As a real estate team, we are always looking for new ways to communicate with leads, prospects, clients and persons of influence in a meaningful way. Are you as well?
We are always looking for new trends or ideas that stir conversation. No one wants to talk about tired, old or boring stuff.
Today I want to talk to you about a unique opportunity that investors and owners of office buildings would be particularly interested in.
There is a new opportunity for flipping Office buildings to create almost instant property value.
Office buildings are valued based upon the income approach. If you increase the Net income of an office property, the value is thereby increased.
For example, let’s say the building has a Net income of $100,000/year. And let’s assume the market says this building value is at a 10% Cap rate. That means the current value is $1,000,000. Now, If we can increase the Net income by $30,000 to a total of $130,000/year, then the value at a 10% cap rate is $1,300,000.
Ok, so how do we increase the NET income? Simply reduce expenses and/or increase income.
In this example let’s look at expenses only. How can we reduce the expenses?
Well one way is to reduce the electricity cost. We can accomplish this by installing the correct Solar power system. What’s interesting is that Office buildings are usually on a “Full Service Lease”. Thus the owner pays for electricity for the building (not to worry, his rent reflects the operating expenses).
If our friendly owner installs solar panels to the building, there will most likely be a reduction in electricity cost. Now it’s just a simple calculation of figuring the cost of the Solar VS the savings it provides. Usually there is a win right there, but that’s not where it ends.
Right now, there are States that offer incentives to install solar systems, such as Rebates, Tax Credits, Grants, etc. Right now in our area (Sacramento) there are programs that provide 30%+ rebates, 0-5% interest on financing, accelerated depreciation (talk with your CPA) and provide loans that are attached to the property taxes. Thus there is no personal liability on the loan!
By the way, Solar is just one example. This all applies to “Energy Efficiency” in general. Additionally there is Lighting, HVAC and water upgrades that will reduce the expenses of a property.
This is huge!
This works phenomenal on Full Service Leased Office properties and Owner/User offices. If an owner/user can cut their expenses, their business improves.
Ever thought about flipping office property…or representing investors looking for unique opportunities? It can be done. And it’s being done right now by a savvy few who see market opportunity. You can too.
What if you were to mail some letters to office investors that said ” Hi Mr/Ms Office Investor, I have a office property that can be re-positioned for profit within a relatively short period of time. I have the property details and a plan ready to go. Please call me at 555-5555″. Talk about a message that’s new and fresh!
That’s all for today. Go out and make it happen!
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