Quote:
Originally Posted by JDMDreams
I would also be interested in hehe thoughts. I don't have fuck you money yet.
I thought commercial is pretty dead, as besides BBT stores, no small businesses are really opening. And from what I've heard commercial lending is really hard to get if it's your first place and you don't have existing commercial property or business to show income from.
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Before we go into CRE, we need to first understand how is the value of a commercial unit derived. It’s not exactly like the RE where you take comps of nearby units and make an educated guess. It does have some effect, but that’s not how it works.
The way CRE is priced, in the eyes of banks is one thing: cap rate. If the market acceptable cap rate for a retail unit is 5%, and a unit is making 50k a year, the value of such unit is 1 million. Since the equation is x*5%=50k, thus x is 1m. This it’s crucial on what to come later as there are a lot of things and strategies you can work around this model.