Frequently Asked Questions
Commercial real estate is a term that describes real property, such as a building or land, that is intended for the production of income. Within this broad definition, we can divide commercial real estate into several asset classes:
Multi-family includes residential rental properties, such as apartment buildings and complexes. It also includes senior housing facilities with skilled nursing or independent living units.
Industrial properties include warehouses, light manufacturing, and industrial land.
Mixed-use is a property that has commercial space on the lower floors with residential or office space above it. For example, a retail mall with office or residential condominiums above the storefronts would be mixed use.
Office buildings and office spaces are primarily for traditional office use. This category also includes high-tech and specialized uses, such as research and development, computer facilities, or medical offices.
Retail properties that primarily provide goods and services to the public on a walk-in basis. This includes shopping centers, strip malls, grocery stores, restaurants.
Specialty properties include hospitality, health care, and other specialized uses that require unique buildings or adaptable spaces.
In terms of return on investment, commercial real estate is typically less volatile than the stock market but more volatile than government bonds. This volatility translates into higher returns for investors who understand how to manage risk through a variety of means, such as financing, asset diversification, and geographic location.
When compared to other types of real estate like residential real estate (single-family homes), commercial properties are less expensive but provide more stability in terms of return on investment. This is due partially to the fact that commercial real estate is typically an older property with higher occupancy rates, while residential real estate is more likely to be a recently built property with the potential for greater risk.
Before investing in commercial real estate, however, business owners and investors should consider several factors.
First, they should assess their risk tolerance and financial means. As with any type of investment, the riskier the return, the more potential there is for a larger profit. If an individual or business is uncomfortable with this level of risk, commercial real estate may prove too volatile and they should in another type of asset class.
Besides assessing their financial situation, potential buyers should also assess their time and ability to manage a non-core asset. While some commercial leases provide the option of hiring a property manager, there is still added responsibility on the small business owner or investor.
Finally, small business owners need to consider the use of their property and determine whether they can handle the responsibility. Commercial real estate is more than just a building: it requires long-term planning, financing, and management, which small business owners should try to avoid if possible.
The bottom line is that commercial real estate provides a solid opportunity for small businesses and investors, but only those with the time to manage it and the means to do so should invest in commercial real estate.
Want all the benefits of property ownership and none of the headaches? Then property management is the solution for you. The Warehouse Hotline offers full-service property management, reducing the headache of your investment while maximizing the property’s return and efficiency. Our property management services are tailored directly to your needs. Management services include Invoicing of rent, bill pay, collection, and depositing of rent, contact for maintenance issues including emergencies, scheduling and follow up maintenance issues, dealing with insurance companies in case of a catastrophic event, respond to tenant questions and concerns, monthly building report and a drive-by of property with a personal visit to tenants, build “escrow” account for large costs, facilitate property tax appeals with a trusted company, use of insurance broker to help reduce insurance costs, QuickBooks processing of your account, monthly financial reports (reconciliation report, profit & loss, and balance sheet), and an end-of-year packet for your accountant.
The Warehouse Hotline provides warehouse HOA management to ensure success in your commercial condominium. You would not believe how many HOAs are mismanaged with funds frequently going unaccounted for. With The Warehouse Hotline, consider this no longer an issue. We take the stress of managing an HOA off your plate so you can focus on what you know best: your business. Our HOA management services include Distribution of monthly statements to owners, preparation of checks for invoices, help in preparing the fiscal year’s annual budget for review, maintain financial data and prepare and distribute a Profit & Loss, prepare a monthly balance sheet and bank reconciliation, deposit associations funds, prepare 1099’s, assist the Board and its legal counsel in the enforcement and collection of delinquent accounts as prescribed in the Association’s CC&R’s and collection policy, record changes of ownership as provided in writing to management, assist the board in verifying that all assessments, late charges, legal fees and special assessments are brought current for any delinquent unit that changes title, filing insurance claims in case of a catastrophic event, work with insurance broker to help reduce insurance costs, coordinate with the board and/or the association’s CPA for the timely filing of state and federal taxes distribute annual budget and reserve study to the owners of record, help obtain and implementing a reserve study if necessary, provide a report summarizing status of delinquent account histories, facilitate property tax appeals with a trusted company, maintain correspondence files for contractors, owners, etc., respond to correspondence received from owners, contractors, and representatives, seek and present contractors for review and approval, conduct regular property inspections, obtain competitive estimates for the board of directors consideration, authorize repairs and maintenance above existing contracted contractor services, not to exceed an amount determined by the board, prepare agendas under the requirements and provisions of the bylaws for the annual meeting, attend the regularly scheduled meetings of board and the annual meeting of association, act as recording secretary and prepare minutes of each meeting, prior to each board meeting, send to each Board member a packet including agenda, minutes, financials, bids, delinquencies, contracts and correspondence, organize and help conduct the annual meeting of the membership and assist in the election associated with said annual meeting, send letters of violation or notify the board of architectural and/or CC&R violations, provide telephone service available 24 hours a day, 365 days a year for emergencies, help secure legal counsel for the amendment of the association’s governing documents.
Warehouses are the most functional, diverse, affordable real estate product for many businesses. Drive-in or dock high access can be key to load and store inventory. A drive-in door is a general garage door, similar to that of a house. A dock high door is an elevated garage door made for semi-trucks to pull up to maximize efficiency. Ceiling height is imperative for warehouses, as tenants frequently need racking to store inventory. Warehouses provide small and large businesses with the most efficient and affordable real estate so they can focus on their business needs.
Warehouse leasing can be as simple as you make it. To maximize your leasing efficiency, pick three must-haves for your future warehouse. For example, 18’ ft clear height, dock high door, and a fenced yard might be your ‘must-haves.’ Everything is negotiable in commercial real estate, but it’s important to understand that real estate moves fast. If you find a space that works for you, pursue it immediately. Once you’ve found the space, it’s time to wow your future landlord. You are now building a case for your future landlord why they want you as a tenant. Business financials, profit, and loss statements, and personal financials can be a great start. Next, you will want to address your desired terms with your landlord. Pick a few key necessities, such as price, length of term, start date, and TI. TI stands for tenant improvements. In many commercial leasing scenarios, landlords offer tenants budgets to upgrade the space. Standard leasing terms for warehouses are 3–5 years. That said, some landlords offer longer terms, some landlords offer shorter terms. Once you have discussed your desired terms with your landlord, let the negotiations begin. Reference this article I wrote in Forbes about my 10 tops tips for negotiations. Your future landlord or tenant should be courteous to you and you should be courteous back. Early negotiations will give you a powerful insight into your future working relationship. Once you and your future landlord/tenant have agreed upon terms, it’s time to complete the deal. The landlord will provide the lease. It is extremely important to read your lease and understand what you are signing. It is never a bad idea to have a real estate attorney review the document. Once you have a full understanding of the document, it is time to sign and give the deposit and first month’s rent. Congratulations! You have now secured your warehouse or tenant! Upon move-in, take pictures of the space and address all issues immediately. Test the HVAC, garage door, and other systems to make sure they are working. Document everything in writing. Communication is key.
Called ‘triple net’. These are your expenses. Well, some of them. Typical warehouse expenses are as follows. First, you have your base rent. Next, you have your NNN expenses. NNN expenses cover property taxes, insurance, and property management. Additional expenses you can expect are water, storm-water, sewer, exterior lighting, security, trash, HVAC maintenance, common area maintenance, etc. It’s important to understand that every property is different. Some landlords like to factor the additional expenses into their NNNs, some don’t. The Warehouse Hotline is proud to maintain some of the most affordable NNNs in the Denver Metro Area. How do you ask? We run our properties, lean and mean. We take pride in maintaining our properties to the highest standards while keeping the budget in mind.
Commercial real estate is a term that describes real property, such as a building or land, that is intended for use in the production of income. Within this broad definition, commercial real estate can be divided into several asset classes:
Multi-family includes residential rental properties such as apartment buildings and complexes. It also includes senior housing facilities with skilled nursing or independent living units.
Industrial properties include warehouses, light manufacturing, and industrial land.
Mixed-use is a property that has commercial space on the lower floors with residential or office space above it. For example, a retail mall with office or residential condominiums located above the storefronts would be considered mixed-use.
Office buildings and office spaces are primarily for traditional office use. This category also includes high-tech and specialized uses such as research and development, computer facilities, or medical offices.
Retail properties that primarily provide goods and services to the general public on a walk-in basis. This includes shopping centers, strip malls, grocery stores, restaurants.
Specialty properties include hospitality, health care, and other specialized uses that require unique buildings or adaptable spaces.
In terms of return on investment, commercial real estate is typically less volatile than the stock market but more volatile than government bonds. This volatility translates into higher returns for investors who understand how to manage risk through a variety of means such as financing, asset diversification, and geographic location.
When compared to other types of real estate like residential real estate (single-family homes), commercial properties tend to be less expensive but provide more stability in terms of return on investment. This is due partially to the fact that commercial real estate is typically an older property with higher occupancy rates while residential real estate is more likely to be a recently built property with the potential for greater risk.
Before investing in commercial real estate, however, business owners and investors should consider several factors.
First, they should assess their risk tolerance and financial means. As with any type of investment, the riskier the return, the more potential there is for a larger profit. If an individual or business is uncomfortable with this level of risk, commercial real estate may prove to be too volatile and they should consider investing in another type of asset class.
In addition to assessing their financial situation, potential buyers should also assess their time and ability to manage a non-core asset. While some commercial leases provide the option of hiring a property manager, there is still added responsibility on the small business owner or investor.
Finally, small business owners need to consider the use of their property and determine whether or not they can handle the responsibility. Commercial real estate is more than just a building: it requires long-term planning, financing, and management which small business owners should try to avoid if possible.
The bottom line is that commercial real estate provides a solid opportunity for small businesses and investors but only those with the time to manage it and the means to do so should consider investing in commercial real estate.
Want all the benefits of property ownership and none of the headaches? Then property management is the solution for you. The Warehouse Hotline offers full-service property management reducing the headache of your investment while maximizing the property’s return and efficiency. Our property management services are tailored directly to your direct needs. Management services include but are not limited to Invoicing of rent, bill pay, collection, and depositing of rent, contact for maintenance issues including emergencies, scheduling and follow up maintenance issues, dealing with insurance companies in case of a catastrophic event, respond to tenant questions and concerns, monthly building report and a drive-by of property with a personal visit to tenants, build “escrow” account for large costs, facilitate property tax appeals with a trusted company, use of insurance broker to help reduce insurance costs, QuickBooks processing of your account, monthly financial reports (reconciliation report, profit & loss, and balance sheet), and an end of year packet for your accountant.
The Warehouse Hotline provides warehouse HOA management to ensure success in your commercial condominium. You would not believe how many HOA’s are mismanaged with funds frequently going unaccounted for. With The Warehouse Hotline, consider this no longer an issue. We take the stress of managing an HOA off your plate so you can focus on what you know best, your business. Our HOA management services include and are not limited to Distribution of monthly statements to owners, preparation of checks for invoices, assistance in the preparation of the fiscal year’s annual budget for review, maintain financial data and prepare and distribute a Profit & Loss, prepare a monthly balance sheet and bank reconciliation, deposit associations funds, prepare 1099’s, assist the Board and its legal counsel in the enforcement and collection of delinquent accounts as prescribed in the Association’s CC&R’s and collection policy, record changes of ownership as provided in writing to management, assist the board in verifying that all assessments, late charges, legal fees and special assessments are brought current for any delinquent unit that changes title, filing insurance claims in case of a catastrophic event, work with insurance broker to help reduce insurance costs, coordinate with the board and/or the association’s CPA for the timely filing of state and federal taxes distribute annual budget and reserve study to the owners of record, assist in the process of obtaining and implementing a reserve study if necessary, provide a report summarizing status of delinquent account histories, facilitate property tax appeals with a trusted company, maintain correspondence files for contractors, owners, etc., respond to correspondence received from owners, contractors, and representatives, seek out and present contractors for review and approval, conduct regular property inspections, obtain competitive estimates for the board of directors consideration, authorize repairs and maintenance above the scope of existing contracted contractor services, not to exceed an amount determined by the board, prepare agendas in accordance with the requirements and provisions of the bylaws for the annual meeting, attend the regularly scheduled meetings of board and the annual meeting of association, act as recording secretary and prepare minutes of each meeting, prior to each board meeting, send to each Board member a packet including agenda, minutes, financials, bids, delinquencies, contracts and correspondence, organize and assist in conducting the annual meeting of the membership and assist in the election associated with said annual meeting, send letters of violation or notify the board of architectural and/or CC&R violations, provide telephone service available 24 hours a day, 365 days a year for emergencies, assist in securing legal counsel for the amendment of the association’s governing documents.
Warehouses are the most functional, diverse, affordable real estate product for many businesses. Drive-in or dock high access can be key to efficiently load and store inventory. A drive-in door is a general garage door, similar to that of a house. A dock high door is an elevated garage door made for semi-trucks to pull up to maximize efficiency. Ceiling height is imperative for warehouses as tenants frequently need racking to store inventory. Warehouses provide small and large businesses with the most efficient and affordable real estate so they can focus on their business needs.
Warehouse leasing can be as complicated or as simple as you make it. To maximize your leasing efficiency, pick three must-haves for your future warehouse. For example, 18’ ft clear height, dock high door, and a fenced yard might be your ‘must-haves.’ Everything is negotiable in commercial real estate, but it’s important to understand that real estate moves fast. If you find a space that works for you, pursue it, immediately. Once you’ve found the space, it’s time to wow your future landlord. You are now building a case for your future landlord as to why they want you as a tenant. Business financials, profit, and loss statements, and personal financials can be a great start. Next, you will want to address your desired terms with your landlord. Pick a few key necessities such as price, length of term, start date, and TI. TI stands for tenant improvements. In many commercial leasing scenarios, landlords offer tenants budgets to upgrade the space. Standard leasing terms for warehouses are 3 – 5 years. That said, some landlords offer longer terms, some landlords offer shorter terms. Once you have discussed your desired terms with your landlord, let the negotiations begin. Make sure to reference this article I wrote in Forbes about my 10 tops tips for negotiations. Understand that negotiations are give and take. Your future landlord or tenant should be courteous to you and you should be courteous back. Early negotiations will give you a strong insight into your future working relationship. Once you and your future landlord/tenant have agreed upon terms, it’s time to finalize the deal. The landlord will provide the lease. It is extremely important to read your lease and understand what you are signing. It is never a bad idea to have a real estate attorney review the document. Once you have a full understanding of the document it is time to sign and give the deposit and first month’s rent. Congratulations you have now secured your warehouse or tenant! Upon move-in, make sure to take pictures of the space and address all issues immediately. Test the HVAC, garage door, and other systems to make sure they are working. Document everything in writing. Communication is key.
Pronounced ‘triple net’. These are your expenses. Well, some of them. Typical warehouse expenses are as follows. First, you have your base rent. Next, you have your NNN expenses. Generally, NNN expenses cover property taxes, insurance, and property management. Additional expenses you can anticipate are water, stormwater, sewer, exterior lighting, security, trash, HVAC maintenance, common area maintenance, etc. It’s important to understand that every property is different. Some landlords like to factor the additional expenses into their NNNs, some don’t. The Warehouse Hotline is proud to consistently maintain some of the most affordable NNNs in the Denver Metro Area. How do you ask? We run our properties lean and mean. We take pride in maintaining our properties to the highest standards while keeping the budget in mind.
There are commercial real estate brokers and there are residential real estate brokers. These jobs are not interchangeable. In a commercial setting, you will want to work with a commercial broker, not an agent.
We can divide commercial property into two very broad categories: investment and or owner/user. An investment property is for a return. An owner/user’s property is to house one’s own business.
Besides category and expertise, there is a third determining factor when choosing the right commercial broker or brokerage: geography. To find the best commercial broker, you’ll need to know where you want to buy commercial property and what type of commercial property you want to buy so you can match their geographical knowledge and skill set with your needs.
Are you a buyer or a tenant? The good news is, your commercial broker is free. Commercial brokers are paid for the sale of commercial property by the seller. The owner pays for leasing commissions.
Commercial real estate involves property where the commercial activity takes place. Shopping malls, office complexes, and industrial parks are all examples of commercial real estate. For the right investor, commercial real estate often yields a better return on investment than residential.
In commercial real estate, we can divide investors into four groups:
- Commercial developers. Developers syndicate and build commercial real estate to resell or rent themselves.
- Commercial investors. Investors buy commercial real estate and rent it out to tenants and/or occupy the building themselves while using the space for their business.
- Professional managers who function as a go-between for tenants and commercial investors take care of all issues related to operating a business out of the property.
- Commercial brokers who represent commercial tenants in the commercial real estate market take care of commercial leasing and act as a go-between for commercial investors and commercial users.
Commercial property investment is less liquid than residential property. The product type intimidates some buyers. Commercial real estate investments can have a higher barrier to entry but yields are higher than other commercial property investments because commercial real estate investors are taking on more risk by financing the entire commercial project themselves. Commercial developers or builders then take some of their commercial project’s commercial profit as a commercial developer fee.
The most important commercial construction cost is commercial land cost, which can be extremely high in commercial real estate development. Other major commercial construction costs include commercial construction materials and commercial construction labor. Commercial developers or builders rarely need to make use of commercial financing, because they cover the full commercial cost of commercial development.
Investors can finance the commercial property for commercial development by commercial construction financing, commercial loans, and commercial mortgages. Commercial lenders offer commercial real estate loans with fixed or variable commercial interest rates and amortization periods of up to 30 years. Commercial mortgage rates are not as low as residential mortgage rates, because commercial borrowers are commercial businesses.
Professional commercial developers or commercial builders finance commercial development with commercial developer fees, commercial equity, and commercial loans. Commercial developer fee is the revenue that a commercial developer earns for commercial building a commercial property. Commercial equity includes all forms of investment in a commercial project by investors other than the one who finances the full cost of commercial development in commercial developer fee. Commercial loans are commercial loans that commercial developers can take out to finance commercial development.
Commercial investors rarely need commercial real estate financing for their investment, but commercial mortgages might be an option when commercial investors want to purchase a commercial property for commercial leasing or commercial development.
The most important factors in commercial mortgage rates are commercial mortgage rates, commercial equity enhancement, and commercial loan to commercial value.
Commercial investors can keep commercial lease rates low if they want commercial tenants to afford commercial rent payments by offering competitive commercial rental rates, which may require commercial incentive programs. Commercial incentives for commercial tenants include free or discounted commercial services like free/discounted commercial parking, commercial tenant improvement funds, or commercial referral fee refunds.
However, commercial incentives can be expensive commercial investments if commercial tenants don’t commit commercial occupancy to the commercial property. Many commercial leases, therefore, require that commercial tenants reimburse commercial investors for part of the commercial incentive amount through higher commercial rental rates after breaking a lease or not fulfilling another obligation in a commercial lease.
Commercial investors in commercial real estate can earn the highest commercial income if commercial tenants commit commercial occupancy and commercial retention rates stay high, which requires encouraging commercial turnover to maintain a competitive commercial rental rate.
The most important factors that affect commercial property investment yield are market conditions and commercial real estate location. The more demand for commercial real estate properties, the higher commercial rent, and commercial lease rates are. The commercial location has a powerful influence on commercial property value and commercial rental rates.
If you own, occupy, or are looking to own or occupy commercial real estate space, you must understand how to value a property. Having a valuation of a property you are looking to pursue can help you determine how to approach the property. In addition, the valuation will provide an assessment of how well your property and product type are doing with other commercial properties in your area, how much equity you have built up, and how much potential profit you can expect from a future sale. If a bank is considering loaning you money or giving you a loan for your business, having an up-to-date valuation done will help the bank determine how much risk to take on when loaning your capital.
There are several methods to value commercial real estate. When getting a commercial appraisal, we take four main variables into consideration: income, expenses, market value, and local comparables.
NOI or net operating income is how much money the building or commercial unit produces in rent. A real estate valuation will also consider how much the tenant pays in rent, the expenses, and the expense structure. Many commercial properties sell based on how much a tenant is paying in rent. We calculate the rental rate and purchase price of the property to understand the net operating income.
When the income from a commercial property exceeds its expenses over a set period, this is called positive cash flow. However, if the expenses exceed its income for that same amount of time, it’s known as negative cash flow. Usually, a real estate valuation will look at how much cash flow the commercial property produces over the last three to six months, reserve funds and how consistently that income has been coming in each month.
Local comparables are similar types of commercial properties that sold in recent months. We can glean this information from the public records of how much any nearby commercial properties have sold for. The age, size, and how well-maintained property is will affect how it’s valued as well.
Besides those three variables, another important aspect of a commercial real estate valuation involves how much your building or business space could be worth in the open market if it were to be sold today. Using an up-to-date list of how much other commercial properties have recently sold for in that area, a professional real estate agent or appraiser will calculate how much your building would likely sell for based on how many square feet of space you have and how valuable the same type of property is in that area.
We can do commercial real estate valuations for a relatively low cost, often ranging from free to $5,000, depending on how much information is available and how fast you need it. It’s advisable to get this type of commercial appraisal by an experienced professional who knows how to find the most recent information about how much similar type properties have sold for. If you do not, you may receive an incorrect commercial valuation that could cause a poor outcome for your business and its future.
To determine whether commercial real estate is right for an investor, one should consider their goals with the property. Are they looking to collect rent? Do they want to flip it? Are they looking for income diversity outside of the stock market? This will help narrow down which type of commercial properties are best suited for said individual.
Those looking to purchase commercial property as an income source can look into commercial mortgage-backed securities (CMBS). These investments are like corporate bonds, except they use commercial property as the underlying value of the security instead of corporations. Commercial mortgages are fixed rate and range anywhere from three months up to five years; however, commercial loans have a higher interest rate than residential mortgages. The further risk associated with purchasing CMBSs is that if a borrower defaults on their commercial loan, it does not mean that their commercial property will go back to the bank. This means commercial mortgage-backed security investors may not receive all of their principal and interest back, and may even lose money on the loan. Investors should know commercial mortgage securities make up a large market with many commercial properties within them, so commercial real estate buyers can expect to have a high risk for higher returns.
Commercial real estate can be a great way for investors to diversify their portfolio and offer stability during market turbulence; however, before making any commercial real estate investments, commercial real estate buyers should consult with commercial financing, commercial mortgage companies, commercial real estate brokers, commercial gold finance accounts, or commercial REITs to ensure that they are making the right choice for their unique financial situation.
Transacting commercial real estate, specifically warehouses, can be an overwhelming task. The Warehouse Hotline is here to help. The sale of a warehouse is as follows. First, call the warehouse hotline. We have brokers who specialize in industrial real estate who are ready to help you maximize your investment. When we find the right broker for you, you will meet your broker at the property to determine the market price of the warehouse. Once you and your broker have determined a market price for the property, your broker will deploy a full marketing package to gear your property up for sale. Once you and your broker have determined your listing date, you are off to the races. The Warehouse Hotline offers concierge sales services. What does this mean? We show up for showings! Too often brokers list and leave, offering a lockbox for potential buyers to come and go from your property as they wish. This is not how the Warehouse Hotline operates. We show up to the showing address and discuss all your future buyer’s potential questions and needs. We collect offers and discuss terms and conditions with you directly. Negotiating with potential buyers with your best interests in mind is what we do. Once we agree on terms, we go under contract, offering the buyer a due diligence period to learn the property and secure funds. The Warehouse Hotline is with you every step of the way until closing day.
There are commercial real estate brokers and there are residential real estate brokers, these jobs are not interchangeable. In a commercial setting, you will want to work with a commercial broker, not an agent.
Commercial property can be divided into two very broad categories: investment and or owner/user. An investment property is for a return. An owner/user’s property is to house one’s own business.
In addition to category and expertise, there is a third determining factor when choosing the right commercial broker or brokerage: geography. To find the best commercial broker, you’ll need to know where you want to buy commercial property and what type of commercial property you want to buy so you can match their geographical knowledge and skillset with your needs.
Are you a buyer or a tenant? The good news, your commercial broker is free of charge. Commercial brokers are paid for the sale of commercial property by the seller. Leasing commissions are paid for by the owner.
Commercial real estate involves property where the commercial activity takes place. Shopping malls, office complexes, and industrial parks are all examples of commercial real estate. For the right investor, commercial real estate often yields a better return on investment than residential.
In commercial real estate, investors can be divided into four groups:
- Commercial developers. Developers syndicate and build commercial real estate to resell or rent themselves.
- Commercial investors. Investors buy commercial real estate and rent it out to tenants and/or occupy the building themselves while using the space for their business.
- Professional managers who function as a go-between for tenants and commercial investors take care of all issues related to operating a business out of the property.
- Commercial brokers who represent commercial tenants in the commercial real estate market, take care of commercial leasing and act as a go-between for commercial investors and commercial users.
Commercial property investment is generally less liquid than residential property because some buyers are intimidated by the product type. Additionally, commercial real estate investments can have a higher barrier of entry. Commercial real estate investment yields tend to be higher than other commercial property investments because commercial real estate investors are taking on more risk by financing the entirety of the commercial project themselves. Commercial developers or builders then take some of their commercial project’s commercial profit as a commercial developer fee.
The most important commercial construction cost is commercial land cost, which can be extremely high in commercial real estate development. Other major commercial construction costs include commercial construction materials and commercial construction labor. Commercial developers or builders generally don’t need to make use of commercial financing, because they cover the full commercial cost of commercial development.
Commercial investors can finance the commercial property for commercial development by commercial construction financing, commercial loans, and commercial mortgages. Commercial lenders offer commercial real estate loans with fixed or variable commercial interest rates and amortization periods of up to 30 years. Commercial mortgage rates are generally not as low as residential mortgage rates, because commercial borrowers are commercial businesses.
Professional commercial developers or commercial builders generally finance commercial development with commercial developer fees, commercial equity, and commercial loans. Commercial developer fee is the revenue that a commercial developer earns for commercial building a commercial property. Commercial equity includes all possible forms of investment in a commercial project by investors other than the one who finances the full cost of commercial development in commercial developer fee. Commercial loans are commercial loans that commercial developers can take out to finance commercial development.
Commercial investors don’t typically need commercial real estate financing for their investment, but commercial mortgages might be an option when commercial investors want to purchase a commercial property for commercial leasing or commercial development.
The most important factors in commercial mortgage rates are commercial mortgage rates, commercial equity enhancement, and commercial loan to commercial value.
Commercial investors can keep commercial lease rates low if they want commercial tenants to be able to afford commercial rent payments by offering competitive commercial rental rates, which may require commercial incentive programs. Commercial incentives for commercial tenants include free or discounted commercial services like free/discounted commercial parking, commercial tenant improvement funds, or commercial referral fee refunds.
However, commercial incentives can be expensive commercial investments if commercial tenants don’t commit commercial occupancy to the commercial property. Many commercial leases, therefore, require that commercial tenants reimburse commercial investors for part of the commercial incentive amount through higher commercial rental rates after breaking a lease or not fulfilling another obligation in a commercial lease.
Commercial investors in commercial real estate can earn the highest commercial income if commercial tenants commit commercial occupancy and commercial retention rates stay high, which requires encouraging commercial turnover to maintain a competitive commercial rental rate.
The most important factors that affect commercial property investment yield are market conditions and commercial real estate location. The more demand for commercial real estate properties, the higher commercial rent, and commercial lease rates are. The commercial location has a strong influence on commercial property value and commercial rental rates.
If you own, occupy, or are looking to own or occupy commercial real estate space, you must understand how to value a property. Having an objective valuation of a property you are looking to pursue can help you determine how to approach the property. In addition, the valuation will provide an assessment of how well your property and product type are doing with other commercial properties in your area, how much equity you have built up, and how much potential profit you can expect from a future sale. If a bank is considering loaning you money or giving you a loan for your business, having an up-to-date valuation done will help the bank determine how much risk to take on when loaning your capital.
There are several different methods to value commercial real estate. When getting a commercial appraisal, four main variables are taken into consideration: income, expenses, market value, and local comparables.
NOI or net operating income is how much money the building or commercial unit produces in rent. A real estate valuation will also take into account how much the tenant pays in rent, the expenses, and the expense structure. Many commercial properties sell based on how much a tenant is paying in rent. The rental rate and purchase price of the property are calculated to understand the net operating income.
When the income from a commercial property exceeds its expenses over a set period, this is called positive cash flow. However, if the expenses exceed its income for that same amount of time, it’s known as negative cash flow. Usually, a real estate valuation will look at how much cash flow the commercial property produces over the last three to six months, how much is left in any reserve funds and how consistently that income has been coming in each month.
Local comparables are similar types of commercial properties that have sold in recent months. This information can be gleaned from the public records of how much any nearby commercial properties have sold for. The age, size, and how well-maintained property is will affect how it’s valued as well.
In addition to those three variables, another important aspect of a commercial real estate valuation involves how much your building or business space could be worth on the open market if it were to be sold today. Using an up-to-date list of how much other commercial properties have recently sold for in that particular area, a professional real estate agent or appraiser will calculate how much your building would likely sell for based on how many square feet of space you have and how valuable the same type of property is in that area.
Commercial real estate valuations can be done for a relatively low cost, often ranging from free to $5,000 depending on how much information is needed and how fast you need it. It’s advisable to get this type of commercial appraisal done by an experienced professional who knows how to find the most recent information about how much similar type properties have sold for. If you do not, you may receive an incorrect commercial valuation that could result in a poor outcome for your business and its future.
To determine whether or not commercial real estate is right for an investor, one should consider their goals with the property. Are they looking to collect rent? Do they want to flip it? Are they looking for income diversity outside of the stock market? This will help narrow down which type of commercial properties are best suited for said individual.
Those looking to purchase commercial property as an income source can look into commercial mortgage-backed securities (CMBS). These investments are similar to corporate bonds, except they use commercial property as the underlying value of the security instead of corporations. Commercial mortgages tend to be fixed-rate and range anywhere from three months up to five years; however, commercial loans generally have a higher interest rate than residential mortgages. The further risk associated with purchasing CMBSs is that if a borrower defaults on their commercial loan, it does not necessarily mean that their commercial property will go back to the bank. This means commercial mortgage-backed security investors may not receive all of their principal and interest back, and may even lose money on the loan. Investors should be aware that commercial mortgage securities make up a large market with many different commercial properties within them, so commercial real estate buyers can expect to have a high risk for higher returns.
Commercial real estate can be a great way for investors to diversify their portfolio and offer stability during market turbulence; however, before making any commercial real estate investments, commercial real estate buyers should consult with commercial financing, commercial mortgage companies, commercial real estate brokers, commercial gold finance accounts, or commercial REITs to ensure that they are making the right choice for their unique financial situation.
Transacting commercial real estate, specifically, warehouses can be an overwhelming task. The Warehouse Hotline is here to help. The sale of a warehouse is as follows. First, call the warehouse hotline. We have brokers who specialize in industrial real estate who are ready to help you maximize your investment. Once we find the right broker for you, you will meet your broker at the property to determine the market price of the warehouse. Once you and your broker have determined a market price for the property, your broker will deploy a full marketing package to gear your property up for sale. Once you and your broker have determined your listing date, you are off to the races. The Warehouse Hotline offers concierge sales services. What does this mean? We show up for showings! Too often brokers list and leave, offering a lockbox for potential buyers to come and go from your property as they wish. This is not how the Warehouse Hotline operates. We show up to showings to address and discuss all your future buyer’s potential questions and needs. We collect offers and discuss terms and conditions with you directly. We spearhead negotiations with potential buyers with your best interest in mind. Once we agree on terms, we go under contract, offering the buyer a due diligence period to learn the property and secure funds. The Warehouse Hotline is with you every step of the way until closing day.
