Commercial Real Estate For Sale Bradenton/Commercial Real Estate For Sale Florida/Commerical Property Bradenton/Commercial Property Florida

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Commercial real estate sales and leases are very different than residential sales and leasing, and they also differ from the sale of businesses, although not as drastically. Even though the methods of estimating value for businesses and commercial properties may have some similarities the methods of sale are usually quite different.

As a real estate professional the first step in assisting you to invest in commercial real estate is to determine what type of investor you are. Are you a 'user client', someone that will use the commercial space as a tenant? Or are you an 'investor client', someone that will be acquiring commercial real estate as a commodity for use as an investment?

If you are a user client we will research and study your business, your products and your customers in order to learn as much as possible about your products and the types of clients who use it. This research will allow us to be of the most help to you in your search for commercial space because the more we know about you, your business, your products and your customers the better equipped we are to find you commercial space which meets or exceeds your requirements.

If you are an investor client we will get to know you, get to know your motivations, your risk tolerances and your desired ROI. We will also determine which sector of the commercial real estate market best suits your risk tolerance and your desired ROI. Then we will intensely research the marketplace for you to locate suitable commercial real estate which meets or exceeds your needs.

Commercial Property Types

Commercial real estate investments are classified into four categories: Retail, Office, Industrial and Multi-Family. Before investing in commercial real estate it is necessary to have a fine understanding of these different types of commercial properties and how they require alternate methods of analysis and sales techniques.

Retail Properties are those properties which are utilized primarily to sell goods and services, such as strip malls, shopping centers and convenient stores.

Office Properties are those properties which are occupied by business or professional offices. These offices can occupy whole buildings or only floors or only part of a floor.

Industrial Properties are those properties which house manufacturing, production, distribution or warehousing operations.

Multi-Famly Properties are residential housing units consisting of between 4 and 60 rental units.

Buying & Selling Commercial Real Estate

When selling a business the confidentiality regarding the business being for sale, at least locally, is of prime importance. However, when selling commercial and income producing properties, the seller usually wants the whole world to know that the property is for sale, and wants the listing agent to shout it from rooftops!

Moreover, the terminology, language and mathematical equations used in the commercial marketplace are quite different from the mathematics, language and terminology used in the residential marketplace.

As an example, some of the terminology with which one needs to be familiar when dealing in commercial real estate are such phrases as; Capitalization Rate or Cap Rate; Gross Rent Multiplier or GRM and Net Operating Income or NOI. When dealing in residential real estate, conversely, these terms are neither heard nor used, there is simply no need.

Okay, so what is a cap rate?

A cap rate is the buyers’ annual rate of return, expressed as a percentage of his investment. But to arrive at a cap rate one must first know the commercial property’s NOI.

Hmm, then what is a NOI?

A NOI is basically how much profit the property is generating. This profit – this NOI - can be determined by subtracting the operating expenses from the effective gross income.

Once you have the NOI you can then divide the asking price – or potential investment - by the NOI. The number arrived at by this mathematic equation is the cap rate, or return on investment (ROI).

For example, if a buyer invested $100,000 in a commercial warehouse and his annual profit from rents (or NOI) was $10,000 his cap rate would be 10%; 100,000 / 10,000 = 10 or 10%.

Now, how about GRM?

The GRM is expressed as the ratio of gross rents to the asking price.

Asking Price (Market Value)/Annual Gross Income = Gross Rent Multiplier

Let’s say a commercial property sold for $1,000,000 and the annual rental income was $210,000. Then, it’s 1,000,000/210,000 = a GRM of 4.76

And the property that you are considering purchasing has a proven annual gross income of $115,000. You would simply take $115,000 x 4.76 = $547,619. So, according the GRM method, that particular commercial property is worth about $550,000.

The Gross Rent Multiplier may be a little quicker way to judge the merit of an asking price on an income producing property but it is subject to more variables than a Cap Rate computation. Generally speaking, the lower the GRM, the more profitable the commercial property.

Another valuable tool with which to determine market value for commercial property is to compare asking price per square foot with sales prices per square foot of comparable properties. It is particularly useful when comparing warehouse space, or warehouse space with attached office space.

For an investor to achieve an elevated rate of return on an investment - a higher cap rate - one of two things must happen: the sales price of the investment, in our case commercial real estate, must come down or the anticipated income must go up.

For instance, if a commercial property was being rented or leased for less than local market rates one could fairly assume that the NOI could be increased by simply raising the rents. And raising the rents does not directly add to expenses so your NOI would increase proportionally to the increase in rental revenue.

You can then easily adjust for factors such and age and condition of the structure, and as in all real estate, location, location, location. If you're considering buying or selling commercial real estate please contact us to set up a free consulation.