What Are The Expenses Involved In Commercial Real Estate?
I would be considered and newbe since I have not purchased a property yet, but am planning my first purchase to be commercial. Wanted to get a list of the expenses involved so I can calculate what I would make in the end. I live in Northern Ohio. I have $50,000 to use in this purchase. This is what I believe would be some of the monthly expenses:
1. Mortgage payment
2. Good old property taxes.
3. Insurance (what kind do I need to own a commerical property? Idea on cost based on price of property?
4. I would hire a company to manage it. What are the typical rates?
5. Lawn service, snow removal, any other maintenance I may have missed?
6. I'm sure I need to put some $$ aside for larger unexpected maintenance. What would some of those expenses be? And average figure I should put aside per month.
Any advise is appreciated.
Insurance (what kind do I need to own a commerical property? Idea on cost based on price of property?
It will vary according to the property ares, etc. What I usually do is once I have selected a property I call multiple agencies and get quotes. Once I have determined that a compnay is giving me good rate, and service I use them regularly and only screen periodically to make sure they are still the best deal in town.
I have a commerical insurance polcy for a $200000, and it runs around $500. However, as I said before that will vary alot depending on state, location, property type, etc.
4. I would hire a company to manage it. What are the typical rates?
8-12%. in my experience. Teh more business you give them, the more you can negotiate it down. If you have a lot of property, you may want to analyze to see if it would be better to just hire a manager as an employee.
5. Lawn service, snow removal, any other maintenance I may have missed?
6. I'm sure I need to put some $$ aside for larger unexpected maintenance. What would some of those expenses be? And average figure I should put aside per month.
For these maintenance items, I equest the last 2-3 years of financial statement on the property. It is easy to see then that they are paying x dollars for landscaping every year. Again, theis will vary a lot according to the individual property. Get the history of that property, and it should not vary significantly.
Look to see if any maintenance has been deferred. Has the building not been painted in years, or the roof is at the end of its life. You will want to place aside $ for capital improvemtns based on the current building condition.
I hope that helps!