What is commercial real estate?
What is the difference between residential and commercial real estate? Should I invest in residential or commercial properties? What types of commercial properties make good investments?
Those are all common questions for any considering to diversify from savings or stock dividends into wealth enterprises of commercial real estate.
Commercial real estate includes a wide variety of properties from condos, apartment complexes, multi-family units, office buildings, industrial sites to large plazas and malls. Each has its own aspect of management, investment criteria and performance indicators. Commercial realtors serve a vital role in helping business owners and investors locate, evaluate and purchase commercial real estate.
Residential properties are usually easier to find with a much lower risk level, unless the buyer is considering luxury home sales. Some investors prefer to own multiple residential units rather than commercial properties. Each buyer / investor determines his own portfolio of investment properties.
Commercial properties often require higher percentage of funds required (loan to value) than residential, unless the owner will occupy the property purchased. Commercial properties often involve much more knowledge of management, the specific business enterprise and investment tools to evaluate a business for profit, return on investment and market comparisons of various business performance levels.
Commercial realtors and business brokers link business owners and investors to properties that perform at desired profit levels.
The question of residential or commercial investment should be determined by the individual’s experience, the desired objective and time performance needed to accomplish the financial objective. Making a “quick buck” could become a “quick loss” without adequate planning and evaluation.
Many commercial transactions are considered over a five year period of performance level. Realtor use of “investment tools” to evaluate properties: Cap Rate, Investment Analysis, Comparative Lease Analysis, Lease verses Loan Analysis, Loan Amount Analysis, Location Risk Analysis, Rate of Return on Investment and other investment performance comparative indicators of better, good or poor investments.
Accurate data helps determine accurate results in considering investment properties. There is a huge difference between the purchase of a $150,000 rental property to be leased and the purchase of a million dollar small strip plaza with seven lease retail units.
Commercial properties make excellent investment properties after proper evaluation. Many commercial properties are purchased to create wealth, “mail box money,” meaning the owner is often absentee and has a management company to deal with the daily operations and collection of lease payments. The owner receives the profits monthly without having to be actively involved.
The type of commercial property purchased should directly relate to the buyer / investor’s experience. Motel operations are entirely different than a convenience store or strip mall.
The owner’s knowledge about the business operations, potential missing cash flow, possible defaults and management of personnel are all important in choosing investment properties. Experienced realtors help investors and business owners consider not only the business profits, but its location to avoid failure by unforeseen problems, like road construction.
My objective as a Commercial Realtor is to help business owners and investors accomplish their financial objectives in Commercial Real Estate.
Your Success is My Business.