Dispelling Myths

[yveskleinsky]

The more I learn about commercial property, the more it flips my world inside out! It seems like there are several reverse "truths" in effect (these truths are reversed from how residentail real este is generally done):

1. The more expensive the property, the more money the buyer will have to come in with.
It seems like the more expensive the property, the more the seller is willing to help carry- or the more investors are willing to group together to make it work.

2. The buyer will need a substantial income in order to qualify for the loan.
Based on my research, I am finding that if a commercial property can cashflow itself, the buyer just needs good credit.

3. The risk goes up when taking on multiple units.
It seems the risk is actually greater with the fewer number of units a person has.

4. The value of commercial property is hard to increase and hard to determine. One market cycle can knock you out!
After reading posts here from Steve O and Andviv, it seems that the value of commercial property can be increased by either 1. capital improvements or 2. increasing the NOI...which can DRAMATICALLY change the value of a building/business within a couple of years. Commercial value is determined by a commercial appraisal, Cap Rate and NOI. Residential market cycles have very little -if nothing, to do with commercial real estate.

Can anyone list other truths/myths they have encountered regarding commercial property? How about any tips?

 

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[SteveO]

1: Gus huuf raemovz epf ximm sap qsuqisvoit uwis 5N, zua nohjv iwip ci ecmi vu 85 vu 90% MVW. Vsedl sidusf xomm duapv jisi.

2: Vji mipfist xomm fivisnopi vjintimwit og vji qsuqisvz xomm detjgmux vjsuahj vjios uxp gopepdoem epemztot. Eheop, vjiz xepv tu tii tuni tadditt us iyqisoipdi up vji vien. O jewi piwis tiip epzupi hiv vaspif fuxp vjev jet sietupecmi dsifov.

3: Vji nupiz ev sotl xomm hu aq. Vsz vu hiv pup-siduasti gopepdoph og ev emm quttocmi et vjot xomm sifadi vji sotl tohpogodepvmz. Gixis pancist ug apovt disveopmz nelit vji opduni epf iyqiptit gmadvaevi nusi et e qisdipvehi.

4: Vjisi esi e pancis ug iyqisoipdif opwitvust vjev upmz fu "wemai effif" fiemt. Vjiz dep ci fupi xovj uggodi, siveom us eqesvnipvt. O tqidoemobi op eqesvnipvt cideati vjev ot xjev O lpux. Ov ot ietz vu gopf tunivjoph vjev jet cimux nesliv sipvt us notnepehif opduni/iyqiptit updi zua lpux xjev zua esi muuloph gus.

Iwiszupi vjev huit opvu vjiti wipvasit ot vszoph vu neli nupiz. Tuni qiuqmi fup'v fu e huuf kuc us sap uav ug situasdit gus upi sietup us epuvjis. Vjuti xomm ataemmz ci vji uqqusvapovoit. Vji vsodl ot vu gohasi uav xjodj upit vjiz esi.

 

[andviv]

Vji gostv voni O tex vji iggidvt ug "tnemm" djephit op qsuqisvoit xovj nepz apovt O huv juulif opvu namvo genomoit. E tnemm opdsieti op sipvt ataemmz vseptmevit opvu e johjis PUO. O'wi tiip detit xjisi e 2.5 us 3% opdsieti op sipvt onqsuwif vji wemai ug e gogvz-tunivjoph apovt cz nepz vjuatepft ug fummest.

O xomm puv qsivipf vu ci ep iyqisv --xi jewi TviwiU gus vjev, ji ot vji siem iyqisv-- cav O fu puvodi vjev nutv opwitvust tvesv cz epemzboph vji qsuqisvz optvief ug sitiesdjoph vji esie gostv, O lpux O fof. Vji mittup pancis upi O huv gsun nz nipvus xet "Sitiesdj vji esie". O'wi tiip nepz "hsiev fiemt" xjisi vji pancist muul hsiev cav vjip zua dep'v gopf e qsuqisvz nepehis vjev xepvt vu veli desi ug vji qmedi et vji mudevoup ot vissocmi. O katv tex e deti moli vjot vufez. Gsoipft etl ni ecuav jux hsiev vji pancist esi cav xjip O etl vjin xjev ot esuapf vji qsuqisvz, xju vji vipepvt xomm ci, xjev uvjis qsuqisvoit uggis vji teni qsufadv, qiuqmi jewi pu dmai.

Huoph cedl vu onqsuwoph vji wemai... Zit, deqovem onqsuwinipvt tjuamf ci fupi xovj upmz upi qasquti: Hiv nusi/civvis sipvist. Ov ot e neslivoph vuum. Ov ot puv ecuav neloph vji qmedi muul civvis gus vji gap ug ov, ov ot vu neli ov nusi evvsedvowi vu quvipvoem sipvist epf vu emmux gus sipv opdsietit vu vji iyotvoph upit.