The Denver Gazette on March 28 highlighted concerns over a bill aimed at limiting evictions without a substantial reason, emphasizing that its basis seems more anecdotal than analytical. This legislation restricts evictions to specific causes such as rent non-payment, plans to sell the property, lease violations, substantial property repairs, or property damage by the tenant. However, it introduces the possibility for tenants to legally challenge evictions, raising disputes over their validity.

Recent legislative sessions in Colorado have aimed to bolster tenant protections in response to the escalating affordable housing crisis in Denver and statewide. House Bill 24-1098 seeks to clarify "just cause" for evictions, raising concerns that economic interventions by politicians often result in unintended consequences for those they intend to help. Critics argue that such regulations elevate operational costs for landlords, potentially leading to higher rental prices due to the bill's implications. Furthermore, the legal background of many state legislators is seen as a factor likely to encourage litigation, with tenants increasingly turning to lawsuits to avert eviction.

The editorial also references Senator Nick Hinrichsen, D-Pueblo, who shared an anecdote about a 67-year-old constituent's alleged retaliatory eviction following complaints about inadequate heating, alongside other eviction scenarios involving personal disputes or political disagreements, though these instances lack substantial evidence and appear to be infrequent.

With the introduction of House Bill 24-1098, tenants who have either fallen behind on rent for several months or have a history of property damage may now claim their eviction is retaliatory. This legislation allows for legal challenges to eviction causes, potentially halting the eviction process and enabling tenants to remain in their homes pending court decisions. This development is seen as undermining property owners' rights and could lead landlords to raise rents in an already expensive market.

As the House and Senate prepare to reconcile different versions of the bill on April 2nd, constituents are encouraged to share their opinions with their representatives and senators, highlighting their stance on House Bill 24-1098 and the broader issues it raises concerning tenant rights and housing affordability. Full Bill can be reviewed by clicking here.

​Are you looking to develop a piece of land for commercial or residential use? Look no further than the land experts at First and Main RE. Our ultimate goal is to help you maximize the potential of your land and achieve a strong return on your investment.

The land development process typically involves several phases, which can vary depending on the specific project and the jurisdiction. Here are some common phases in land development:

1. ​Conceptual Planning: This phase involves identifying the overall vision and goals for the project, and determining the feasibility of the project based on factors such as zoning, environmental regulations, and market demand.
2. Site Analysis and Design: This phase involves conducting a detailed analysis of the site, including topography, soils, vegetation, and other natural features. Site design is also developed, which includes layout and circulation, grading, and stormwater management.
3. Entitlement and Permitting: This phase involves obtaining the necessary approvals and permits from local, state, and federal agencies, such as zoning variances, building permits, and environmental impact reports.
4. Construction: This phase involves the actual construction of the project, including grading, infrastructure, and building construction. This phase is also important to manage and monitor the work site safety and comply with the regulations.
5. Leasing and Marketing: This phase involves marketing the project to potential tenants or buyers and negotiating leases or sales agreements.
6. Occupancy and Closeout: This phase involves the final inspection and approval of the project by the local building department, as well as the transfer of the property to the new owner or tenant.
7. Post-development monitoring: This phase involves monitoring the development to ensure that the project is meeting the requirements and conditions of the permits, and that the project is being used and maintained as intended.​

It's important to note that the specific phases and steps may vary depending on the project and location, and that some steps may overlap or occur simultaneously.

Are you looking to develop a piece of land for commercial or residential use? Look no further than the land experts at First and Main RE. Our ultimate goal is to help you maximize the potential of your land and achieve a strong return on your investment.​

​Commercial real estate leases will introduce you to a whole new set of vocabulary, which can make it difficult to fully interpret documents. To make dissecting the fine print simpler, familiarize yourself with these common terms that you need to know:

1. Right of First Refusal
If you a sign a lease that includes a right of first refusal clause, your landlord is required to offer you additional space to lease before offering it to the general public. This gives you the opportunity to lease more office space in an in-demand building if it becomes available and can be highly beneficial if you anticipate major growth in the coming years.

2. Sublease Clause
A sublease clause may or may not be included in the contract. This clause either permits or prohibits a tenant from subleasing their space to another individual or business. A sublease occurs when the tenant rents to someone else only a partial amount of time during the remaining time of the lease. Make sure you know if you are permitted to sublease in case an emergency arises.
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3. Usable Square Footage
The amount of space inside the office or building that you are renting is known as the usable square footage. It is the space that your company is actually occupying within the facility.

4. Rentable Square Footage
Rentable square footage includes the usable square footage plus a portion of the square footage that you share with other tenants, such as bathrooms located in hallways, reception areas, on-site gyms, elevators and cafeterias. Landlords base your rental rate on this number, rather than the actual usable square footage in your space.

5. Parking Ratio
​The parking ratio is the number of parking spaces that are reserved in the lot for your employees. Take the total rentable square footage of your space and divide it by the number of parking spaces. This is usually as a ratio of spaces per 1,000 square feet.

6. Load Factor
Also known as the core factor, this number is used by the landlord to determine how much common area square footage to assess to each tenant. Your prospective landlord should be able to explain how this number was calculated, so that you can determine whether or not your rent is being calculated with a fair rentable square footage.

7. Common Area Maintenance
Common area maintenance, called CAM for short,  refers to the cost of operating expenses for a building that you are responsible for paying a share of with some types of leases. As with load factors, landlords should be transparent about how the common area maintenance fee is calculated and exactly what it covers.

8. Request for Proposal
One of the first steps in finding new space to lease is to sit down with your commercial real estate broker and figure out both what you need and what you want in a space. As you find spaces that you think might suit your needs, you can submit those wants and needs in a request for proposal (frequently referred to by its initials -- RFP) document. That RFP lets the landlord know what your general needs are so that they can then begin negotiating with you.

Knowing these terms will put you in a better position at the negotiating table, but you should still be prepared to encounter other terms with which you may not be familiar. That's why it's important to have a tenant representative to assist you throughout the process.

A deed is a legal instrument, in writing, duly executed and delivered, whereby the owner of real property, otherwise referred to as the grantor, conveys to another, referred to as the grantee, some right, title, or interest in or to the subject of real estate.

GENERAL WARRANTY DEED
In a general warranty deed, the grantor guarantees the title to the real property against any defects existing before the grantor acquired title as well as during the time of the grantor's ownership.  

A general warranty deed conveys both present and after-acquired interest of the grantor.

The operative language in a general warranty deed is usually the expanded version, "grants, bargains, sells and conveys"; however only the phrase "sells and conveys" is required by statute.  In addition, a general warranty deed will include the phrase "and warrants title to the same" that is short hand for the following covenants:

1. The grantor, at the time of making the deed, is lawfully seized or vested with an indefeasible estate in fee simple and has good right and full power to convey the property;
2. That title is free and clear of all encumbrances, except those identified in the deed; and 
3. That grantee and his heirs and assigns will enjoy the quiet and peaceable possession of the property and that the grantor will defend the title against all persons.

It is important to note that the above covenants of title, run not only to the benefit of grantee but to all persons down the chain of title from grantee, so that breach of  covenants of warranty may be enforced not only by the direct grantee from grantor but also by grantee's successors and heirs.  Also, liability of the grantor may be imposed against either the grantor and/or the grantor's heirs.

SPECIAL WARRANTY DEED
A special warranty deed differs from a general warranty deed in that where a general warranty deed guarantees title against interests predating the grantor's ownership of the property, a special warranty deed merely guarantees title only against defects arising during the time the grantor owned the real property.  That is to say, a special warranty deed warrants title as against anyone whose interest has arisen from grantor, but not from others..  Like a general warranty deed a special warranty deed includes after-acquired title.

The operative language in a  general warranty deed is usually the expanded version, "grants, bargains, sells and conveys"; however only the phrase "sells and conveys" is required by statute.

In addition, a special warranty deed will include the phrase "and warrant the title against all persons claiming under me," or an expanded phrase with the same meaning "and warrants title against all claiming by, through, or under me."

Using a special warranty deed should be considered when the grantor is willing to warrant against any adverse interest or defect in title which the grantor, herself, created but not against interests of or defects occurring before the grantor was the owner.  In essence this deed says, I, as grantor of this property will be responsible and liable for anything I did to the title of the property but not for what others may have done.

QUITCLAIM DEED
A quitclaim deed is one in which the grantor warrants nothing.  This deed conveys whatever interest the grantor has in the property, if any at all.  To be clear, a quitclaim deed does not even represent that the grantor has any interest, whatsoever.

Unlike both a general warranty deed and a special warranty deed, a quitclaim deed does not convey any after-acquired title.

A quitclaim deed uses the operative language "sells and quitclaims."  Of note is the absence of the word "conveys' which is present in both a general warranty deed and special warranty deed.  

A quitclaim deed is generally  used where the grantor may or may not have an interest in the property or where the grantor is unwilling to warrant title.  Typical types of uses for a quitclaim deed can be to clear title from an interest otherwise affecting marketable title such as interest the grantor may possess through some prescriptive easement in adjacent property.

Investors who have commercial properties they wish to acquire or dispose, landlords seeking tenants to lease space in the commercial properties they own, and tenants seeking to lease space in a commercial property, all hire a commercial real estate Broker.

​So, how does a commercial real estate Broker get paid…and who pays them?

Commercial Real Estate Brokers Get Paid on Commission. All commercial real estate brokers get paid on commission based on the representation of the two parties in a transaction. In a sale transaction this would be the buyer and seller, and in a lease transaction this would be the landlord/owner and the tenant.

The amount a commercial real estate Broker receives on a commission is calculated as a percentage of the total commercial property sale price or lease value. While it’s illegal due to anti-trust laws to set a market- or industry-wide standard for commission percentages, most Brokers earn anywhere from 4% to 8%.

The manner in which a CRE Broker is paid, and who is responsible for the payment, depends on whether the commercial transaction is a sale or a lease.

Commission on Commercial Real Estate Sales:  Commercial real estate Brokers receive a commission on the sale of a commercial property by representing an owner, a buyer, or both. The amount of the commission is calculated as a percentage of the final sale amount. If there are two different Agents involved in the transaction they will split the commission 50/50.

For example, say the negotiated commission rate on a commercial property is 6% and it sells for $600,000, that is $36,000 is commission. The full $36,000 will go to the listing Broker (representing the owner) if they are the one who procured the buyer. If another commercial real estate Broker brought the buyer, then the two Brokers would split the commission 50/50 each earning $18,000 on the deal.

In most commercial real estate sale transactions it is the responsibility of the property owner to pay all commissions upon closing.

Commission on Commercial Real Estate Leases:  Commercial real estate Brokers receive a commission on lease transaction by representing a landlord/owner, a tenant, or both. The amount of the commission is calculated as a percentage of the total lease value, also called total consideration. If there are two different Brokers involved in the transaction they will typically split the commission 50/50. This is, unless otherwise noted in the lease agreement.  

For example, say a tenant signs a 5-year lease for a 3,500 square foot suite at $10 per square foot.
                            5 years x (3,500 SF x $10) = $175,000 Total Lease Value

If the negotiated rate is 6%, the total commission on this lease will be $10,500 ($175,000 x 6%). If there were two commercial real estate Brokers on the deal (one representing the landlord/owner and one representing the tenant) then each broker will earn $5,250 ($10,500./ 2).

In leasing transactions the landlord/owner of the commercial property is the one who pays the commission fee. Typically, half at lease signing and the remaining half upon tenant occupancy.

Seeking a Commercial Real Estate Broker? Whether seeking to invest in properties, dispose of current assets, lease up your building, or find space to lease, the brokerage experts at First and Main RE have the transactional experience and market knowledge to get you the best deal possible. Contact us today to see how we can help you see the highest return on your investment.

Multiple studies have confirmed the medicinal benefits of marijuana, but what about its impact on the health of the housing market? Does medical and recreational legalization lead to growth in home values or is the pot industry just blowing smoke?

This past year, voters in California, Massachusetts, Maine, and Nevada all legalized recreational use while Florida, Arkansas, North Dakota, and Montana voted to legalize or expand medical use in those states.

One thing is clear, pot entrepreneurs are contributing to real estate booms in commercial and residential markets in states that have legalized the drug for medical recreational use.

Impact on Commercial Sales:  Previously vacant warehouses and factories are now home to growers while long-abandoned strip malls have become the storefront for pot shops. The pot industry has created a huge demand for commercial operations. As a result, states like Colorado and Washington are seeing premium prices for building leases and purchases within the proper zoning.

​Buying real estate is an attractive asset to marijuana growers and retailers because it provides a safe haven for their profits that many banks are still reluctant to manage due to federal regulations and give them more freedom to create specialized spaces for their business. Landlords also notoriously price gouge marijuana tenants, so buying makes good business sense over renting.

Successful owners of marijuana businesses quickly turn to real estate and become landlords themselves. In Colorado, Polk and Stone rents properties to marijuana businesses with the agreement that rent will increase only 3 percent a year. In an industry where rent can increase by 50 percent from year to year, this business model is enticing to marijuana entrepreneurs.

​Impact on residential sales:  Colorado's state law allows for counties to determine if they and how they want to legalize and regulate the drug. Areas where it’s legal attract more homebuyers, including marijuana users as well as entrepreneurs and job seekers. As more growers and retailers open up shop in these municipalities, the demand for workers rise. The influx of new residents inevitably leads to more home sales and higher rents. There are also plenty of people moving to pot-friendly states without intent to work for the industry, but rather to enjoy the bud of its labor.

Impact on home values: Realtor.com reports the four states with at least a year of experience with recreational marijuana sales showed a marked increase in home prices — well above the national median price.

The data from Colorado provides some of the best insights on what happens to the housing market after recreational use is legalized because it has permitted its use the longest. Since the first shops started operations on January 1st, 2014, the median home sale price in the state has risen from $248,000 in the first half of 2014 to $298,000 in the first half of 2016 according to the realtor.com analysis. In jurisdictions where the drug can be purchased, the median sales price of homes in the second quarter of 2016 were a hit $305,200 while homes in areas where it is banned only went for $267,200. Of course, there are other industry sectors that have been experiencing rapid growth in Colorado, so it’s difficult to contribute the rise in home prices strictly to the rising business of pot, but it's an obvious leading contributor.

Unfortunately, not every homeowner in states with legalized weed is getting a good deal. On the flip side, Colorado neighborhoods harboring grow houses lose value. The pungent odor the plant emits turns off home seekers.

Concern for criminal activity: One of the greatest concerns of detractors of legalization is the claim it will encourage more crime and further reduce home values of those living near grower, manufacturers, and retailers. Looking to Colorado again, in Denver, the crime has grown by 44% as reported to the National Incident Based Reporting System since legalization. But police argue that the system potentially over counts crimes and prefer to cite the FBI's Uniform Crime Report which indicates only a 3.5% increase over the same time. It's important to note, however, the city began tracking marijuana-related crimes as well, which make up less than 1% of all offenses. Experts conclude that the rise in crime is tempered when taking population growth into account, and not directly tied to the sale or use of the drug.

Dealing with real estate transactions: From a real estate professional perspective, a lingering question is how to deal with money that comes from an industry that is still federally prohibited under the Controlled Substance Act. There is a serious lack of banking services for commercial operations in the medical and recreational marijuana business. Although many title companies will help close on a cannabis deal, they will not facilitate the exchange of funds. That's because banks refuse to work even indirectly with marijuana business owners. As a result, title companies have formal policies against serving as escrow, especially when the land is designated for pot-related use, but will issue limited title insurance policies on the land that won't cover federal governmental actions such as civil and criminal forfeiture.

As more states pass legalization, this will provide opportunities for agile and creative real estate brokers to provide much needed professional guidance for marijuana business owners.

The purchase, sale, funding or even leasing options for commercial property often hinge upon the appraised value of the building. Assessing that value, however, is no simple matter. Whether it’s multi-unit housing, an industrial space, a retail shopping center, or an owner-occupied business structure, commercial appraisals are generally more subjective than residential valuations. 

Why? Commercial values are often dependent upon uncontrollable elements like the current market price for which spaces rent, fewer available comparables and overall maintenance costs (which can vary dramatically from industry to industry). And then, of course, there’s the tricky question of how much a buyer is willing to pay.

With so many variables to consider, how does an investor or small business owner price a potential property? There are five valuation methods often used to determine intrinsic value.

Cost Approach: This valuation method considers the cost to rebuild the structure from the ground up, taking into account the current cost of associated land, construction materials, and other costs that would be associated with the replacement of the existing structure.

Cost approach is generally applied when appropriate comparables are difficult to locate, such as when the property contains relatively unique or specialized improvements, or when upgraded structures have added substantial value to the underlying land.

Sales Comparison Approach: Also known as the “market approach,” this method relies heavily upon recent sales data for comparable properties. By seeking recently sold buildings with similar properties from the same market area, a buyer hopes to ascertain a fair market value for the property in question.

For example, an office complex might be compared to another that sold in the same neighborhood just a few months earlier. While this valuation method is typically used to value residential real estate, it does have one significant drawback. Depending on general and localized market conditions, it can be difficult to find recent comps that have similar properties.

Income Capitalization Approach:  This valuation method is based primarily on the amount of income an investor can expect to derive from a particular property. That projected income could be derived in part from a comparison of other similar local properties, as well as from an expected decrease in maintenance costs.

Say a building is purchased for $1 million, and the expected yield is 5 percent, based on local market research. That $50,000 per year in expected income could be enhanced by tightening inefficiencies, or by passing along other associated costs to the tenant, like electric or water usage. All expected future income is discounted to reflect present value.

​Value Per Gross Rent Multiplier: The Gross Rent Multiplier (GRM) is a calculation used to measure and compare a property’s potential valuation by taking the price of the property and dividing it by its gross income. This method is generally used to identify properties with a low price relative to their market-based potential income.

Value Per Door: Occasionally used to value apartment buildings, this valuation method breaks down the building’s worth by the number of units. A building with 20 apartments priced at $4 million, for example, would be valued at $200,000 ‘per door’ irrespective of each unit’s size.

In the end, every buyer values property differently. The valuation of commercial property does have a subjective and unscientific component. The best commercial real estate investors and brokers have honed their gut instincts around finding the most attractive deals, and the most effective valuation methods for each particular type of transaction. At the end of the day, no matter how much analysis has been conducted, the value of commercial real estate is always in the eye of the beholder.

Amenities: Check the potential neighborhood for current or projected parks, malls, gyms, movie theaters, public transport hubs and all the other perks that attract renters. Cities, and sometimes even particular areas of a city, have loads of promotional literature that will give you an idea of where the best blend of public amenities and private property can be found.

Building Permits and Future Development: The municipal planning department will have information on all the new development that is coming or has been zoned into the area. If there are many new condos, business parks or malls going up in your area, it is probably a good growth area. However, watch out for new developments that could hurt the price of surrounding properties by, for example, causing the loss of an activity-friendly green space. The additional condos and/or new housing could also provide competition for your renters, so be aware of that possibility.

Number of Listings and Vacancies: If there is an unusually high number of listings for one particular neighborhood, this can either signal a seasonal cycle or a neighborhood that has "gone bad." Make sure you figure out which it is before you buy in. You should also determine whether you can cover for any seasonal fluctuations in vacancies. Similar to listings, the vacancy rates will give you an idea of how successful you will be at attracting tenants. High vacancy rates force landlords to lower rents in order to snap up tenants. Low vacancy rates allow landlords to raise rental rates.

Rents:  Rental income will be the bread and butter of your rental property, so you need to know what the average rent in the area is. If charging the average rent is not going to be enough to cover your mortgage payment, taxes and other expenses, then you have to keep looking. Be sure to research the area well enough to gauge where the area will be headed in the next five years. If you can afford the area now, but major improvements are in store and property taxes are expected to increase, then what could be affordable now may mean bankruptcy later.

Natural Disasters:  Insurance is another expense that you will have to subtract from your returns, so it is good to know just how much you will need to carry. If an area is prone to earthquakes or flooding, paying for the extra insurance can eat away at your rental income.

The team at First and Main have helped many new and veteran landlords find their new profitable real estate investment. Call us today!

Rental properties, whether single family or multi-family can be an amazing and profitable investment. But for the best returns, do your research going in. 

Neighborhood: The quality of the neighborhood in which you buy will influence both the types of tenants you attract and how often you face vacancies. For example, if you buy in a neighborhood near a university, the chances are that your pool of potential tenants will be mainly made up of students and that you will face vacancies on a fairly regular basis (during summer, when students tend to return back home).

Property Taxes: Property taxes are not standard across the board and, as an investor planning to make money from rent, you want to be aware of how much you will be losing to taxes. High property taxes may not always be a bad thing if the neighborhood is an excellent place for long-term tenants, but the two do not necessarily go hand in hand. The town's assessment office will have all the tax information on file or you can talk to homeowners within the community.

Schools: Your tenants may have or be planning to have children, so they will need a place near a decent school. When you have found a good property near a school, you will want to check the quality of the school as this can affect the value of your investment. If the school has a poor reputation, prices will reflect your property's value poorly. Although you will be mostly concerned about the monthly cash flow, the overall value of your rental property comes in to play when you eventually sell it.

Crime: No one wants to live next door to a hot spot for criminal activity. Go to the police or the public library for accurate crime statistics for various neighborhoods, rather than asking the homeowner who is hoping to sell the house to you. Items to look for are vandalism rates, serious crimes, petty crimes and recent activity (growth or slow down). You might also want to ask about the frequency of police presence in your neighborhood.

Job Market: Locations with growing employment opportunities tend to attract more people – meaning more tenants. To find out how a particular area rates, go directly to the U.S. Bureau of Labor Statistics or to your local library. If you notice an announcement for a new major company moving to the area, you can rest assured that workers will flock to the area. However, this may cause house prices to react (either negatively or positively) depending on the corporation moving in. The fallback point here is that if you would like the new corporation in your backyard, your renters probably will too.

Ask any real estate professional about the benefits of investing in commercial property, and you'll likely trigger a monologue on how such properties are a better deal than residential real estate. Commercial property owners love the additional cash flow, the beneficial economies of scale, the relatively open playing field, the abundant market for good, affordable property managers and the bigger payoff from commercial real estate.

But how do you evaluate the best properties? And what separates the great deals from the duds?

To be a player in commercial real estate, learn to think like a professional. For example, know that commercial property is valued differently than residential property. Income on commercial real estate is directly related to its usable square footage. That's not the case with individual homes. You'll also see a bigger cash flow with commercial property. The math is simple: you'll earn more income on multifamily dwellings, for instance, than on a single-family home. Know also that commercial property leases are longer than on single-family residences. That paves the way for greater cash flow. Lastly, if you're in a tighter credit environment, make sure to come knocking with cash in hand. Commercial property lenders like to see at least 30% down before they'll give a loan the green light.

The best way to find the most profitable investments? Hire an experienced agent. Give us a call. We just happen to know a few. 

Commercial real estate differs from residential in many ways, including the metrics by which feasibility and return on investment are measured. Here are three metrics you should be familiar with and consider, with the help of an experienced broker.
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Net Operating Income (NOI) - The NOI of a commercial real estate property is calculated by evaluating the property's first year gross operating income and then subtracting the operating expenses for the first year. You want to have positive NOI.

Cap Rate - A real estate property's "cap" – or capitalization – rate, is used to calculate the value of income producing properties. For example, an apartment complex of five units or more, commercial office buildings, and smaller strip malls are all good candidates for a cap rate determination. Cap rates are used to estimate the net present value of future profits or cash flow; the process is also called capitalization of earnings.

Cash-on-Cash - Commercial real estate investors who rely on financing to purchase their properties often adhere to the cash-on-cash formula to compare the first-year performance of competing properties. Cash-on-cash takes the fact that the investor in question doesn't require 100% cash to buy the property into account, but also accounts for the fact that the investor will not keep all of the NOI because he or she must use some of it to make mortgage payments. To uncover cash on cash, real estate investors must determine the amount required to invest to purchase the property, or their initial investment.