Commercial Deals and cap rate

[Antwone Austin]

What are the main things to consider when looking at a commercial property? Is it more so the price or cap rate that attracts investors? Have high ticket commercial leads with a decent cap. Any feedback is appreciated.

[Ellie Perlman]

There are many things to look at. Cap Rate is only one factor, and imo not the most important one. Among other things, my team and I are looking at:

- current vacancy (higher or lower than market? why?)

- rent comps: are rents under, at or above market (so we can see if we can raise them)

- deferred maintenance (so we can budget for it)

- vale add plan (can we renovate the property and raise rents?)

- sale comps: how much nearby properties have been sold recently (looking at cap rate as well).

- location! 

- what loan/term we can get (it can make or break a deal)

- what other paid amenities (washer/dryer, reserved parking) and services (view or location premium, pet fees, etc) can we add to increase NOI (net operating income)

The reason why I am not focused on cap rate, is that if we improve the property and raise rents, cap rate can change in 12-18 months. So it's one factor we look at, but it's not everything.

Hope that helps!

Ellie