The Florida market is in an upswing. Over the past year,
prices have gone up 17% and the available market is only one third of what it
used to be. Not to mention that money is still cheap to borrow. People are
shopping—and they are buying. This does not only apply to residential homes—commercial
and investment properties are also extremely busy.
The commercial market always stays behind the residential
sales, whether the prices are dropping or going up. You can easily identify
commercial opportunities with a BFI. A BFI document is an executive summary of
a potential acquisition that will indicate why a client should be drawn to a
project. It is, in essence, the first paragraph of a good resume—it’s purpose
to draw the client in to read into the rest of the project, and then call in
for more information.
To
get a good BFI opening statement may take weeks of analysis of a project. It is
the opening statement that carries all the meat of the presentation. Here is an
example:
The
Opportunity:
To acquire an off market 200+ unit broken condominium project in Lee County,
Florida for $30 million dollars ($23 million purchase price, $5 million in
improvements and $2 in carry cost) that will provide a three year return
of 96% based on available financing.
The
“off market” tells the buyer the deal has not been shopped. The “broken
condo” tells him it’s probably banked owned. “Available Financing”
tells him that this can be a leveraged deal. Now he is going to want to
read the rest of the document to flesh out the details.
The
BFI may refer to CAP rates (Capitalization Rates), IRR (Internal Rates of
Return), LTV ( Loan to Values) and may include absorption studies, BOVs (Broker
Opinions of Value), and Market Analysis. Of course, the BFI will not contain all of those details, but those studies
have to be done in order to distill the information presented in just a few
pages.
BFI’s
are normally done for larger projects but there are also tools we use for
single family home and smaller investments as well. The bottom line is
that there are opportunities in today’s market. Analysis and knowledge are
still critical and so is the use of a knowledgeable profession real estate
agency and agent. You not only need the answers to your questions, you need to
know the right questions to ask.
