If you’re considering buying or selling a commercial property in Colorado, you should know some ground rules to help you make a better decision. At United Country Real Estate Western Land & Lifestyle Properties, we have a dedicated commercial real estate division specializing in commercial real estate transactions in Western Colorado’s mid-sized market. Let’s explore some of the most frequently asked questions we receive about commercial properties.
What Makes the Commercial Real Estate Market Different From the Residential Real Estate Market?
The commercial real estate market tends to remain more steady, while the residential real estate market is more tumultuous. In a mid-sized commercial market, you don’t see as much turnover from businesses as you do from people in their homes. This is because businesses and commercial real estate investors must be extra diligent that the property they’re purchasing is suitable for operation. To prove this point, for residential sales, the due diligence period (between offer and purchase) usually lasts 30-45 days. For commercial sales, the due diligence period can last many months while all of the inspections are fulfilled.
What Is a Cap Rate in Commercial Real Estate?
Capitalization rate (cap rate) is a metric that helps brokers and investors determine the potential return a property can generate. It is calculated by dividing the property’s net operating income by the current market value. For example, if a property’s value is $200,000, a 7.5% cap rate indicates an annual return of $15,000.
If you're considering an investment property of any kind, check out my other blog post, "When Is The Best Time To Buy an Investment Property in Colorado?", for more details.
H2: What Are Tenant Improvements?
When a tenant is renting and using a commercial property, they may request tenant improvements to ensure the property meets their needs. These improvements usually require permits and construction. While who pays for tenant improvements is up for negotiation, the tenant is usually responsible for the cost because the improvements are not necessary to the function of the property itself but rather the tenant’s business.
What Are Some Common Mistakes People Make When Searching For a Commercial Property?
The biggest pitfall that encumbers commercial real estate investors is starting the search for commercial properties without a qualified real estate broker to help. When you’re looking for residential real estate, it’s easy to reference sites and tools, like Zillow, to filter properties that meet your criteria. With commercial real estate, it’s a little more complicated. You need a broker and a detailed list of criteria to start searching for properties you might not have access to. Additionally, commercial properties aren’t as widely available as residential properties, so your real estate broker should know your needs ahead of time and can flag potential properties as they hit the market.
To avoid these mistakes and find a commercial property in Colorado that suits your needs and generates high returns, get in touch with me, Jennifer Thomas. I would love to serve as your real estate broker and help you through the buying or selling process. Reach out at 970-209-2378 or email@example.com.