Types of commercial properties: which is the best?
What types of commercial properties should you buy? You should consider the pros and cons of each type of property, as well as have a good understanding of your investment goals and experience. These factors will help you find your ideal commercial property.
The most common commercial property types are listed below.
Apartments/Multi-Family
Apartments or multi-family buildings are often the first choice for new business investors. The management and financing of apartments is very similar to residential, so new investors feel more comfortable with them. The main disadvantage of the apartments is that they require intensive management.
For an apartment to be considered commercial property, it must have 5 or more units. There are numerous subtypes of apartments:
When looking for properties to buy, pay close attention to the location and the general market for that area. You will want to avoid properties that are located in economically depressed or seasonal areas. In addition, the property must have acceptable aesthetic qualities to be competitive with market standards and have a minimum occupancy of at least 85%.
What if the property you are evaluating has inferior physical characteristics or is located in an economically depressed area?
You may have a higher interest rate, higher reserves, and tighter subscription restrictions.
mobile home parks
Mobile homes can be a wonderful investment, especially if you own the land and sell the mobile home. You are only renting land at the time! If you’re new to mobile home investing, you should read “Deals On Wheels: How to Buy, Sell, and Finance Used Mobile Homes for Big Profits and Cash Flow” by Lonnie Scruggs. This book is a gem! Lonnie explains how to buy and sell mobile homes in a note. His presentation is very basic and understandable.
Now back to mobile home parks. Mobile home parks are rated 1-star, 2-star, 3-star, 4-star, and 5-star. Star rating is based on park conditions and amenities.
Mobile home park must be at least 85% occupant and located in desirable areas. Also, be careful if the park has too many homes for sale (more than 20% of total homes) or if more than 20% of total homes are rented homes owned by the park.
Retail
Commercial properties are properties that are occupied by one or more tenants and the property is used for business purposes.
An independent retail shopping center with an anchor that holds is a well-known commercial retail business such as a national chain store or regional department store strategically located in a mall to generate the most customers for all stores located in the mall. Year Unanchored Mall It is a facility that is occupied by multiple tenants, none of whom is an anchor tenant.
Single Holder Investment Grade Commercial properties are properties that are net leased to an investment grade lessee (rated BBB- or higher).
Office
The different categories of offices include:
Potential office buildings must have a minimum 85% occupancy and be located on or near a major thoroughfare and easily accessible. Properties that have more than 20% of the total income from owner-occupied or owner-affiliated tenants will generally have a higher interest rate on any loan.
mixed use
These properties will be a combination of any of the above property types. A real estate development of mixed-use properties must be complementary to each other.
Health care
These types of properties are nursing homes, group care facilities, and assisted living. Properties must be close to shops and community services. Be wary of properties in economically depressed or seasonal areas. Also, make sure the property meets ADA requirements.
Hotel
Hotels are characterized by being full service or limited service.
Full-service hotels can be divided into luxury, upscale, mid-scale, and extended-stay hotels.
Limited-service hotels can be divided into mid-scale, economy, economy, and extended-stay hotels. When considering hotel properties, the property must have a stable operating history. A property with a history of four years or less must be examined. The minimum acceptable occupancy is usually 60%. Lenders also prefer franchise-affiliated hotels with franchise agreements that extend beyond the proposed loan term.
Industrial
These types of property will be used for industrial purposes only. as
Storage
Also called Mini-Storage, it is used for personal storage for lease by consumers.
Other Specialties
These types of properties are unique and financing them can be difficult. include
gas stations, oil change facilities, etc.