Commercial vs Residential Real Estate: Which is Better?

When evaluating investment opportunities, it is important to understand the difference between commercial and residential real estate. They are both vastly different beasts with their own unique sets of pros and cons.

The main difference between commercial and residential real estate is that commercial real estate is used for business purposes, while residential real estate is used for living purposes. That means that commercial properties are typically larger and more expensive than residential properties, but they also have the potential to generate higher returns. Commercial real estate is also riskier than residential real estate, so it’s essential to do your due diligence before investing.

So, which is better? It all depends on your individual goals and needs as an investor. Here’s a look at the key differences between commercial and residential real estate to help you make an informed decision.

What is Commercial Real Estate?

Commercial real estate is any property zoned and used for commercial purposes. This can include office buildings, retail space, warehouses, factories, and more. Commercial real estate is integral to any city or town as it provides space for businesses to operate.

Different types of commercial property

There are four main types of commercial property: office, retail, industrial, and mixed-use:

• Office properties typically host business operations, including small single-story buildings to large skyscrapers.
• Retail properties are designed for businesses that sell goods or services to the public, such as stores, restaurants, and malls.
• Industrial properties are usually large warehouses or factories where goods are manufactured or stored.
• Mixed-use properties are a combination of two or more of the other types of commercial property and are often found in busy urban areas.

Is it worth buying commercial property?

The estimated value of the commercial real estate in the U.S. is $20.7 trillion, including large apartment buildings and special-use properties like hospitality and self-storage. Regarding real estate investment, commercial properties offer a range of advantages over their residential counterparts.

Firstly, commercial tenants tend to stay longer, leading to a steadier income stream. Commercial properties also often have higher rent rates, providing the potential for greater returns on investment. In addition, commercial leases often include clauses that require the tenant to cover certain expenses, reducing the financial burden on the owner. Examples include property taxes, improvements, and building maintenance.

What are the disadvantages of commercial real estate?

While commercial real estate can bring in steady income through rent or leases, it also carries a higher risk than residential properties. One drawback is the longer timeline for finding tenants or customers and negotiating contracts, resulting in potentially longer periods without income.

In addition, commercial properties often require more maintenance and upkeep, including major repairs such as roof or HVAC replacements. Another potential issue is the higher cost of financing, as commercial loans generally have stricter requirements and shorter repayment terms. Overall, careful research and analysis are necessary to weigh the potential risks and benefits before deciding.

What is Residential Real Estate?

Residential real estate is the property for living purposes, including new construction and resale homes. It covers many property types, from single-family homes to multifamily dwellings like apartments and condos.

Different types of residential property

There are many different types of residential real estate, including single-family homes, townhouses, condominiums, and cooperative apartments:

• Single-family homes are the most common type of residential real estate in the United States. These homes are typically detached from other residences and have a yard or garden area.
• Townhouses are another type of residential real estate. They are attached to other residences but usually have their entrance.
• Condominiums are another type of residential real estate. They are similar to apartments, but each unit is owned by an individual rather than rented from a landlord.
• Cooperative apartments are residential real estate where the residents own and operate the property together.

Other types of residential real estate include multifamily homes (such as duplexes and triplexes), mobile homes, and manufactured homes. Multifamily homes are usually investment properties, while mobile and manufactured homes offer a more affordable option for those who want to own their own home.

Is it worth buying residential property?

Many people view commercial real estate as the more profitable investment, but residential property also presents its unique benefits compared to commercial. One significant advantage is the consistency of demand. Commercial properties can experience fluctuations in rental income due to changes in the industry or the economy. Conversely, residential rents tend to remain steady as there will always be a need for housing.

Additionally, rental rates for residential properties have a strong potential for growth over time. This can provide investors with a steady income stream and the potential for value appreciation if they choose to sell. And, unlike commercial leases, which often have long terms and strict landlord responsibilities, residential leases are typically shorter and less demanding.

What is the Difference Between Commercial vs. Residential Real Estate?

Commercial real estate vs. residential real estate investing

Here’s a more detailed look at the key differences between these two real estate types.

Location

Location is one of the most important factors when choosing between commercial and residential real estate. Commercial properties are usually located in business districts or nearby businesses, whereas residential properties are typically situated in neighborhoods or subdivisions. The location of a property can impact its value, so it’s essential to choose wisely.

Renters/Tenants

Another key difference between commercial and residential real estate is who rents/lives in the property. In commercial real estate, businesses are the typical tenants, while in residential real estate, individuals or families are the usual occupants. The type of tenant can affect the stability of income, as well as the amount of maintenance required.

Size/Scale

Commercial real estate properties are often much larger than residential ones since businesses need more space than home residents. This means that commercial properties typically require more capital to buy and more manpower to maintain. However, it also means that there’s potential for higher returns on investment (ROI).

Financing Options

When it comes to financing, commercial and residential real estate each have their unique options. For instance, with commercial real estate, you may get an SBA loan, which the Small Business Administration backs. With residential real estate, you can take out a home equity loan if you own your home outright or have significant equity built up. You could use these funds as a down payment for a rental property.

Is commercial real estate better than residential?

So, which is better—commercial or residential real estate? The answer depends on your goals as an investor. Residential real estate is probably your best bet if you’re looking for stability and modest returns. However, if you’re willing to take on a bit more risk in exchange for potentially greater rewards, commercial real estate could be the way to go.

Whatever you choose, make sure you do your homework first to know what you’re getting into.

The Bottom Line

Choosing between commercial and residential real estate is a big decision that should not be made lightly. There are many factors to consider, such as location, type of tenant, size/scale, and financing options. In addition, the type of investment you choose will depend on various factors, including your investment goals, budget, and experience level. By understanding the critical differences between the two, you’ll be better positioned to make the right decision.

 

Source: Commercial vs Residential Real Estate: Which is Better? | Crexi Insights

https://www.creconsult.net/market-trends/commercial-vs-residential-real-estate-which-is-better/

The Most Common Types of Commercial Real Estate Loans

Commercial real estate loans are for purchasing a property such as an office space, retail space, or apartment building to lease out to tenants. In most cases, you can take out a real estate loan of up to $5.5 million, with interest rates beginning around 5%. Repayment terms can vary but can usually extend up to 25 years.

It is essential to know that loan-to-value (LTV) ratios of property loans are generally 65%-75%, which means the down payment will be at least 25% of the purchase price. Read on for a breakdown of the most used CRE loans and what to remember when seeking commercial real estate lending.

Benefits of Commercial Real Estate Financing

There are several benefits to taking out a commercial real estate loan. The most crucial advantage is establishing ownership of the property with a small down payment, with the ability to collect rental income and build equity over the long term.

You often have lower interest rates and fixed monthly payments to help you plan for upcoming expenses. You can pay for your commercial mortgage over the years, which helps you focus on essential business details without stress.

Benefits of Using OPM

Investing with OPM or other people’s money can unlock several benefits. Investing with other people’s money allows you to make more without spending all of your own money.

Earning a return on investment, or an ROI, is the ultimate goal when investing in commercial real estate. Using OPM finance can drastically increase your cash return on investment.

What is Leverage?

Leverage is when you use borrowed capital to increase your real estate investment return. While leverage can provide excellent returns, it can also lead to loss if the real estate industry enters a downward cycle. Staying abreast of macro and local commercial real estate trends can keep you aware of what the future may bring.

What are the Common Types of Commercial Real Estate Loans?

There are several types of commercial real estate loans you can apply for. The most common ones include SBA, permanent, hard money, blanket, and bridge loans.

SBA Loans

The SBA (United States Small business Administration) provides two types of business loans for commercial real estate financing: SBA 7(a) and SBA 504.

Before applying for an SBA loan, you will need to make sure you have the following:

Business Plan	Good Credit	Know the Amount You Need	Collateral
You must provide your lender with a business plan when applying. The SBA’s website has a free business plan guide.	Lenders will look at your credit history to determine your credit risk and interest rates.	You need to know how much money you will need and how an SBA loan will benefit your company. You will also need to show how you will use the funds and how you will pay for the loan.	Often, you will need to provide your home or other types of collateral to take out a loan.

SBA 7(a)

The SBA 7(A) is the most popular out of the two different SBA loans due to its flexibility. It is usually for longer-term business financing.

The maximum amount you can take out for an SBA loan is usually $5 million. There is also an SBA Express loan with a maximum of $350,000, and SBA Export Express loans have a maximum of $500,000. The maximum maturity for SBA loans for real estate is 25 years.

The borrower and lender negotiate the interest rates, though they need to consider the SBA maximums. According to the SBA website, the chart below shows mortgage rates for variable-rate loans:

Loan Amount	Max rate if maturity is less than 7 years	Max rate if maturity is more than 7 years
$25,000 or less	Base rate plus 4.25%	Base rate plus 4.75%
$25,000 to $50,000	Base rate plus 3.25%	Base rate plus 3.75%
$50,000 or more	Base rate plus 2.25%	Base rate plus 2.75%

SBA 504

504 loans provide fixed-rate financing of up to $5 million for significant fixed assets where businesses can grow and create jobs. An example of these fixed assets would be existing land or buildings.

You can get a 504 loan through Certified Development Companies known as CDCs. Certified Development Companies are community-based partners regulated by the SBA and promote economic growth inside their communities.

When applying for an SBA 504, you must show proof that you have management experience, provide a business plan, and qualify as a small business before getting credit approval.

Permanent

Despite its name, a permanent loan is not unlimited, but it does have an unusually long term. Real estate developers secure permanent loans once a construction project is finished and investors purchase an existing commercial property for sale. These loans take the place of a construction loan and generally have loan terms of between 5-10 years, with amortization rates of between 20-30 years.

Hard Money

Hard money loans are issued by private companies and individuals instead of by traditional lenders such as banks. This short-term loan is popular with real estate investors who don’t plan on holding onto the property for a long period. Hard money loans typically last between three and 36 months.

Blanket

A blanket loan is used mostly by builders and developers to purchase multiple real estate pieces.

What separates a blanket mortgage from a traditional mortgage is the release clause. The client can sell a property and release their liability for that part of the mortgage. This allows the person to sell the property without repaying the loan in full or having to refinance each time they sell.

Bridge

Bridge loans are a short-term financing option often used to cover the gap between a development loan and permanent financing can be secured. These short-term loans usually last between six to twelve months and have higher interest rates than traditional loans, usually ranging between 8.5% and 10.5%.

Business Line of Credit

A business line of credit is a less common loan to cover short-term costs. These loans do not provide the borrower with a lump sum, so you only pay interest on what you withdraw.

Business lines range anywhere from a couple of months to 10 years, with interest rates starting at 7%. The downside is that it can be hard to get a business line of credit with a bank, and online lenders can have interest rates ranging from 8% to 80%. Due to the low availability and high-interest rates, a business line of credit should be for highly short-term needs such as emergency expenses or buying inventory.

Where Can You Find Commercial Real Estate Loans?

There are several options to choose from when it comes to finding investment property loans. It is essential to thoroughly research your choices and compare commercial loan rates from different lenders.

Commercial Lenders

Commercial lenders offer a handy choice for those who need a real estate loan quickly for their small or medium-sized company. Commercial lenders typically have lower fees and closing costs, but their interest rates are usually higher than loans from banks. Also, most loans from commercial lenders are short-term, so this might not be for you if you are looking for a long-term loan.

Banks

Banks provide commercial loans for different kinds of properties, including long-term financing. The standard loan amount for a bank loan is usually $1 million, and your bank may provide a discount if you are already a customer.

When taking out a commercial real estate loan with a bank, expect it to be fairly slow. You will need to provide ample documentation, and the bank will approve or decline your loan based on your credit. If your credit score is less than 620, this might not be a good option.

SBA Lenders

Traditional banks can often provide an SBA loan, or you can go through an online lender that offers these types of loans. SmartBiz is a great option. However, the SBA website has a valuable lender match tool to help you find a local SBA lender.

The Bottom Line

Investing in commercial real estate property can be a rewarding and enjoyable experience when you are adequately prepared. Before you get involved with purchasing any property, you need to figure out how you will pay for your investment. Before deciding, weigh your options and compare interest rates, costs, requirements, and more with each bank or lender.

 

 

Source: The Most Common Types of Commercial Real Estate Loans | Crexi Insights

https://www.creconsult.net/market-trends/the-most-common-types-of-commercial-real-estate-loans/

The Basics of Commercial Real Estate Property Types

Commercial real estate is the US's third most valuable asset class, right behind stocks and bonds. With an estimated market value of about $17 trillion, it’s understandable why many investors are adding commercial real estate to their investment portfolios.

Let’s take a quick look at commercial real estate basics, including commercial real estate types and asset classes, and the best opportunities for commercial real estate investing this year.

What Makes Real Estate Commercial?

Commercial real estate (CRE) is used for business or investment purposes and is usually rented to tenants to generate income. CRE is a massive asset class and includes everything from single storefronts and apartment buildings for sale to large multi-tenant office buildings and industrial distribution centers.

Multiple income streams are among the most significant advantages of investing in a multi-tenant commercial real estate building. That means the property still generates cash flow if one unit goes vacant.

Commercial real estate prices are generally higher than a residential rental property, so there is less competition from other investors. CRE investments can also be more management-intensive, with larger commercial properties usually having an on-site property manager and leasing office.

Commercial Real Estate Classes

Commercial real estate is categorized into one of three groups or classes:

• Class A property is newer buildings with the best amenities and highest rents in the best locations.
• Class B property is older with average amenities at at-market rents, often attractive to value-add investors for renovation or repositioning.
• Class C property is the oldest, with minimal amenities and below-market rents, usually with obsolete floorplans and in need of significant maintenance.

It’s important to note that CRE property classes are market-specific. For example, a Class A office building in Tulsa might be considered a Class C property in a more urbanized market like San Francisco.

Main Types of Commercial Real Estate

Commercial real estate properties are generally placed into one of five main types, according to the 2021 US Real Estate Market Outlook from CBRE and the Appraisal Institute’s Property Use Classification System.4,5

Office

• Central Business District (CBD)
• Suburban Office Business Park
• Creative/Loft
• Medical
• General Purpose
• Research and Development

According to CBRE, suburban office markets are forecast to grow faster than office buildings in a central business district (CBD). Business-friendly office markets such as Raleigh-Durham, Nashville, Tampa, Phoenix, and Dallas-Fort Worth should perform best for investors and tenants looking to rent office space in 2021.

Industrial

• Industrial Business Park
• Warehouse – distribution, refrigerated/cold storage, lumber yard, general-purpose
• Flex Industrial Space – reconfigurable with up to 85% office space
• Manufacturing – light, heavy, high tech
• Processing – food, minerals, refinery, solid wastes
• Research and Development
• Communication and Data Center

E-commerce will continue to drive the demand for industrial space, according to CBRE. Commercial real estate investors can expect more retail-to-industrial conversions as industrial occupiers search for last-mile delivery solutions.

Industrial markets to watch include Phoenix, Las Vegas, Salt Lake City, Texas, and Southeastern CRE markets such as Atlanta, Charleston, and Central Florida.

Retail

• Automotive
• Day Care Facility
• Laundromat
• Restaurant and Bar
• General Storefront/Street Retail
• Convenience Store
• Strip center
• Neighborhood Center
• Community Shopping Center
• Regional Center
• Super-Regional Center/Mall
• Specialty Retail Center

Retail store closures will likely continue this year, creating opportunistic investment opportunities in many retail markets. Adaptive reuse and conversion of Class B and C malls into higher and better uses will keep accelerating.

CBRE lists Phoenix, Austin, Denver, Charlotte, and St. Louis as some of the best retail markets to watch for commercial real estate investment.

Multifamily

• Multiple Units – buildings with more than four units, including garden, mid-rise, and high-rise apartments
• Student Housing – dormitory, fraternity/sorority, and both on-campus and off-campus housing
• Senior Living – independent and assisted living, retirement community, skilled nursing facility
• Group Housing – for people with disabilities or criminal backgrounds to reintegrate into society.

Multifamily vacancy rates should remain relatively low in 2021, with rents rising in many markets as more households rent rather than own. Affordable Class B and C workforce housing will remain in short supply.

Suburban multifamily assets in the Midwest and Southeast regions were recommended as the best multifamily investment opportunities by CBRE. Particularly promising cities include Indianapolis, Memphis, Cleveland, Kansas City, and Louisville.

Hotels

• All Suites
• Bed and Breakfast
• Casino Hotel
• Convention Hotel
• Economy Hotel/Motel
• Extended Stay
• Full Service
• Limited Service
• Luxury
• Resort and Spa

Normal hotel occupancy levels are not expected to return until 2023, with higher chain hotels suffering the most due to their dependency on business and group travel. Hotels and lodging facilities in drive-to destinations are predicted to recover the fastest by CBRE. Rural and interstate hotels and lodging facilities in small metros and rural areas in drive-to destinations may offer the best opportunities for investing in hotels.

Alternative Commercial Real Estate Types

With an asset class as large and varied as commercial real estate, some CRE properties are difficult to categorize into one of these five main types. Alternative commercial real estate properties have distinct, specialized uses or a combination of the aforementioned ones.

• Mixed-Use properties combine two or more uses, such as retail and office space on the first level, with multifamily units on the upper floors.
• Unique Purpose properties have a niche or purpose-built use and include parking lots and garages, self-storage facilities, sports stadiums, theaters, amusement parks, churches, and government buildings.
• Data Centers are colocation facilities leased to large cloud service providers and content providers. They have rapidly developed into a new subclass of alternative commercial real estate and are ideal for CRE investors looking for high-quality assets leased to long-term credit tenants.

Where to Find Commercial Real Estate Listings

Some commercial real estate property types will grow faster than others, although each type offers CRE investors unique opportunities. High-rise urban offices may be impacted more by employees working from home, while suburban office buildings closer to home better fit the hub-and-spoke model.

Retail property in markets such as Las Vegas is performing well, while other retail types offer investors the opportunity for repositioning to use better. The same is true of hotels, with hospitality and lodging properties in drive-to locations providing the best investment opportunities.

In most markets, industrial and multifamily commercial real estate performed exceptionally well and will likely continue to do so even during an uncertain economy.

 

Source: The Basics of Commercial Real Estate Property Types | Crexi Insights

https://www.creconsult.net/market-trends/the-basics-of-commercial-real-estate-property-types/

Should I Sell or Should I Hold? When is the best time for asset repositioning?

When it comes to selling their investment properties, clients typically ask me,’ Why should I sell?’ Great question. Why should you sell? The obvious answer is that you purchased the investment property as an investment, and it may not be doing as well as other investment opportunities, and after a while, you don’t realize the appreciation and thus maximization of profit from the property until you sell and acquire another investment property. So the question is really, ‘When should I sell? Clients really lose the perspective of the driving reason why they invested in an investment property in the first place. An investment property is just that; an investment. Treated as such, every investment must have a horizon and an exit strategy. If a property was purchased as an investment, then it makes full sense to profit as much as possible from the investment.

The real estate market, like any other market, will go through peaks and valleys. Trying to predict the exact moment of peak or the exact moment the market reaches the bottom is practically impossible. The real estate cycle has four phases; recovery, expansion, hyper supply, and recession. The complete real estate market cycle seems to have an average duration of about 18 years as there is good historical data to support that. So, where are we in that cycle now? How much more upside will we see before we reach the peak? The question really is, ‘What is your appetite for risk?’

Below is a chart of the real estate cycles dating back from the 1800s. The last real estate market crash started at 2006. We are almost 16 years into that cycle. Interest rates are still at all-time lows. Money is cheap, and the threat of inflation is very high. How long can government print money without paying the price down the road? How much road do we have left?

So when is a good time to exit an investment property? As with everything else, real estate is cyclical. Those of us that have been around for some time have witnessed several cycles in the real estate market. Since it is practically impossible to predict the peak of cycles, what strategy should you then use to maximize your investments? Keeping it simple, when evaluating if you should consider selling an investment property, it doesn’t really matter what the current real estate market is like. If you are looking to replace the investment property with another investment property, the ultimate decision to sell should also be based upon if you can increase your returns with the new replacement property, not what state the current market is in now.

There are a number of factors that can impact real estate prices; availability, investment potential, and interest rates, to name a few. Interest rates impact the price and demand of real estate—lower rates bring in more buyers due to the lower cost of money but also expand the demand for real estate, which can then drive up prices. As interests rate starts to inch up, the cost of money increases, and thus the appetite for real estate investments declines.

However, there are many ways that one can still protect their investments. 1031 Exchanges give investors a vehicle to reposition assets and mitigate risk. There are certain asset classes that inherently hold less risk and still perform as an investment vehicle. The questions really come down to; ‘How long do I hold on during this cycle? Do I have the time horizon to outlast another cycle? Is it time to reposition and take advantage of 1031?

As part of the team for our client’s investments, we specialize in building solutions around our client’s needs. We analyze the requirements, crunch the data, and present assets entirely based on their circumstances and the goals they are trying to achieve with their investment.

Have you thought of selling your property and would like to know what it’s worth? Request a valuation for your property below:

Request Valuation

 

Source: Should I Sell or Should I Hold? When is the best time for asset repositioning?

https://www.creconsult.net/market-trends/should-i-sell-or-should-i-hold-when-is-the-best-time-for-asset-repositioning/

1120 E Ogden

Retail / Office Space For Lease | 3,674 SF | $20/SF NNN
1120 E Ogden Ave, Suite 101 | Naperville, IL 60563
Broker: Randolph Taylor rtaylor@creconsult.net | 630.474.6441

https://www.creconsult.net/retail-office-for-lease-1120-e-ogden-ave-suite-101-naperville-il-60563/?wpo_all_pages_cache_purged=1

9301 Golf

Golf Sumac Medical Offices For Lease | 998 - 2,853 SF | $28/SF MG
9301 West Golf Rd | Des Plaines, IL 60016
Broker: Randolph Taylor rtaylor@creconsult.net | 630.474.6441
https://www.creconsult.net/golf-sumac-professional-building-medical-office-space-for-lease-9301-golf-rd-des-plaines-il-60016/

The Basics of a Commercial Building Sale

Commercial property sales generated over $400 billion in transaction volume in 2020, with apartment buildings for sale and office properties leading the charge. However, one of the biggest challenges that commercial building owners face is understanding when and how to sell.

This article explores some of the primary exit strategies commercial property sellers use to market a commercial building.

When is the Right Time to Sell?

Sophisticated commercial real estate investors always have an exit strategy to help maximize profits by selling when the time is right. There are three main exit strategies to consider when selling commercial real estate:

Loan Maturity

Commercial real estate loans have a 25-year amortization with a 5- or 10-year term. Even though monthly loan payments are amortized over 25 years, the loan will be called or due between five and ten years. Rather than refinancing the existing loan, some investors begin the building sale process at least 12 months before the loan is expected to mature.

Maximize Occupancy

The net operating income (NOI) a property generates largely determines the commercial real estate value in space for rent. In a 6% cap rate market, a building with an annual NOI of $500,000 is worth about $8.3 million ($500,000 NOI / 6% cap rate). On the other hand, a property with an NOI of $300,000 in the same market is valued at $5 million. Once a commercial building is leased up and reaches maximum occupancy, it may be the perfect time to sell.

CapEx Expenditures

Many commercial real estate investors hold the property and collect cash flow until significant capital expenditures (CapEx) are on the horizon. Items such as replacing a roof or repaving a parking lot can take a serious bite out of profits. Owners who aren’t willing to invest additional capital in their property may decide to sell to another investor, even if the selling price is slightly below market.

Three Ways to Sell Commercial Real Estate

When the time is right, there are three main ways for an investor to sell commercial real estate, including lots of land or apartment complexes for sale:

1. Sell directly to another investor: Motivated buyers with financing arranged or cash in hand may be willing to close quickly on the right property at the right price. Sellers should know the fair market value of their property by ordering a commercial appraisal and compiling buyer documents to help the buyer move fast.

2. Work with a commercial real estate broker: Depending on the market size, commercial brokers may specialize in specific real estates niches, such as medical office space or workforce multifamily housing. A good broker will guide an investor through the selling process from start to finish, although sellers should plan on paying a sales commission of between 4% – 10% depending on property type and sales price.

3. Sell as an FSBO: “For sale by owner” commercial real estate deals are prevalent in some markets. FSBO sellers choose to represent themselves and cooperate with buyers represented by a commercial real estate broker. Because there’s no co-broker involved, sales commissions are usually less. However, sellers representing themselves must understand the local retail real estate market trends to avoid leaving money on the table by selling too low.

Documents That CRE Buyers Need

Before listing a commercial building for sale, sellers should gather the documents buyers need. Having the correct information makes it easier to attract qualified buyers and avoids having the property fall out of escrow due to unknown defects:

• Order a title report through a real estate attorney or escrow officer, allowing seven to ten days for a complete description.
• Update the Phase I environmental survey if it is more than six months old, allowing two to three weeks for the ecological study to be complete.
• Compile a list of repair and service records on crucial building components such as plumbing and electrical, fire and safety equipment, HVAC, roof, and parking lot.
• Put together a rent roll with information on each tenant, including payment history, lease abstract, and scheduled rent increases.
• Run profit and loss statements for the current year and the previous two years to demonstrate the revenue growth the property is generating to potential buyers.

Prepare the Property for Sale

Sellers should do these things before listing and marketing a commercial building:

Pre-listing property inspection

Hire a professional inspector to review the overall condition of the building and identify necessary repairs. This prevents a seller from being caught off guard when a buyer does its inspection once the property goes under contract.

Do repairs

Make the repairs discoverable by the pre-listing inspection to help increase the sales price. Sellers who sell with deferred maintenance can adjust the asking price accordingly, letting a buyer know the lower price is compensation for repairs that need to be made.

Appraise the property

After repairs have been made, hire a certified commercial real estate appraiser to walk through the property, run comparables, and determine fair market value. Factors affecting commercial property appraisal include location, rent roll, property condition, market trends, and recent sales of comparable properties in the market or submarket.

How to Market a Commercial Building Sale

Sellers should be prepared to proactively find the most qualified buyers for their property instead of waiting for a buyer to come. Essential parts of a commercial real estate marketing campaign include:

• A property marketing flyer with high-quality photos, a location map, a list of surrounding amenities, and current rent rates and building information.
• Add the property to the listing page of the commercial real estate firm representing the seller. Include a downloadable link to the flyer, detailed listing information, and multiple ways to contact the broker.
• Virtual tours make it easy for prospective buyers to preview the property without having to go on-site, especially for out-of-town investors who are narrowing down their top choices before coming into town.
• List the property on free commercial real estate listing websites like Crexi, the industry’s fastest-growing marketplace, with over 500,000 commercial listings totaling more than $1 trillion in property value.

Understanding the transaction from both sides of the closing table helps savvy owners sell fast and for a fair price. By knowing the local commercial real estate market and comparing similar properties, sellers can better appreciate and communicate the actual value of their commercial building to potential buyers.

Source: The Basics of a Commercial Building Sale | Crexi Insights

https://www.creconsult.net/market-trends/the-basics-of-a-commercial-building-sale/