Top 5 Most Asked Commercial Real Estate Questions

Top 5 Most Asked Commercial Real Estate Questions

Top 5 Most Asked Commercial Real Estate Questions


1. What makes commercial real estate so different from residential real estate?

Among many differences, the biggest is probably the due diligence period. For residential sales this is usually a quick 30-45 days with a quick inspection period within that period. On the commercial side of things, the inspection period is more extensive, and the due diligence period can last many months.

2. What is a commercial real estate cap rate?

Cap Rate, or Capitalization Rate is how your broker will determine the potential return on investment (ROI) of a property.

3. What is CAM?

Charges billed to tenants such as tax, insurance, and common area maintenance are known as triple net (NNN). The CAM is one of the charges that will be billed to the tenants in a triple net lease.

4. What are tenant improvements and who pays for them?

Tenant improvements (TI) are going to be improvements requested by the user of the property. This will in most cases require permitting, plans and construction. The tenant improvements are usually paid for by the tenant, however in some circumstances the landlord will credit some of the cost for the improvements. This can absolutely be negotiated.

5. How do my brokers determine the sale price for my property?

Your broker will consider many factors such as the location of your property, the year it was built, the type of property it is and the size of the property. Your broker should be taking a market approach, which means they are looking at recent sales of other properties that match many of the characteristics of your commercial property to determine the sale price.