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Frequently Asked Questions

General Commercial Real Estate FAQ’s

1. What is commercial real estate?

Commercial real estate refers to properties used for business purposes, such as office buildings, retail centers, warehouses, industrial properties, and multifamily residential buildings (five or more units).

Unlike residential real estate, which is primarily used for personal living spaces, commercial properties are intended for business activities and investments, often generating rental income for property owners.

  • Office Buildings (Class A, B, C)
  • Retail Spaces (Strip malls, shopping centers)
  • Industrial & Warehouse Properties
  • Multifamily Apartments (5+ units)
  • Mixed-Use Properties
  • Vacant Land for Development

This depends on your business goals, financial situation, and long-term plans. Leasing provides flexibility, while purchasing can offer long-term investment value and potential appreciation.

  • Location & accessibility
  • Zoning regulations
  • Market demand
  • Property condition
  • Lease terms or budget

There are three primary lease types:

  • Gross Lease – The landlord covers most operating expenses.
  • Net Lease (NNN, NN, N) – The tenant pays some or all operating costs.
  • Modified Gross Lease – A hybrid of gross and net lease agreements.

In an NNN lease, tenants pay property taxes, insurance, and maintenance costs in addition to rent, making it a lower-risk investment for landlords.

Property value is typically determined by:

  • Income Approach (based on rental income)
  • Sales Comparison Approach (comparing similar properties)
  • Cost Approach (based on construction/replacement costs)

The cap rate is a metric used to evaluate the return on investment (ROI) of a commercial property. It is calculated as:

  • Cap Rate = Net Operating Income (NOI) ÷ Property Value
  • Value = Net Operating Income (NOI) ÷ Cap Rate
  • Net Operating Income (NOI) = Cap Rate x Property Value

A 1031 Exchange allows investors to defer capital gains taxes when selling a commercial property by reinvesting the proceeds into a similar property.

Common financing options include:

  • Traditional bank loans
  • SBA 504 or SBA 7(a) loans
  • Bridge loans
  • Private lenders or investors
  • Property taxes
  • Insurance
  • Maintenance & repairs
  • Utilities & operating costs
  • Management fees (if applicable)
  • Experience in your industry/market
  • Strong negotiation skills
  • Understanding of financial metrics
  • Proven track record of successful transactions

Depending on complexity, a purchase can take 60–180 days, while lease negotiations can be finalized within a few weeks to several months.

Zoning laws determine how properties can be used (e.g., commercial, residential, industrial). It’s essential to ensure your intended use aligns with local zoning regulations.

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