C
OMMERCIAL
R
EAL
E
STATE
I
NVESTING
E
ASY STEPS TO
GETTING
STARTED
12
JACK CUMMINGS
John Wiley & Sons, Inc.

C
OMMERCIAL
R
EAL
E
STATE
I
NVESTING

C
OMMERCIAL
R
EAL
E

STATE
I
NVESTING
E
ASY STEPS TO
GETTING
STARTED
12
JACK CUMMINGS
John Wiley & Sons, Inc.
Copyright © 2005 by Jack Cummings. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.
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Library of Congress Cataloging-in-Publication Data:
Cummings, Jack, 1940-
Commercial real estate investing : 12 easy steps to getting started / Jack Cummings.
p. cm.
Includes index.
ISBN 0-471-64714-4 (pbk.)
1. Commercial real estate. 2. Real estate investment. 3. Commercial real estate—United
States. 4. Real estate investment—United States. I. Title.
HD1393.55.C86 2004
332.63'24—dc22
2004042221
Printed in the United States of America.
10987654321
(978) 646-8600, or on the web at www.copyright.com. Requests to the Publisher for permission should be
www.Wiley.com.
v
CONTENTS
FOREWORD
xi
INTRODUCTION
xiii
CHAPTER 1
How to Get Started Investing in Commercial Real Estate 1
Commercial Real Estate Defined 2
Investment versus Use 3
Comfort Zone 3
Setting Realistic Goals 4

How to Get the Most out of This Book 6
CHAPTER 2
Why Commercial Real Estate Is a Dynamic Investment 9
Invested Amount = Cash + Debt + Time 10
Other People’s Money 11
Leveraged Cash Flow 12
Equity Buildup 13
Appreciation You Can Accelerate 13
Management Postures 1, 2, 3, and 4 15
Supply and Demand 16
The Seven Dynamics of Commercial Real Estate 17
How Not to Be Intimidated by Commercial Real Estate 25
The Four Real Estate Myths That Need to Be Unveiled 26
CHAPTER 3
What Makes Real Estate Value Go Up or Down 31
Community Planning 32
Departments of Transportation 33
Fire and Health Codes 34
Lack of Concurrency 35
Land Use Changes 36
Condemnation and Eminent Domain Proceedings 37
Building Moratoriums 37
Economic Obsolescence 38
The Rule of Small 39
Six Primary Factors That Make Real Estate Value Go
Up or Down 42
CHAPTER 4
How to Build an Effective Commercial Real Estate
Comfort Zone 55
Listing Services 56

FSBO 56
Active Listings 57
Tax Assessor 57
MapQuest 58
Zoning Maps 59
Elements Common to All Initial Comfort Zones 60
Key Factors to Becoming an Expert in Your
Own Backyard 62
Learn How to Let Your Computer Lead the Way to
Your Success 66
How to Choose Your Comfort Zone 68
CHAPTER 5
How to Accomplish Effective Due Diligence 75
Due Diligence by Definition 77
Letter of Intent 78
Formal Agreement 80
Inspection and Review Period 81
Environmental Inspections 81
Easements 81
Encroachments 82
Code Violations 83
Zoning Use 85
Allowed Use 85
CONTENTS
vi
The Eight Most Important Elements of Due Diligence 86
The Four Elements to Prepare for Due Diligence 93
Eight Things You Can Do When You Find Problems 96
CHAPTER 6
The Effects of Leverage 101

How Positive Leverage Works to Your Benefit 102
Cheap Money + Cash-Flowing
Investments = Opportunities 104
Three Magical Factors to High Positive Leverage 104
How Constant Rates in Mortgages Work 107
How to Use the Annual Constant Rate Chart 108
How to Determine If Negative Leverage Is Bad 108
Six Elements for Maximum Leverage 114
Pitfalls in Highly Leveraged Mortgages 118
CHAPTER 7
How to Maximize Your Financing 121
Seller-Held Financing 122
Loan Officer 126
Wall Street Financing 128
Acquisition and Development Loans 129
Income and Expense Projections 130
Loan Draw Schedule 131
Seven Important Factors to Maximize
Your Financing 132
CHAPTER 8
How to Become a Commercial Real Estate Insider 141
A Real Estate Insider Defined 142
Local Governmental Control over Real Estate 143
The Board of Adjustment 144
The Planning and Zoning Board 145
The Nine Stages of Becoming a Real Estate Insider 148
Contents
vii
CHAPTER 9
How to Build Effective Contacts 167

Interim Goals 167
Fine-Tune Your Positive Attitude 169
Sharpen Your People Skills 170
Shorten Your Path to Becoming a Real Estate Insider 171
Recognizing Positive People 171
Negative Washing 172
Fluid Interim Goals 172
Building Self-Confidence 173
Effective Listening 174
Cutting out the Blah Blah Blah 175
Ten Ways to Effectively Build a Contact into a
Profitable Relationship 176
Join Quality-Building Organizations 177
CHAPTER 10
The Three Most Important Words: Use, Location,
and Approval 191
Access 194
Demographics 196
Traffic Count 196
Traffic Flow 197
School Districts 198
Plats 199
Why Zoning Ordinances Are the Key that Opens the
Door to Use 200
The Power of Absolute Approval 206
CHAPTER 11
Future Vision 209
Land Use Master Plan 210
Current Uses Allowed 212
Already Approved Infrastructure Changes 223

Rezoning Possibilities 224
CONTENTS
viii
Project Economics 225
Economic Conversion 231
Discover the Magic of Economic Conversion 231
CHAPTER 12
The Six Most Powerful Negotiating Tactics 241
Rent Adjustments 242
Contract Negotiations 244
The Six Powerful Negotiating Tactics 246
Graduation Time 263
INDEX
265
Contents
ix