Buying and financing commercial real estate is a crucial choice that might have long-term beneficial or bad effects on your organization. This is why it’s crucial to have a capable CRE on your team to assist you in finding the ideal piece of property. As anyone who has looked at a commercial property ad for the first time will discover, there is a lot of business jargon that is useless for figuring out things like a property’s pricing or specifics.
Here are some valuable tips for reading a commercial real estate listing in Nashville, TN.
Understanding Capitalization Rate and Debt Coverage Ratio
The cap rate is a popular statistic for normalizing attributes and comparing the potential returns of various properties. The annual percent return you can anticipate on a property is known as the cap rate. It may be calculated by dividing the sale price by net operating income (NOI).
The opposite of the cap rate is the debt coverage ratio, and both must be understood to read a commercial real estate listing in Nashville, TN. It is calculated by dividing the monthly mortgage payments by the NOI. When you add the two together, you can determine if a potential property would be profitable at the asking price and what sale price would make it a good deal.
Understanding Core Investment
NAI Nashville Stanton Group states that a high-quality real estate asset situated in a very convenient and sought-after submarket is considered a core investment. An asset that is at least 80% leased, has long-term leases with credit-worthy tenants, and is one of the most sought-after properties on the market, for instance, would be considered a core investment.