Commercial Real Estate
Transcript: Marzucco Real Estate Commercial Real Estate MLS 1 Loopnet.com 2 Where? Where do I find Commercial Listings? Signage 3 Off Market or Developer 4 Approved Usage/Land Development & Zoning Code Approved Usage Land Code Development Zoning Code Municipal Code Library (County Website) Types of Use Different Types Of Commercial RE - Restaurant/Retail - Office - Retail - Medical - Industrial - Shopping Centers/Strip Malls - Multi-Family/Residential Developments -Vacant Land Commercial Sales Commercial Sales 1. It’s Dynamic and Market-Driven Like all other industries, market factors also drive commercial real estate. Before making any important decisions, consider the supply and demand, the key return metrics, and overall industry performance to reduce your risk. 2. You Have Multiple Investment Options Whether a business owner or an investor, you have the option to choose from 3 different types of properties, depending on your affordability or portfolio preference. 3. Local Market Trends are Important While you need to look at the overall market trends for the commercial real estate industry before investing, you also need to consider the local trends in the area. The demand, supply, and preferences for each region are likely to be different and need to be considered to increase profitability. 4. You Can be an Active or Passive Investor As a commercial real estate investor, you can choose to be active or passive. As an active investor, you will be responsible for property maintenance, repairs, and tenants. As a passive investor, you can simply hire an expert who will manage the property for you and make the process easier for you. Investment vs. Owner/User There are essentially two categories all commercial real estate owners fall into: investors or users. Investors purchase the property and then lease it out to tenants to generate income, while owner/users utilize the building, or a space within the building, for their own business purposes. Owner_Occupied owner also known as owner-user commercial real estate – is key to understanding lending options to finance a new property for a business. The financial upsides of owning versus renting are many. An owner will build equity with every mortgage payment and asset appreciation increases value in the property over time. Capitalization Rate (Cap Rate) vs Return On Investment (ROI) Capitalization Rate (Cap Rate) vs Return On Investment (ROI) - Cap Rate = Net Operating Income / Property Value Example: $12,000 NOI / $150,000 Price = 0.08 or 8% Cap Rate - ROI = Annual Return / Total Investment Example: $15,000 Annual Return / $100,000= .15 or 15% ROI Commercial Leases Commercial Leases ● Lease Terms (can range anywhere from 1-30 years) ● Price Per SF/Year ● Gross vs Triple Net ● Common Area Maintenance (CAM) ● Annual Increases (%) in longer term lease Additional Info To Know ● Contract/Lease Agreement vs Letter Of Intent (LOI) ● Due Diligence Periods ● Financing Options
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