Florida Commercial Real Estate Investment – Basics
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Would You Rather Have 15 Million in Single Family Homes or 15 Million in Commercial Property?
That will be a lot of homes and tenants to take care of.On the other hand $15 million will buy only a very small number of commercial properties that will be comparatively easy to manage with much lesser overheads.Commercial properties include offices, industrial sheds, free standing retail shop, bulk retail, block of shops, medical centers, service stations, motels, hotels, back packers, health clubs, churches, funeral parlors, child care centers, car yards, convenience stores, shopping malls, to name just a few.
The income is also more stable because of the long leases.It is typical to have returns of around 10% net for a commercial real estate investment and any where from 7% to 9% net return for a prime property.
The value is also determined by the quality of the tenant and length of the lease.The value of a commercial property can drop substantially if it becomes vacant.
It is common to charge penalty interest on the out standing rent or lock the premises on continued default of rent.By far the biggest risk in commercial real estate investment is finding a new tenant in case of a vacancy.
|In commercial real estate the requirement of each tenant in terms of size, location, use and rent payment capacity is so different that it is very difficult to get the right tenant for the right property. For the reasons mentioned above it is also difficult to sell a commercial property investment.|