Finding a commercial property
Commercial Real Estate tends to be more challenging to real estate professionals, due to the numerous considerations that need to be taken into account. Commercial properties are valued in a different way from residential properties, and also come with bigger cash flows.
Amongst the things to take into consideration when evaluating a commercial property are:
Net Operating Income – calculated by subtracting the operating expenses for the first year from the property’s gross operating income for that same year.
Cap Rate - used to calculate the value of properties that generate income, such as commercial office buildings or shopping malls.
Cash on Cash – this metric is used to calculate the rate of return on the property based on the cash invested in it.
Apart from these metrics, a commercial real estate professional has to have a very in-depth knowledge of the local scenario. Every industry tends to have its main ‘hub’ within a city and country; for example, online gambling companies tend to seek for offices within the same district, whereas financial firms will be clustered in another area of town. Property prices will be higher in these areas, which is why it’s essential to build good relationships with property owners, to have a greater chance of landing a good deal!