Commercial Real Estate Investing 101

Commercial real estate investing can be a great way to increase your income streams and build wealth. In Tampa Bay, investing in commercial real estate is highly viable and accessible with many opportunities in the urban centers or sprawling suburbs. Commercial real estate is a property that can be leased out to businesses or retail where investors can collect rent from businesses that occupy the space. Once you have figured out that the income-producing potential of a commercial real estate property might be lucrative, a commercial real estate agent can help you find the right property. Commercial real estate investments earn money through income and also through appreciation of the property over time. Here are the main types of commercial real estate available for investment:

 

Office/Retail/Special Purpose

Office space, retail space, and special purpose can be suburban or urban locations that bring revenue through lease. 

 

Industrial

Warehouse spaces that can house manufacturing companies, storage, assembly or even art fabrication. 

 

Multi-family

Multi-family covers apartment buildings, townhomes, condominiums and co-ops and can range in vertical size from one-story to high-rise levels.

 

When looking at properties, keep an eye open for potential repairs, land damage, and areas of risk to determine if you have a worthy investment. More than likely, you are looking at not just property appreciation but also rentability.

 

Key terms to know (Investopedia)

 

Capitalization Rate: Calculating this number (a process also known as capitalization of earnings) is used to estimate the net present value of future profits or cash flow. Apartment buildings, commercial business offices, and small strip malls are all great candidates for determining this value.

 

Net Operating Income: To find this number (which should be positive), subtract your first year’s operating expenses from your first year’s gross operating income.

 

Cash on Cash: This formula is used to compare the first-year performance of competing properties. If you are an investor who relies on financing to purchase your commercial real estate property, know that you will not get to keep your entire net operating income (NOI) because you will have to spend some of that money-making mortgage payments. This is important to keep in mind when calculating whether or not your property will be profitable.

 

Contact a Smith concierge now to help you invest.

 

Posted on November 14, 2019 at 9:51 am
Aimee Albright | Category: Company News

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