No matter how long you are in the commercial real estate market, there is one question that investors ask over and over. While you can back up your answer with data and charts, it can still change in an instant. It can make or break your commercial investment, regardless of how long you have been in the real estate business. The question is: what is a good return on investment on commercial real estate? This may seem simple to answer, but there are so many factors, which Ullian Realty offers insight on Good ROI on commercial property.
What Type of Property Offers a Good ROI in Commercial Real Estate?
One of the biggest variables to remember is that the ROI changes with each type of commercial property. According to Nolo.com, the average ROI on any commercial property is between 6% and 12%, but it varies beyond that. The type of tenants greatly impacts the ROI and for good reason. Some commercial investors follow a portfolio approach in order to receive a higher ROI, although in this scenario you may be less connected to the day-to-day operations of the building.
Business tenants often maintain their space at a high standard to meet customer expectations. An apartment building is also a commercial property, however, it’s common to experience more wear and tear from tenants which will require more upkeep on the part of the property owner. A manufacturing tenant will customize a space and it’s common to make major renovations before a new tenant occupies the building. This can cut into the overall ROI.
Does the Location Matter for the ROI for Commercial Real Estate?
Location is everything! A town that lacks business development may have a slower return on investment. A busy city home to many industries will provide more opportunity and tenants will pay a higher price for stability. It’s important to make sure the properties you are investing in are not only zoned properly for the ways you intend to use them but that they are easily accessible for tenants and customers.
Is the Highest ROI the Main Focus?
Regardless of the ROI on your next commercial real estate property, developing a long-term plan will always win over focusing on the highest paycheck. As you know, not all commercial properties appreciate over time. You may hold onto a property for 10 to 20 years, so having a plan and hiring the right professionals along the way is vital.
One of the best ways to help determine your commercial property ROI is by working with a local broker. They will know the details of the area as well as market trends much better than anything you will find online.
Contact Ullian Realty in Brevard County, FL if you are looking to invest in properties on Florida’s Space Coast. With over 50 years of combined experience in Brevard County, the Ullian team is ready to answer all your questions and help you determine which properties are best for your investment goals. Give us a call today.