Breakfast For Astute Investors: Commercial Real Estate, Investment Property, Income Property, Cash Flow, Appreciation of Investment

May 10, 2015

After all said and done, article after article in major financial publications, we have repeatedly stated that commercial real estate which includes investment and income property is a key strategy that astute wealthy worldwide billionaires practice yearly.

Steady income that increases over time with cap rates that seem to get lower in key cities and states that are popular with both business and growth of population. This appreciation comes along with these traits, no wonder investment property and income property remains so important to wealthy investors.

Price per square foot of the asset itself along with rent per square foot of the tenants leasing the units are crucial to the price paid. If a building costs as an example 200 dollars a sq ft to build and an investor pays 500 dollars a square foot based on a exceptional high rent for the tenant or tenants in the building.

What You Need To Be Carefull Of About Investment Or Income Property

Any future problem with the economic climate or the tenant’s ability to pay or remain in the building will cause a DISASTER in the cash flow of the investment or income property. Thus be very careful when choosing the tenant and cost of the buildings replacement costs.

The right location including city, state, neighborhood and even position on the street matters with appreciation and cash flow values. Example buying in the middle of the block may decrease value for rental income instead of the corner location.

Don’t simply rely on the tenant themselves for paying high rent, for there is no guarantee they will stay in your location or even survive bad economies. A generic building helps to prevent special use structures like a Starbucks that sign 10 year leases with options so if they don’t perform well you the owner have a real mess on your hands.

Next to impossible to re-rent that type of structure without spending considerable funds to change it for the next tenant who most likely won’t pay the same high rent and their credit may not be as good as well.

Leases that are not true triple net, where tenants pay all expenses and should have increases in their rent, are troublesome. Owners should look for leases that are at least 15 years or more in length to keep potential resale value high. Less than 10 years is a major concern.


Looking To Buy Commercial Property?

Find out why triple-net lease real estate investments should be part of your investment portfolio.