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).
2. How is commercial real estate different from residential real estate?
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.
3. What types of commercial properties are available?
- 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
4. Should I buy or lease a commercial property?
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.
5. What factors should I consider when choosing a commercial property?
- Location & accessibility
- Zoning regulations
- Market demand
- Property condition
- Lease terms or budget
6. How are commercial leases structured?
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.
7. What is a Triple Net Lease (NNN Lease)?
In an NNN lease, tenants pay property taxes, insurance, and maintenance costs in addition to rent, making it a lower-risk investment for landlords.
8. How do I determine the value of a commercial property?
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)
9. What is a Cap Rate (Capitalization Rate)?
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
10. What is a 1031 Exchange?
A 1031 Exchange allows investors to defer capital gains taxes when selling a commercial property by reinvesting the proceeds into a similar property.
11. How can I finance a commercial real estate purchase?
Common financing options include:
- Traditional bank loans
- SBA 504 or SBA 7(a) loans
- Bridge loans
- Private lenders or investors
12. What are common expenses associated with commercial properties?
- Property taxes
- Insurance
- Maintenance & repairs
- Utilities & operating costs
- Management fees (if applicable)
13. What should I look for in a commercial real estate broker?
- Experience in your industry/market
- Strong negotiation skills
- Understanding of financial metrics
- Proven track record of successful transactions
14. How long do commercial real estate transactions take?
Depending on complexity, a purchase can take 60–180 days, while lease negotiations can be finalized within a few weeks to several months.
15. What is zoning, and why does it matter?
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.
For The Best Commercial, industrial, and Land Real Estate Services
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EXPERIENCE
35 years in the semiconductor industry, 20 years in real estate.
NEGOTATIONS
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