type. Some loan types can be completed in just a couple/few weeks while other conventional financing options can take 45-70 days. Some lenders are more streamlined then others.

Our Commitment to You

With our representation we are committed to securing financing that fits your strategy and needs. Our job as your broker is to leverage our relationships, save you time, money and guide you through the process. We pride ourselves on thoroughly going through the pro's & con's and aiding in making a decision that benefits you.

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Reverse 1031 Exchange

Mon, 12 Feb 2024 20:55:37 GMT

Navigating a Reverse 1031 Exchange

Unlocking Investment Potential: Navigating Reverse 1031 Exchanges with Constant Commercial Real Estate Inc.

For seasoned real estate investors, navigating the intricacies of tax code benefits can be a critical strategy for maximizing returns and minimizing financial burdens. Among these strategies, the 1031 exchange stands out as a powerful tool for deferring capital gains taxes on the sale of investment properties. While traditional 1031 exchanges require acquiring a replacement property after selling the relinquished one, reverse 1031 exchanges flip the script, presenting unique opportunities for savvy investors.

This article delves into the intricacies of reverse 1031 exchanges, showcasing their potential through a real-life example and highlighting the expertise of Constant Commercial Real Estate Inc. in guiding investors through this complex process.

Understanding the Reverse 1031 Exchange:

In a standard 1031 exchange, an investor sells a qualifying investment property and reinvests the proceeds within specific timelines (45-day identification period and 180-day exchange period) into another like-kind property. This reinvestment effectively defers capital gains taxes until the replacement property is eventually sold. However, what if acquiring the ideal replacement property comes first? This is where the reverse 1031 exchange shines.

In a reverse exchange, the investor first purchases the replacement property and then has 180 days to identify and sell a relinquished property of equal or greater value to complete the tax-deferred exchange. This approach offers several advantages:

Act on Time-Sensitive Opportunities: Identify and secure your dream investment property without the pressure of simultaneously selling your existing one.
Improve Negotiating Leverage: By already owning the replacement property, you can potentially negotiate better terms on the sale of your relinquished property.
Maintain Investment Income: Avoid potential income gaps between selling your old property and acquiring the new one.

Example: Single-Family Home to Multi-Unit Apartment Building:

Imagine you own a free-and-clear single-family home with a market value of $500,000. You've identified a 10-unit apartment building valued at $1,500,000 that perfectly aligns with your long-term investment goals. However, selling your current home first may not be ideal due to market conditions or personal preferences.

Through a reverse 1031 exchange facilitated by Constant Commercial Real Estate Inc., you can:

Purchase the apartment building: Utilize your own funds or financing to acquire the desired property while Constant Commercial guides you through the intricate paperwork and timelines.
Identify your relinquished property: Within 45 days, identify your single-family home as the qualifying "relinquished" property.
Sell the single-family home: With Constant Commercial's expert guidance and network, list and sell your home within the 180-day timeframe, ensuring a smooth transition.
Complete the exchange: Upon successful sale, the proceeds from your home are used to "purchase" the apartment building, finalizing the 1031 exchange and deferring capital gains taxes.

The Expertise of Constant Commercial Real Estate Inc.:

Executing a reverse 1031 exchange requires meticulous planning, adherence to strict IRS regulations, and collaboration with qualified professionals. Constant Commercial Real Estate Inc. boasts a team of experienced specialists who take the complexity out of the process, offering:

Comprehensive Guidance: From initial consultation to finalization, Constant Commercial walks you through each step, addressing your unique needs and concerns.
Qualified Intermediary Services: Referral partners specializing in all facets of like-kind exchanges (QI), ensuring secure handling of exchange funds and strict adherence to IRS regulations.
Network of Experienced Professionals: Connect you with a network of trusted legal, tax, and financial advisors to safeguard your transaction.
Market Expertise: Leverage local market knowledge and negotiation skills to optimize the sale of your relinquished property.

Conclusion:

Unlocking the full potential of your real estate portfolio requires strategic planning and informed decisions. Reverse 1031 exchanges, when skillfully executed, can be a powerful tool for deferring capital gains taxes and maximizing your investment returns. With the expertise of Constant Commercial Real Estate Inc., you can navigate this complex process with confidence, transforming your investment vision into a reality.

Partnering in Real Estate? Investing as a TIC

Thu, 04 Jan 2024 15:53:27 GMT

Partnering Capital: Unlocking Investment Potential Through Tenancy in Common Ownership

In the dynamic world of commercial real estate, securing capital for lucrative opportunities can be a hurdle. For investors with ambitious visions, partnering for property acquisition holds immense potential. Among various partnership structures, tenancy in common (TIC) ownership offers a compelling option, leveraging shared resources and tailored control to amplify your real estate portfolio.

1. Building the Foundation: Understanding Tenancy in Common Ownership

At its core, a TIC arrangement allows multiple investors to share ownership of a commercial property, each holding a discrete, undivided interest. This flexible structure grants individual ownership rights proportionate to their investment, enabling diversified exposure and greater access to high-value assets. Unlike joint tenancies, TIC ownership avoids automatic transfer of interest upon one partner's death. Each tenant's share can be freely inherited or sold, offering an added layer of liquidity.

2. The Blueprint for Success: Key Provisions of an Operating Agreement

A watertight operating agreement is the cornerstone of any successful TIC investment. This document serves as the blueprint, outlining the rights, responsibilities, and objectives of each partner. The agreement typically covers:

Ownership percentages: Clearly defines the individual ownership stake of each tenant in the property.
Profit and loss sharing: Establishes the distribution mechanism for income generated from the property, ensuring transparent and fair allocation.
Decision-making process: Outlines the voting procedures and power dynamics regarding key property matters, such as major repairs, tenant selection, and property management.
Exit strategies: Addresses scenarios for termination of the partnership, including buy-out provisions and procedures for sale of the property.
Dispute resolution mechanisms: Provides a framework for resolving potential conflicts through mediation or arbitration.

A well-crafted operating agreement fosters an environment of mutual trust and clarity, minimizing risks and maximizing the collaborative success of the investment.

3. 1031 Exchange: A Pathway to Growth

The Internal Revenue Service allows for advantageous tax-deferral through 1031 exchanges. This benefit extends to TIC ownership, empowering partners to reinvest proceeds from the sale of a TIC property into another qualifying commercial property within a prescribed timeframe. By leveraging TIC as a stepping stone, investors can acquire larger, higher-yielding assets, strategically climbing the value chain without incurring significant tax liabilities.

4. Expanding the Investment Landscape: Beyond Traditional Assets

The flexibility of TIC extends beyond core commercial properties like office buildings or retail spaces. This structure can be applied to diverse asset classes, opening doors to specialized or alternative investments such as:

Medical facilities: Partnering to own and manage medical office buildings or healthcare clinics can offer stable income streams and capital appreciation potential.
Multifamily properties: Participating in the burgeoning residential market through acquisition of apartment complexes can yield attractive returns.
Industrial assets: Owning warehouses, distribution centers, or other industrial facilities exposes investors to the robust e-commerce and logistics sectors.

By venturing beyond traditional boundaries, TIC empowers investors to tap into emerging opportunities and diversify their holdings for long-term financial success.

5. Choosing the Right Partner: A Matter of Synergy and Expertise

Selecting the right partners is crucial for a successful TIC venture. Seek individuals who share your investment objectives, risk tolerance, and commitment to responsible property management. Look for partners with complementary skillsets and experience, leveraging their expertise to navigate market nuances and maximize returns.

6. Embracing a Collaborative Spirit: Key to Unlocking Shared Value

As with any partnership, open communication and transparency are vital. Regularly engage with your co-tenants, sharing information, addressing concerns, and fostering a collaborative approach. Remember, your collective success hinges on aligned goals, proactive communication, and a shared commitment to the property's optimal performance.

Conclusion:

TIC ownership presents a compelling avenue for commercial real estate investors seeking to expand their horizons and amplify their portfolios. By partnering with like-minded individuals, meticulously crafting an operating agreement, and embracing a collaborative spirit, investors can unlock the tremendous potential of shared ownership. Whether navigating strategic 1031 exchanges or exploring diverse asset classes, the flexibility and control offered by TIC empower investors to build a solid foundation for sustainable growth and lasting value in the dynamic world of commercial real estate.

"Inventory" in Residential Real Estate - What is it?

Fri, 08 Dec 2023 18:28:50 GMT

Residential Real Estate - "Inventory"

Residential Real Estate Inventory: A Critical Analysis of Current Trends and Future Outlook

The residential real estate market is a complex system with a multitude of factors influencing its dynamics. One of the most critical elements impacting market activity is inventory, or the number of available homes for sale. Understanding current inventory trends and their implications for the future is crucial for both buyers, sellers and investors navigating the market.

Current Inventory Landscape:

According to the National Association of Realtors (NAR), the national inventory of existing homes for sale stood at 1.22 million units in October 2023. This represents a 3.3% increase from September 2023 but remains 0.8% lower than the level recorded in October 2022. Notably, the current inventory level equates to a 3.2-month supply at the current sales pace, significantly lower than the historical average of a 6-month supply.

This low inventory level can be attributed to several factors:

Strong buyer demand: Despite rising interest rates, the demand for residential properties remains high, fueled by a strong economy, low unemployment, and favorable demographics.
Limited new construction: The COVID-19 pandemic and subsequent supply chain disruptions have hampered new construction, leading to a shortage of available homes.
Investor activity: Real estate investors have been actively purchasing properties, further reducing the available inventory for owner-occupiers.

Impact of Low Inventory:

The low inventory level has a significant impact on both buyers and sellers in the residential real estate market:

For buyers: The lack of available properties creates a competitive environment, leading to bidding wars, price increases, and frustration for buyers struggling to find suitable properties.
For sellers: The low inventory level provides sellers with more leverage, allowing them to command higher prices and favorable terms for their properties.

Future Outlook:

While the current low inventory situation poses challenges for buyers, experts believe that the market may start to see a shift in the coming months. Here are some factors contributing to this prediction:

Rising interest rates: As interest rates continue to rise, some buyers may be priced out of the market, leading to a decrease in demand and eventually a slight increase in inventory.
Seasonality: The holiday season typically sees a slowdown in the housing market, with fewer buyers actively searching for properties. This could lead to a temporary increase in inventory levels.
New construction: While the pace of new construction remains slow, it is gradually increasing, which could eventually help alleviate the inventory shortage.

NAR's Perspective:

The NAR anticipates that the national housing inventory will gradually increase over the next few years, but it will likely remain below historical averages. This indicates that the market will continue to favor sellers in the short term, with buyers still facing challenges due to limited options. "The inventory situation is expected to improve gradually in the coming years, but it will be a slow process," says Lawrence Yun, NAR's chief economist. "This means that both buyers and sellers need to be prepared for a competitive market and adjust their strategies accordingly."

Conclusion:

The current low inventory level in the residential real estate market presents both challenges and opportunities for buyers and sellers. Understanding the factors influencing inventory trends and the potential future outlook is critical for making informed decisions in this dynamic market. As the market evolves, adaptability and informed decision-making will be critical for success in the ever-changing landscape of residential real estate.

Inherited Real Estate and the Stepped-Up Basis

Tue, 14 Nov 2023 00:33:15 GMT

Maximizing Investment Returns: Understanding Inherited Real Estate and the Stepped-Up Basis

In the dynamic world of commercial real estate investment, strategic planning plays a pivotal role in maximizing returns and minimizing tax liabilities. One often overlooked but critical aspect is the inheritance of real estate and the potential benefits of a stepped-up basis. In this brief guide, we will introduce into the intricacies of inheriting investment real estate and how leveraging a stepped-up basis can be a game-changer for investors with proper planning. Always consult with a proper council while estate and tax planning surrounding real estate.

I. The Basics of Inheriting Investment Real Estate:

Probate Process:

When an investor inherits real estate, the property typically goes through the probate process. This legal procedure ensures the proper distribution of assets according to the deceased individual's will or applicable state laws. It's crucial for investors to navigate this process diligently, as the outcome directly impacts the future of the inherited investment property.

Valuation and Inheritance Tax:

The value of the property at the time of the owner's death is a key factor in determining the tax consequences of inheritance. While federal estate taxes generally apply to larger estates, some states impose inheritance taxes based on the value of the inherited assets. A thorough understanding of these tax implications is essential for investors to make informed decisions.

II. Stepped-Up Basis: A Strategic Advantage for Investors:

Definition and Concept:

The stepped-up basis is a tax advantage that comes into play when real estate is inherited. Instead of inheriting the property at its original purchase price, the new owner receives a "step-up" in the property's cost basis to its current fair market value at the time of the original owner's death. This adjustment can result in significant tax benefits for investors should they decide to liquidate the asset and cash out.

Capital Gains Tax Implications:

The stepped-up basis is particularly advantageous when it comes to capital gains taxes. When an investor eventually sells the inherited property, the capital gains tax is calculated based on the difference between the selling price and the stepped-up basis. This can lead to substantial tax savings compared to selling a property with a lower basis. Oftentimes investors think they need to 1031 exchange their inherited property and often-times, this is not the case. The investor is not confined by the 1031 exchanges timelines and complications.

III. Strategies for Maximizing Stepped-Up Basis Benefits:

Holding Period Considerations:

The length of time an investor holds the inherited property can impact the potential tax savings. Generally, the longer the holding period, the greater the appreciation in the property's value. Investors should carefully weigh the benefits of holding the property for an extended period to maximize the stepped-up basis advantage. For example, an investor inherits a $2,000,000 commercial/multifamily property in 2020. The property over the coarse of the last X amount of years has gone up in value. The basis will be calculated from the time of inheritance (2020) and capital gains exposure is present on the gain in value and depreciation. It may be minimal exposure, but that number needs to be calculated by a tax professional.

Strategic Considerations:

1031 Exchange:

Investors looking to diversify their real estate portfolio can strategically use 1031 exchanges in conjunction with the stepped-up basis if needed. This would be applicable for an investor who inherited properties in the past and values have gone up. It is still prudent to determine the investors capital gains exposure. The reason an investor would have to exchange is they have gain since inheriting the property. For example, a property owner inherited a property 5 years ago with a valuation of $1,000,000 at the time of taking ownership. Today that property is worth $1,450,000 and the capital gains exposure would be on the $450,000 gain in value.

Cashing out:

Real estate owners who have recently inherited property will have the chance to "cash out" of the property at the stepped up basis. This would involve selling the property and pocketing the equity after the sale. All, none or some of the capital could be reinvested without the time constraints of the 1031 exchange.

IV. Common Pitfalls to Avoid:

Failure to Document Fair Market Value:

To ensure the stepped-up basis is accurately determined, it's crucial to document the fair market value of the inherited property at the time of the original owner's death. Failing to do so can lead to disputes with tax authorities and potential overpayment of taxes.

Inadequate Estate Planning:

Investors and property owners must engage in comprehensive estate planning to minimize tax implications for their heirs. Inadequate planning can result in unnecessary tax burdens and may diminish the overall financial legacy passed on to beneficiaries. This is where getting all members of your team on the same page is very important. Your team could be comprised of your CPA, Attorney, Financial Planner and Constant Commercial Real Estate Inc.

V. Conclusion:

Inheriting investment real estate presents a unique set of opportunities for savvy investors, and understanding the stepped-up basis is essential for unlocking its full potential. By navigating the probate process, strategically leveraging the stepped-up basis, and implementing sound investment strategies, investors can optimize their returns and build a robust real estate portfolio for generations to come. As the real estate market continues to evolve, staying informed and proactive in managing inherited assets will be key to achieving long-term success in the competitive landscape of commercial real estate investment.

Get ahold of Constant Commercial Real Estate and we can guide you through the process of inheriting real estate and the many options you have.

Financing Changes Effective November 20, 2023 for Owner Occupied Multifamily

Fri, 06 Oct 2023 04:37:12 GMT

Fannie Mae's New Owner-Occupied Financing Changes for Multifamily Properties: Effective November 18, 2023

On November 18, 2023, Fannie Mae is set to implement significant changes in its owner-occupied financing guidelines for multifamily (2-4 unit) properties. These changes are aimed at fostering responsible and sustainable homeownership while also addressing the unique challenges of multifamily housing. Previously, owner occupied buyers using conventional financing to acquire a duplex required 15% down and for triplex and fourplexes 25% down. The change coming allows buyers using conventional financing to put 5% down on 2-4 unit properties that they intend to occupy. This financing type has its benefits when compared to FHA.

FHA financing usually has higher private mortgage insurance (PMI) costs that stick with them for the life of the loan. Conventional PMI is usually less costly and has a clause allowing it to drop once a property has reached a certain equity position.

To monitor compliance with the new owner-occupancy requirements, Fannie Mae will introduce more robust reporting mechanisms. Property owners will be required to provide regular updates on the owner-occupancy status of their multifamily units. Failure to meet these reporting requirements could lead to financial penalties or even the revocation of Fannie Mae financing. This comes as no surprise as being a landlord is no easy task, especially in our Oregon market given the tenant/landlord laws in place. These measures are intended to ensure that property owners adhere to the new guidelines and maintain the required level of owner-occupancy.

Unknown to me at this time are the potential for stricter borrower qualifications and potential for homeowner/investors to meet higher eligibility criteria. Historically owner occupied multifamily buyers could utilize the income from adjoining units to help boost pre-qualification amounts. Called phantom income, the lender would allow 75% of the current rents in place as income for the borrower. Vacant units would be left to the appraiser to determine market rents and that income would help push the buyers maximum loan amounts up.

Fannie Mae's new owner-occupancy financing changes for multifamily properties, set to take effect on November 18, 2023, represent a significant shift in its approach to multifamily housing. By raising the minimum owner-occupancy requirement, tightening borrower eligibility criteria, and implementing stricter reporting and compliance measures, Fannie Mae aims to strike a balance between rental housing and homeownership.

These changes are intended to promote responsible homeownership, improve property stability, and provide aspiring homeowners with greater access to affordable housing options. However, they may also present challenges for investors who rely on rental income from multifamily properties. I suspect with the added allure to house hacking (bigger pockets coined term for "owner occupied") there will be increased competition in the 2-4 unit space, where valuations are already convoluted between comparable sales and the income-approach.

As these changes come into effect, it will be essential for property owners, investors, and prospective homeowners to carefully assess their implications and adapt their strategies accordingly. Ultimately, Fannie Mae's goal is to create a multifamily housing market that offers both rental and homeownership opportunities while promoting responsible and sustainable housing practices.

Fix and Flipping

Tue, 12 Sep 2023 18:36:43 GMT

Introduction to Fix and Flips

Fix and flipping, a real estate investment strategy that involves buying distressed properties, renovating them, and then selling them for a profit, has become an increasingly popular venture for intermediate and experienced investors. While it offers the potential for substantial returns, it also comes with its fair share of challenges and risks. In this introductory guide, we will delve into the intricacies of fix and flipping, providing valuable insights, strategies, and tips for those looking to maximize their success in this competitive market. We all know the logistics of fix and flips and improving systems, timelines and costs will aid in successful strategy performance. Finding the right deal with enough upside still proves to be the hardest component to executing this strategy successfully. Constant Commercial is always looking to add referral partners and network with professionals in the space.

I. The Fix and Flip Basics

Before diving into the advanced strategies and techniques, let's review the fundamentals of fix and flipping:

1. Market Analysis: The first step for any fix and flip project is thorough market research. Identify target neighborhoods with growth potential, analyze local property values, and understand market trends.

2. Financing: Experienced investors often leverage a combination of personal funds, private loans, hard money loans, and traditional financing to fund their projects. Calculate your budget carefully, including acquisition costs, renovation expenses, and holding costs.

3. Property Acquisition: Seek out distressed properties with significant renovation potential. These could include foreclosures, short sales, or neglected homes. Negotiate favorable terms to secure a property below market value.

4. Renovation: The key to a successful flip is the quality and efficiency of the renovation. Create a detailed budget and timeline, hire reputable contractors, and maintain open communication throughout the project.

5. Aesthetics and Market Appeal: Design the property with the target market in mind. High-quality finishes and modern designs often attract buyers, but be careful not to over-improve for the neighborhood.

6. Pricing Strategy: Set the right asking price by analyzing comparable sales and market conditions. Aim for a balance between maximizing profit and attracting buyers.

7. Marketing and Sale: Utilize effective marketing strategies to showcase the property's features. Staging, professional photography, and online listings are essential tools in this process.

Now, let's explore advanced strategies that can help experienced investors excel in the fix and flip game.

II. Advanced Fix and Flip Strategies

1. Portfolio Diversification: Experienced investors often diversify their portfolios by taking on multiple projects simultaneously. This spreads risk and can generate more consistent income streams.

2. Networking: Networking is a powerful tool in real estate. Build relationships with real estate agents, contractors, and other industry professionals to gain access to off-market deals and insider knowledge.

3. Distressed Property Auctions: Participate in foreclosure auctions and sheriff sales for potential bargains. Be cautious, as these auctions require immediate payment and may come with unseen issues.

4. **Creative Financing: Explore creative financing options such as seller financing, lease-to-own agreements, or partnerships to acquire properties with limited upfront capital.

5. Advanced Renovation Techniques**: Consider innovative renovation techniques like energy-efficient upgrades, smart home technology integration, or environmentally sustainable improvements to enhance property value.

6. Market Timing: Timing is crucial in fix and flipping. Experienced investors keep a close eye on market cycles and seasonal trends to optimize their buying and selling decisions.

III. Risk Mitigation Strategies

1. Due Diligence: Thoroughly research properties before acquisition. Conduct professional inspections to identify potential hidden issues that could eat into your profits.

2. Budget Contingencies: Always include a contingency fund in your budget to cover unexpected costs or delays during the renovation process.

3. Insurance: Adequate insurance coverage is crucial. Consider builder's risk insurance to protect your investment during renovations and general liability insurance for unforeseen accidents.

4. Market Shift Preparation: Be prepared for market fluctuations. Experienced investors have exit strategies in place, such as renting the property if they can't sell at the desired price.

5. Legal Compliance: Ensure that all renovations and property sales comply with local building codes, zoning regulations, and real estate laws.

6. Partner: Improve efficiencies by partnering with another investor that has a skillset supplementing the project.

IV. Maximizing Profit and Efficiency

1. Speed and Efficiency: Time is money in fix and flipping. Streamline your renovation process by using project management software, maintaining a reliable contractor team, and minimizing downtime.

2. Tax Efficiency: Consult with a tax professional to optimize your tax strategy. Understanding deductions, credits, and depreciation can significantly impact your bottom line.

3. Long-Term Planning: Some experienced investors transition from fix and flipping to buy-and-hold strategies to generate passive income. Planning for the long term can lead to financial stability.

Fix and flipping can be a lucrative venture for intermediate and experienced investors, but success requires a combination of market knowledge, financial acumen, and a well-thought-out strategy. By mastering advanced strategies, mitigating risks, and maximizing efficiency, investors can unlock the full potential of this real estate investment approach. Remember that each project is a unique learning experience, and continuous education is key to achieving long-term success in the fix and flip game. Constant Commercial Real Estate Inc is always looking for partner on projects that fit our investment criteria. Give us a call to discuss opportunities to see if our network and services can be any help.

Tip: View and download our Proprietary Fix and Flip Calculator in the Resources page.

Creative Financing in Real Estate

Wed, 30 Aug 2023 19:11:30 GMT

Strategy Considerations For Seller Financing

Creative Financing in Real Estate Transactions: Exploring Innovative Approaches

Real estate transactions have long been a cornerstone of wealth building and investment. The traditional approach to financing these transactions involves conventional mortgages and loans from financial institutions. However, the realm of real estate financing has evolved, giving rise to a plethora of creative financing techniques that provide alternatives to traditional methods. Creative financing involves unconventional approaches to funding real estate deals, often incorporating innovative strategies that benefit both buyers and sellers. This essay delves into the concept of creative financing in real estate transactions, exploring its various forms, benefits, potential risks, and its role in shaping the modern real estate landscape.

Forms of Creative Financing:

Creative financing encompasses a wide range of techniques, each tailored to specific circumstances and objectives. Some prominent forms include:

Seller Financing: In this arrangement, the seller acts as the lender, allowing the buyer to make payments directly to them instead of securing a traditional mortgage. This method can be particularly beneficial for buyers who may have difficulty obtaining financing through conventional channels.
Lease Options: Lease options, also known as rent-to-own agreements, enable a prospective buyer to lease a property with the option to purchase it at a predetermined price after a specified period. This approach allows the buyer to accumulate equity while assessing the property's suitability before committing to a purchase.
Subject-to Financing: In this scenario, a buyer takes over the existing mortgage of a seller while gaining ownership of the property. The buyer does not assume direct liability for the loan, but rather continues to make mortgage payments on behalf of the seller.
Wraparound Mortgages: This involves a secondary mortgage taken out by the buyer that "wraps around" the existing mortgage. The buyer makes payments to the seller, who then continues to make payments on the original mortgage. This can be advantageous in situations where the buyer does not qualify for a new loan.
Hard Money Loans: Hard money lenders offer short-term loans with higher interest rates and lower qualification requirements compared to traditional lenders. These loans are often used for investment properties or when quick financing is needed.

Benefits of Creative Financing:

The appeal of creative financing lies in its ability to address specific challenges that traditional financing may not adequately resolve. Some benefits include:

Increased Access to Financing: Creative financing opens doors for individuals who might not qualify for conventional mortgages due to credit issues or unconventional income sources.
Flexibility: These methods offer greater flexibility in structuring deals, allowing parties to tailor arrangements to their needs and goals.
Faster Transactions: Creative financing methods can expedite transactions since they often involve fewer bureaucratic processes than traditional loans from financial institutions.
Win-Win Scenarios: Creative financing can lead to mutually beneficial outcomes for both buyers and sellers. Sellers might secure a higher price or steady income, while buyers can secure properties without stringent bank requirements.
Diverse Investment Opportunities: For investors, creative financing provides a range of options to diversify their portfolios beyond traditional investment avenues.

Potential Risks and Challenges:

While creative financing offers numerous advantages, it is not without its risks and challenges. It's essential to approach these methods with caution and a clear understanding of potential downsides:

Regulatory Complexities: Depending on the jurisdiction, certain creative financing arrangements might face legal and regulatory hurdles. Buyers and sellers must navigate these intricacies to avoid legal complications.
Risk of Default: Some creative financing methods carry a higher risk of default, which could lead to financial losses for both parties involved.
Equity Concerns: In certain arrangements, buyers might not build equity at the same rate as with traditional financing methods, potentially leading to dissatisfaction.
Due Diligence: Proper due diligence is critical to ensure that the property's value aligns with the agreed-upon terms and that the seller's financial obligations, such as existing mortgages and liens, are accurately assessed.
Market Volatility: Economic fluctuations can impact the success of creative financing deals, potentially causing financial strain for both parties.

Impact on the Real Estate Landscape:

Creative financing has had a notable impact on the real estate landscape, influencing how transactions are conducted and reshaping industry norms:

Diversification of Investment Strategies: Investors now have an array of financing methods at their disposal, enabling them to diversify their investment strategies and capitalize on various market conditions.
Empowerment of Non-Traditional Buyers: Creative financing empowers individuals who might have been excluded from the real estate market due to credit or financial limitations.
Adaptation to Changing Markets: During market downturns or times of economic uncertainty, creative financing can serve as a lifeline by providing alternative funding sources when traditional financing options become scarce.
Evolution of Seller Strategies: Sellers can explore creative financing to attract a broader pool of buyers and sell properties faster, especially in competitive markets.
Innovation in Real Estate Services: The rise of creative financing has prompted the development of specialized services and professionals who cater to these non-traditional financing methods.

Creative financing has emerged as a transformative force in the real estate industry, offering innovative solutions to the challenges posed by traditional financing methods. While it presents unique benefits, it's crucial for all parties involved to approach these strategies with thorough research, due diligence, and an awareness of potential risks. As the real estate landscape continues to evolve, creative financing will likely remain a dynamic and influential component, shaping the way properties are bought, sold, and invested in for years to come.

CCRE's Multifamily Underwriting Process

Sat, 11 Mar 2023 21:31:34 GMT

Introduction to CCRE's Proprietary Analysis used for Underwriting

Constant Commercial Real Estate takes an analytical and calculated approach to investment real estate underwriting. We believe in adhering to investment fundamentals and looking beyond the surface level of an opportunity by taking a deep dive into the numbers. Our clients get an under the hood view of our process. In this article we will outline the CCRE’s client experience by illustrating the technology and commonly used proprietary analysis tools to underwrite income producing real estate.

As a CCRE client you will share access with our Advisors to a Google Team Drive where all documents from our engagement will be stored. The Team Drives file structure is usually split into the different engagements types we have. This can include Commercial Financing, Property Underwriting (currently owned or acquisitions), listing documents and transactions files. This file structure allows security of private files (like tax returns) and other members of an investment team limited access. The Team Drive also allows live-time analysis updating and property forecasting. Clients can comment their questions or suggestions and we can work together in a collaborative way.

Each analyzed property will get its own folder containing the due diligence documents available to the broker. This usually includes a current rent roll, offering memorandum, profit and loss statements, photos and our proprietary analysis tools.

For each property CCRE underwrites, we provide two proprietary analysis tools. First we start with the Real Estate Valuator (REV) to determine a range of value for the investment using the income approach. The second analysis is the Property Analysis and Return Projections (PARP) to determine yield and model the performance of the investment adding the variability of debt.

Real Estate Valuator (REV): This tool uses the income approach to determine the current value of an investment. The income approach is one of the three valuation methods and allows investors to estimate the value based on the income the property generates. The income approach is a function of the properties income minus the operating expenses to determine the net operating income (NOI). A capitalization rate is applied to the NOI. Capitalization rates are determined based on comparable sales of similar like-kind properties. For example, 10-20 unit buildings in B neighborhoods built in the 1970’s may have a current market capitalization rate of 6%. CAP rates are a metric used before/excluding debt. Determining capitalization rates requires access to data, experience and should be assessed by a professional. Example: Subject property earns $120,000 in annual income. Total annual expenses excluding debt is $42,000. This provides the Net Operating Income (NOI) of $78,000. Properties similar to this example sell at CAP rates near 6%. Net Operating Income of $78,000 with a 6% Capitalization rate equals a property value of $1,300,000 ($78,(503)222-0282 = $1,300,000).
Property Analysis and Return Projections (PARP): This analysis inputs include income, expenses and factors the variability of debt in years 1, 3, 5 and 7. It takes into consideration principal pay down, tax effects (depreciation, interest expense and investors effective tax rate), annual increases in income & expenses and returns on hte invested capital/equity. This analysis has several utilities allowing the advisor to underwrite prospective acquisitions, currently owned properties and modeling projected returns following a refinance. Many of the major return metrics analyzed are:
Pre-tax Cash Flow
After-tax Cash Flow
After-tax Cash Flow + Principal Pay Down
After-tax Cash Flow + Principal Pay Down + Appreciation-x% = Total Return
Capitalization rate, Gross Rent Multiplier and Debt Calculations for proceeding Years 3, 5 & 7

The underwriting process is more of an art than an exact science. Advisors must draw conclusions on adjusting income and expenses from marketing material and provided operating statements. Marketing material often generalizes and could overstate income and make light of the expense load. For buildings with upside and requiring turns, operating expenses may run higher than the provided operating statements. Properties that recently underwent large capital expenditures that are deflating the profit and loss statements in the short term must be adjusted to realize an actual expense load reflected during the hold period. Each property tells its own story and while underwriting may be maneuverable based on the investors goals and capabilities.

Constant Commercial Real Estate Inc takes pride in advising on your investment real estate journey. By taking a conservative approach to underwriting, keeping financing front of mind and staying involved between the buy/sell moment we are your trusted investment real estate specialists.

Where To Search Investment Real Estate Listings?

Fri, 06 Jan 2023 19:54:25 GMT

A brief guide to the online listing platforms to search active listings -

There are a growing number of online real estate platforms to search for single family, multifamily and commercial investment properties for sale. Each has their pro’s & con’s and as an investor searching in a fast moving Pacific Northwest market, opportunity can present itself on several or just one of the platforms depending on property type. Constant Commercial Real Estate Inc shares our go-to sites to stay up-to-date on new, pending and old listings. We will also describe how your Broker/Agent can be a major benefit in identifying off-market opportunities by leveraging their relationships.

Multiple Listing Service (MLS) - The multiple listing service is where real estate brokers, agents and realtors input properties they have been hired to sell. The private platform is a cooperation of real estate brokers to share information on properties they have listed and invite other brokers to cooperate in exchange for compensation. This high exposure platform showcases the listed properties and funnels them to brokers with a pool of buyer clients with a defined criteria. The MLS is a powerful tool for brokers and allows the smaller firms to compete with larger national firms on an equal playing field. The MLS is generally a private database that is created, maintained and paid for by real estate professionals and is region specific. Some MLS platforms have a broker/agent portal allowing agents and their clients to save, favorite and comment on listings in a cooperative manner. The downside to the MLS (to an investor) is it is exclusive to only real estate brokers who choose to subscribe. Many commercial and apartment listings never make their way to the MLS. Talk with your broker about leveraging this tool that ultimately funnels to the common public listing sites.

The Multiple Listing Service funnels into several public user-friendly online listing sites. Some of the common ones are zillow, redfin, trulia and realtor.com. These listing platforms have several similarities and boils down to preference. Our favorite public sites are discussed and starting with residential then ending in commercial dominant platforms.

Commercial -

CoStar is the largest commercial real estate information and analytics provider in the nation. They own several other platforms such as homes.com, loopnet, apartments.com,ten-x, homesnap, and land.com. They are a powerhouse of data and provide tools to real estate professionals and investors. They cover all commercial property types and require a subscription. Many listings in Co-Star are only available to subscribers, but an agent who subscribes can share them with their clients. The program is used by professionals to do rent studies, comparable sales analysis, prospecting, lease information and accessing public information on one platform.
LoopNe t is owned by CoStar and predominantly commercial, apartment and land listings. Loopnet is geared towards income producing real estate. We set up searches to get notification of property types across the state that align with our current clients needs.
Crexi is a newer platform described as a real estate community, marketplace and technology company. Listing for brokers is free as they grow their platform. They continue to increase their data for prospecting and tools for investors and real estate professionals searching for listings. We set up searches similar to CoStar and Loopnet as it is common because of the low cost for listings to end up here and not on the other larger platforms.

Residential -

Redfin is a large Seattle based residential real estate brokerage found in 95 major markets in the United States and Canada. Redfin’s application for most is to just explore currently listed properties. We find the platform to be very user friendly. As with all residential listing sites, they are covered in paid advertisements by brokers and offering their services.
Zillow is similar to Redfin as it is a large national brokerage that does offer brokerage services. This is another user-friendly website to view listings and rentals. We find clients who cruise these websites for residential, land and 2-4 unit listings are using them for its easy to use platform and apps.
Realtor.com is also similar to Zillow and Redfin, but is built around being a resource for Brokers to receive recommendations and ratings for their recently closed listings. Not everything maps to the program, but it is a way to see brokers closed sales in your area. Professional accounts link to the MLS to parse the data over.
Trulia is another public site that is owned by Zillow.
There are endless small marketplaces like RealNex, BiggerPockets, Facebook and Craigslist designed for a low entry, inexpensive and often free place to market specialty properties to investors.

*When it comes to use of the above residentially focused programs, it really comes down to preference. Be careful not to inquire with brokers running advertisements if you already have an agency relationship with a broker/agent/realtor. These programs will parse the commercial and apartments that are listed into the MLS, but not all opportunities will be input. If you’re interested in learning the market and viewing listings, consult with one of our brokers and we can all get searches set up in a variety of programs to get prompt notification of properties that fit your criteria.

Off-market listings can be identified. Our brokers have gained experience in their respective markets and property type focus areas. We have nurtured relationships with other brokers, clients and investors through past transactions and networking. It is not uncommon for the community to share coming soon or pocket (off-market, may not be listed) listings of a variety of property types. As our clients' needs change throughout the year and with each transaction, we network with our sphere of brokers to identify these opportunities early. This goes both ways as we share coming soon and off-market opportunities with our clients and others who we have created a relationship with. During Constant Commercial’s prospecting, we often hear of investors who would sell but do not want to go through the listing process - so we have commonly stuck deals together by making a note and revisiting the opportunity when one fits a clients investment profile.

We are a regional investment real estate and commercial mortgage brokerage firm serving private investor clients throughout the state of Oregon. We work with investors searching for strategic capital and real estate portfolio advising. CCRE takes a consultative and analytical approach to income-producing real estate acquisitions, dispositions, financing and portfolio capital/equity management.

Intro to Real Estate Valuator Tool - Income Approach (Multifamily Application)

cory@constantcommercial.com (Cory Carlson) — Wed, 14 Dec 2022 21:08:01 GMT

Real Estate Valuator (REV) Tool - Income Approach

+ Add Other Income = $6,000 ($50 utility bill back per unit)

- Subtract X% Vacancy (multiply total income by 0.95; $148,800 x .95 = $141,660)

Step 2: Expenses –

The left column in this example is showing the expenses the seller or listing broker may be advertising. The expense load in the “Per Owner/Broker” scenario is 31%. An expense load is the total expenses divided by the Effective Gross Income. Generally, in multifamily this can range from 30%-50% depending on several factors. The variability could be found in self managed properties, low/high repair/maintenance/turnover expenses or just omitting an expense item all together. The middle column is showing “Appraiser/Underwriter” guidelines for the expense load. Note the footnotes at the bottom of the sheet justifying the more realistic 39% expense load.

Step 3: Net Operating Income & Capitalization Rate –

In the above examples, the discrepancy between the seller/broker's expenses (left) and lender/underwriters (right) changes the NOI by ~$12,000. Below you will see when applying a capitalization rate to the Net Operating Income how much this changes the valuation. Capitalization rates are describing the returns without debt. A lower capitalization rate translates to a higher valuation. Lower capitalization rates can be associated with newer and more stable assets. A 5.50% capitalization rate is describing the Net Operating income ($86,427) divided by the value ($1,571,404) equaling 5.50%.

Capitalization rate = Net Operating Income / Valuation

The difference in valuation with a 5.50% capitalization rate is ~$214,000 after accounting for the 8% difference in expenses. With any offer CCRE writes on an income producing property where the income approach is applicable, a REV analysis will be attached to justify the offer price. The Real Estate Valuator has many applications and can be helpful for investors underwriting their own deals and getting a pulse on area capitalization rates. The tool allows the underwriter to apply a range of CAP rates to generate a pulse of potential offer/strike/list prices.

Owner Occupied Multifamily - House Hack Strategy 101

cory@constantcommercial.com (Cory Carlson) — Wed, 07 Dec 2022 21:28:04 GMT

Strategy Explained - House Hack 101

Introduction - While Constant Commercial Real Estate Inc is a Commercial Brokerage and offers Commercial Financing, we have helped clients with capitalize on the owner occupied strategy all over the state of Oregon.

With rising housing costs buyers interested in acquiring an investment and principal residence are showing increased interest in occupying a single-family home with an additional dwelling unit (ADU) or 2–4-unit property. The northwest has a high entry barrier for getting started in real estate investing so when compared to a single-family home, some fundamentals work in the buyers favor when purchasing a multiplex, especially for those with low down (<20%) payments. Oftentimes coined a "house hack" the benefits include increased buying power (easier qualification), subsidized housing costs and lower cost principal pay down (debt reduction). I am going to illustrate the buyers benefits and provide a few examples to set realistic expectations for buyers who are considering this investment strategy.

Buying power is the combination of down payment (capital) and loan amount. Factors contributing to buying power includes income, type of financing, down payment, credit, and debit-to-income. In the case of an owner-occupied multiplex (2-4 units), the adjoining unit(s) current rent(s) can be recognized as income to the lender and aids in increasing buying power. For example, a borrower talks to their lender and gets pre-qualified for a single-family home with a $500,000 loan amount. After the borrower factors in rent from a duplex’s other unit, the borrower now qualifies for a loan amount of $550,000. Not all, but a percentage of the other unit(s) rent can be valued as income, known as phantom income. Financing is the first step before analyzing and quantifying any investment strategy. A multifamily property up to a 4-plex allows borrowing similar to a single-family home but with a few additional caveats depending on the financing type. Buyers can have access to low down payment options, such as a Federal Housing Administration (FHA) insured loans which can permit as low as 3.5% down compared to conventional financing requiring higher down payments. Consult with an experienced mortgage advisor (we can refer you one) to find which programs exist for your situation and will allow you to back into any financing limitations.

After understanding financing we build a buyer and property profile and begin to tailor a strategy that fits your available capital, abilities and risk tolerance. First we identify an understanding of where the buyer draws the line between utility and investment. Utility is referring a buyers desires regarding a place to live, where the property serves a purpose to the buyer beyond just investment returns or upside. Buyers who are more focused on the future returns and exit would fall on the investment side of the line. Generally investors have a less restrictive property type/size/condition and are willing to give up comfortability to see a return on their money.

Subsidizing your housing costs and principal paydown are the obvious benefits of having tenants and choosing this strategy. A tenants monthly rent lowers your monthly out of pocket and the principal pay down realized is lower when compared to occupying a single family home with no tenant income. The below illustration is a comparison of monthly out pocket before and after factoring principal paydown for a single family home with no tenants and a duplex or ADU scenario.

EXAMPLE 1 – Single Family vs. Duplex (or ADU)

Single Family Home with a $650,000 purchase price, conventional 30-year 80% loan-to-value (20% down) financing at 5.5% and taxes & insurance of ($6,250 & $1,000) has a monthly payment of $3,613 . To limit variables and for illustration purposes, we will use properties with the same value, financing and omit utilities. Note low down financing options can vary between single family and 2-4 unit properties.

Duplex with a $650,000 purchase price, conventional 30-year 80% loan-to-value (20% down) financing at 5.5% and taxes & insurance of ($6,250 & $1,000) has the same cost as the previous single family home example with a monthly payment of $3,557 . Simply put, if the adjoining units rent for $2,000. The owners monthly out of pocket (before fixed and variable expenses) is $1,557. The owner occupants monthly out of pocket is less than market rents, serving as a sound personal finance decision.

Both property types have additional expenses the owner incurs. This may include utilities, repairs/maintenance, HOA (if applicable) and capital expenditures. Multifamily properties may and oftentimes have utilities from the additional unit-(s) that the owner is responsible for, commonly water/sewage and garbage. This illustration does not take into account different expense loads.

Building Equity for less out of pocket is achievable in any strategy with adjoining unit income. With the mortgage subsidized by income from the property, combined with the additional buying power acquiring it, the buyer has in turn reduced their cost towards building equity when compared to a single-family home. This is a simplistic personal finance approach utilizing the house hack strategy. In both scenario’s the first year’s principal pay down is $7,005 except the duplex’s monthly out of pocket costs approximately ~$1,557 (after $2,000 in rent) and the single-family property costs ~$3,557+ per month after omitting expenses.

In conclusion the owner occupied investor can enter the investment real estate market with a lower entry barrier with attractive low down financing options and reap the benefits of the strategy. Getting started with additional qualification, subsidized housing costs and a sound personal finance decision can propel capital/equity growth and poise an introductory investor to build a portfolio.

Following this article will be a more analysis and analytical "201" article introducing our Property Analysis & Return Projections (PARP) sheet that puts real numbers to several strategies including return on equity and debt effects on yield for owner occupied investors.

Be sure to subscribe for email updates here: https://www.constantcommercial.com/news-and-insights

The Cash Couch Podcast - 2022

Thu, 01 Dec 2022 17:36:29 GMT

Episode 37 - Cory Carlson Opens His Own Shop, Constant Commercial Real Estate Inc

Today we are joined by our good friend Cory Carlson. Excited to announce the opening of his new commercial real estate brokerage, Constant Commercial Real Estate, INC.

In this episode Cory talks about current commercial and residential markets and the general state of the economy.