Commercial real estate investments make sense — and dollars
The crash of the markets in 2007 and subsequent economic recession left many investors with money on the sidelines. But the smart money says it finally could be time to get back in the game.
Market conditions have become quite attractive compared to recent years, and the commercial real estate market is no exception.
For many investors, the purchase of commercial property makes good sense. There are several strong indicators that support the purchase of commercial, industrial and multi-family properties today. The strongest indicator of all could be the historically low interest rates that are still available. The consensus is that interest rates are far more likely to go up than down — and probably sooner rather than later.
While prices for many commercial properties have held up better than those in the residential market, there are still terrific values to be found. Once you have found a property, you might find that financing has become more accessible. According to a recent Wall Street Journal article, quarterly commercial and industrial lending was up last quarter for the first time in two years. Moody’s predicts such lending will continue to increase this year.
When you factor in an increasingly favorable business climate and a stock market that remains unpredictable, an investment in local commercial real estate looks attractive.
Here are two examples of local properties that could yield approximately a 10 percent capitalization rate with a 20 percent down payment:
n Price: $735,000. Interest: 6 percent. Taxes: $13,090. Size: 6,700 square foot. Monthly payment: About $4,700 in principal, interest, taxes and insurance. Income: $12 a square foot plus a triple-net lease of $67,000 annually
n Price: $525,000. Interest: 6 percent. Taxes: $5,051. Size: 6,000-square-foot building on 1 acre. Monthly payment: About $3,015 PITI. Income: $8.50 a square foot plus a triple net lease of $51,000 annually.
Whatever you consider as the right time to buy, it’s always wise to be informed on how the local market is faring. Check with a commercial real estate broker for ideas and properties.