"You Can't Sell Out of an Empty Wagon"

The above phrase has been a sort of mantra during my 48 year real estate career. Most real estate firms, to be viable, must have product or inventory in sufficient quantities. Getting a sizable share of the market of commercial properties has made us one of the top brokerages, if not THE top. We maintain 200+ listings at any given time and the amount of marketing that takes place to lease or sell those properties is considerable (if not legendary). Our signs are everywhere, you may have noticed.

But lately, we find ourselves seeking inventory to fill the increasing demand, especially with the industrial property type. If you are thinking of about selling or leasing your industrial property, please give us a call. Let us put our powerful marketing program to work for you.

Warmest Regards,
Bruce Bossow
345 Memorial Dr.
Crystal Lake, IL 60013
Industrial Flex with income.

Crystal Lake - 32,889 SF with existing tenant occupying 9550 SF leaving 22,339 SF available for owner/user. 16407 high end office build out that can be reclaimed for warehouse.

Broker: Heather Schweitzer
3922 W. Main St.
Mchenry, IL 60050
Historical bank with vault.

Mchenry - Price reduced on this 3,646 SF office or retail building with 2,000 SF on main level and 1,646 SF in lower level. Exposed brick, open ceilings, lots of parking. 1 block to commuter train.

Broker: Bruce Kaplan and Kevin Kaplan
2420 W. Johnsburg Rd.
Johnsburg, IL 60051
Mixed Use Investment

Johnsburg - 5 unit neighborhood strip with 4 stores and 1 apartment. Ideal for user investor.

Broker: Bruce Kaplan and Kevin Kaplan
5306 Business Parkway #101/103
Ringwood, IL 60072
Industrial Flex Condo

Ringwood - 3600 SF pre-cast condo with 1900 SF office and 1700 SF warehouse. Fully furnished, 14' ceilings, 3 DIDs.

Broker: Bruce Kaplan and Kevin Kaplan
212 Lindow Ln., Units A, B, C, D
Marengo, IL 60152
Commercial or Warehouse Space

Marengo - 5000 SF precast space with 18' ceilings and one 12x14 DID. Great for showroom or recreational use.

Broker: Bruce Kaplan and Chris Yuan
NEC Randall & Algonquin Roads
Lake in the Hills, IL 60156
78,563 SF
Joe Billitteri
Rt. 23 & Harmony Rd.
Marengo, IL 60152
90.55 Acres
Heather Schweitzer
1750 Cumberland Parkway
Algonquin, IL 60102
17,335 SF
Bruce Bossow and Bruce Kaplan
2055 S. Eastwood (Route 47)
Woodstock, IL 60098
14,000 SF
Bruce Kaplan and Kevin Kaplan
4804 Cog Cir.
Crystal Lake, IL 60014
56,310 SF
Heather Schweitzer
By Bruce Kaplan Senior Broker Associate, Premier Commercial Realty

If you are a real estate investor, you most likely know something about cap rates. If you’re not a real estate investor, you might want to know about the type of returns you can make on your money if you invest it in commercial real estate and how to compare those returns to what you are earning in your savings or other investments.

Cap rate is short for capitalization rate. It is one of several investment performance measures that real estate investors use to compare one investment to another. It is used to establish what an income producing piece of property is worth. It is considered a return OF and ON your invested capital.  It is also called an Overall Rate of Return.

To some extent, the cap rate reflects the risk of a particular investment. If the risk is low, so is the cap rate. The higher the risk, the higher the cap rate.

To compute a cap rate, you start with the Net Operating Income (NOI) of a property. In general, the NOI is computed by subtracting the property expenses (before debt service or depreciation) from the gross scheduled income based on existing leases. After you have your NOI number, you divide that number by the price to get a cap rate (expressed as a percentage). If you decide to play with this equation, you will note that the higher the price, the lower the cap rate. The lower the price, the the higher the cap rate. Hence, an inverse relationship exists between price and cap rate.

Cap rates vary from one part of the country to another. So there is a geographical tolerance inherent in the concept. Where there are a lot of investment dollars chasing a shortage of available properties, investors seem to be willing to settle for lower cap rates than in an area where investment opportunities are plentiful.

They also vary from property type to property type. Multi-family apartments tend to have lower cap rates than other commercial property types because they tend to be easier to lease up when there is a vacancy. Demand tends to be high for apartments versus, say, office buildings. Triple net leases with national credit tenants and long term leases often have lower cap rates, again, a function of lower risk. Strip centers and office buildings with mom and pop type tenants will often generate higher cap rates, a reflection of higher risk and less demand when a vacancy occurs.

When comparing one cap rate against another you will want to know what line items were used in the Operating Statement to arrive at that cap rate. For example, it is common and proper to subtract a Vacancy expense even if the property has no current vacancies. This is because you need to allow for some level of vacancy at some time in the future. If a property is never vacant, this could mean rents are too low. Another line item often missed in the computation of NOI is a management expense. If you intend to self-manage the property, you may be able to justify leaving out this line item. But it is a legitimate expense and it reduces NOI and hence price.

Often a client will enumerate his or her investment objectives to us and will say, “I need at least an 8% cap rate.” That doesn’t mean we only look for 8% cap rates. Why? Because a property offered at a 7% cap rate, as an example, if bought for less money than the asking price, can end up being an 8% cap rate. Some variation on that theme happens all the time.

Some investors don’t use cap rates as their favorite benchmarks for comparing properties. They have their own criteria and as brokers, we roll with it.

If you have questions on the use of cap rates, don’t hesitate to contact us.

Bruce S. Kaplan is a Senior Broker Associate at Premier Commercial Realty. He can be reached at 847-854-2300 X20 or [email protected] .

By Bruce Kaplan Senior Broker Associate, Premier Commercial Realty

A career as a commercial real estate broker has its plusses and minuses. Allow me to tell you why I like it and can’t fathom doing anything else.

After 43 years in the “commission only” business, I should pretty much know if I’m going to stick with it for the long haul. The “hook” for me was FREEDOM.

I worked in the corporate world after college for four grueling years. Someone else set my hours, my salary schedule, my days off, etc. I hated playing corporate politics, trying to please my superiors in hope of a promotion, having to ask for a raise.

In real estate sales, you are your own boss, free to do what you want each hour of each day or every week. Nobody looks over your shoulder, clocks you in or out, or tells you when you can take your lunch.

Once I set myself free from “the man”, I loved being able to attend my kids’ sports and school events when most dads were on the job or commuting home. I was inspired by the concept that I could work as hard and make as much money as I wanted—nobody was holding me back or charting my career path.

For the first 10 years, I straddled the line between residential and commercial real estate. I now call that kind of broker a “resi-mercial” broker. I had an appetite for both. However, residential was a relentless treadmill of seven days a week, weekends, holidays, evenings. It was definitely not conducive to a family life.

Commercial brokerage tended to be more in line with my preferred lifestyle. It was based around corporate hours, Monday thru Friday, 8 am to 5 pm. No weekends, unless I wanted to.

Commissions per transaction were potentially huge, five figures sometimes, although not quite as frequent. There was not so much “emotion” in the decision process.

Not as much competition was another factor. Of 1,000 members of the local Board of Realtors, only a handful specialized in commercial brokerage. The satisfaction gained by orchestrating a complicated transaction and helping someone through the maze of hurdles and helping them build wealth was, and still is, a process that gets my juices flowing. When that same client comes back to me or refers someone else to me, it is even more gratifying.
The composition of the existing mix of commercial brokers in this Far NW Suburban area of Chicago consists largely of males in their sixties or seventies which means there is a lot of room and, in fact, a NEED for new blood, including women, coming into the business.

If there are any downsides to the business, I would have to say it’s the relatively long learning curve. In my own case, I did it the hard way. I had no mentors or in house training programs. I learned from the school of hard knocks.

Now I recommend that you start out at a firm where you can get training and maybe apprentice under someone for a year.

To sustain yourself financially during this learning curve is a challenge, and probably the biggest reason why more people don’t do it. There are sometimes long gaps between paychecks. You do have to get licensed and you also have continuing education requirements. The ongoing monthly costs for data base memberships (a requirement in most offices) can also make it hard. You are an independent contractor in most offices, but that means you have to possess discipline. Why? Because there are a lot of distractions that can derail you and get you off your planned day.

The other downside is the economic swings. The business is tied to the economy. If interest rates zoom up, transaction volume tends to slow down. During recessions, when consumer and business confidence is low, there are fewer deals to be done. Right now, the economy is booming, we are at full employment and both consumer and business confidence is high. It is a good time to get in.

We are always on the lookout for new motivated brokers. I hope this peak into our exciting business causes you to take a closer look. If you are a residential real estate agent and have thought about doing commercial, I would encourage you to talk to me about making the transition as seamless as possible.

Bruce Kaplan is a Senior Broker Associate at Premier Commercial Realty in Lake in the Hills. He can be reached at [email protected] or 847-507-1759.

Bruce Bossow, x 12 847-732-3462
Bruce Kaplan, x 20 847-507-1759
Heather Schweitzer, x 15 815-236-9816
Heide Casciaro, x 26 847-774-5660
Joe Billitteri, x 21 847-833-5004
Kevin Kaplan, x 13 309-261-0920
Chris Yuan, x 24 312-927-6333

 9225 S. IL Route 31
Lake in the Hills, IL 60156
 847-854 2300