As a rule of thumb, if you don’t have an appraisal, don’t order one. Let the funder that has an interest in your project suggest one that you use. Otherwise, if you want to order your own appraisal, there are few bits of advice to follow:

1) Ask your mortgage broker who they use and have had success with. Be prepared to spend more than what the local guy quoted you. Your mortgage broker is always going to choose an appraiser he or she has had success with and gotten deals funded with, which is your primary objective.

2) If you want to shop yourself, make sure the appraiser is MAI certified. The acronym stands for Member of the Appraisal Institute. It’s no simple achievement to get this accreditation. According the the Apraisal Institute, MAI appraisers must meet the following criteria for accreditation:

* Receive a passing grade on 11 examinations that reflect 380 hours of classroom instruction and that test the appraiser’s knowledge of basic and advanced appraisal principles, procedures and applications; report writing; valuation analysis and standards of professional practice
* Receive a passing grade on a four-module, two-day comprehensive examination
* Hold an undergraduate degree from a four-year accredited educational institution
* Experience: Receive credit for 4,500 hours of experience, all of which must meet strict criteria

3) Anyone that is not MAI certified will perform your appraisal at about half the cost, but…it’s a fool’s errand because your finder is going to require that you get an MAI certified appraisal. So, you end up paying for two appraisals.

4) Try to find someone that is familiar with your area and project type. This enables them to do them faster and at a lower price.

While this is not the appropriate place to give recommendations, feel free to contact me at my office and I’ll gladly steer you in the right direction.

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Actually, I do, and I want to be very precise with my strong buy recommendation. This article is specifically for business owners who are currently leasing space and who also intend to be in business for at least the next 10 years. If that’s you, the remainder of 2009 may present the best buying opportunity you will see in your lifetime. Consider the following:

1) You Need a Place to Operate Your Business

This may seem obvious, but unless you’ve set up shop in your home, every business needs space to operate. You’ve already decided to be in business, now you must choose to either rent or own your space.

Real estate rental costs are typically the third largest expense a business incurs (after payroll and taxes). On average, lease payments typically increase by 3% or more per year, every year. Finding an ideal location to purchase can convert this large, consistently growing expense into an investment that you will someday recapture, hopefully with a nice profit, when you eventually sell the property.

Furthermore, you will be the owner of all tenant improvements you make to the property and never need to worry about a lease not being renewed or having a property sold out from under your business. Don’t underestimate the pride of ownership you will feel as the owner of your business and the place from which your business conducts its business.

2) We Are in a Buyer’s Market

This year is clearly a bad year for many commercial property investors; rental rates are down and vacancies are high. These investors, unlike business owners, depend on the rental income their property generates to pay the mortgage. The vast majority of investment property loans have balloon payments every 5, 7 or 10 years. In today’s unstable market, banks are very conservative with property valuations and refinancing investment properties is harder than ever.

Many investors need to sell properties, even ones with positive cash flow, due to a lack of available financing. As a consequence, there are a large number of attractive acquisition opportunities available at historically low prices relative to the cash flow they can generate.

The investor’s challenge is your opportunity. As a business owner you will use your business’ cash flow to cover the mortgage expense. There is a good chance that you are already spending most if not all of the mortgage payment as rent.

3) Short Term Value Fluctuations Don’t Matter

The idea is not that your owner occupied real estate is somehow immune to down market cycles. The point is that as a business owner you don’t particularly care because you have no intention of selling in the short term. Certainly all property owners hope to enjoy increasing property values, but for owner occupied properties it’s not a day to day concern.

4) Historically Strong Inflation Hedge

Commercial Real Estate has a long history of being an excellent hedge against inflation. Over the long term, commercial properties tend to increase in value at a rate approximately two percent higher than the rate of inflation. Large deficits combined with huge increases in the money supply are going to lead to high inflation at some point. It’s already baked into the economic pie. When that inflation hits, your commercial property will become more valuable. Additionally, you will be paying your mortgage with dollars that are increasingly less valuable.

5) Outstanding Exit Strategy Options

When you one day decide to retire, owning the property will provide several attractive options. You will be able to sell the business and lease the property to the buyer; sell the business with the property, increasing the business value and making the transaction easier to finance, or sell the business and the property to different buyers.

6) Make Your Accountant Happy

Property ownership provides many tax benefits and can help shelter business income. Interest deductions, depreciation, amortization, 1031 exchanges and other benefits will help you keep more of what you earn. Speak to your accountant to gain a better understanding on how commercial property ownership can help you keep more of your income and reduce your tax burden.

7) Excellent Financing Options are Available

Outstanding financing options are currently available to help business owners purchase or refinance owner occupied commercial properties. Several underutilized loan programs can provide up to 90% financing for qualified projects. These loans are fully amortizing, so you never need to worry about facing a balloon payment either.

It’s hard to get up the courage to invest in commercial real estate when the market is in turmoil, but I urge you to consider doing just that. The benefits of ownership are compelling and the timing is right.

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1. Commercial real estate will not make you a quick dollar.

Most properties require a long-term investment before you will begin to see any profit at all. Many people are fooled by residential real estate television programs where sellers renovate a home in a few months and sell it for a massive profit. Commercial real estate works in a completely different way. If you’ve seen past success in the residential domain, proceed with caution before plunging into commercial real estate.

2. You’re in charge of maintenance and building upkeep.

Even if you are renting out offices, you’re the landlord. If it breaks, you have to fix it. That means you’ll have to pay out quite a bit to ensure the building remains in good condition. There will be a few major bills if you do happen to hold onto the property for many years.

3. Choose the right type of commercial real estate.

Pick a route and stick with it, whether it is apartments, condos, offices, or parking lots. Each kind of property must be managed in a different manner. Investing in two very dissimilar properties, such as retail and apartment buildings, will only cause greater stress to you and more opportunity for failure. Choose one type and work to become an expert in that before you branch out to new venues.

4. You need to attract reliable tenants to keep the profit streaming in.

You will have tenants that pay late, break contracts, and do many other things that might be upsetting. This is all part of the commercial real estate business. Be prepared to be hands on and involved with your clients and the building. Your investment will collapse if you do not care for it.

5. Get help.

Find successful commercial real estate owners and follow their lead. Listen to their advice and most importantly, use it. They have the knowledge to help you get your new investment up and running. And why make the same mistakes that others have made time and time again before you? They can warn you about common pitfalls. Remember, if you were an expert on the subject, you wouldn’t be looking for tips on the internet.

6. Enlist in the services of a financial planner or accountant.

Don’t bury yourself in debt or a bad investment. Be sure that this is something you can afford and are willing to take a certain economic risk in order to achieve. There is no guarantee that you will make a wise investment, but being aware of your finances can help lessen the potential (and shock) of failure.

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