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Top Adding - Which Types of Commercial Property Should You Invest In?
When it comes to commercial real estate investment, investors often want to know which types of properties they should consider investing. This article discusses about 5 groups of properties and reasons why you should or should not consider them.
1. Land: the people who invest in raw land often hope to buy agricultural land near commercially-zoned land at a few thousand dollars per acre. They dream their lot will be re-zoned to commercial in the near future whic
1. Land: the people who invest in raw land often hope to buy agricultural land near commercially-zoned land at a few thousand dollars per acre. They dream their lot will be re-zoned to commercial in the near future whic
According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product
h is worth hundreds of thousand dollars or more an acre. People who convince you to invest in raw land often try to sell you this dream. While this dream actually happens just like it’s possible to hit the jackpot in Las Vegas, the reality is most investors lose money or get little return in land investment. It is a very risky investment as land generates either no or very little income. From an income tax viewpoint, land does not depreciate in value so you cannot clai
; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.
Examples of combination products may in
Examples of combination products may in
depreciation. On top of that the interest rate to land loan is also very steep compared to other types of commercial properties. So each month, you would need to come up with money to pay for the mortgage while collecting none. You should consider invest in land if you
- Know how to develop so you could convert raw land into a shopping center.
- Know exact what you do and have deep pocket.
- Own the land of a shopping center (you don’t own the buildings).
2. Ap
- Know how to develop so you could convert raw land into a shopping center.
- Know exact what you do and have deep pocket.
- Own the land of a shopping center (you don’t own the buildings).
2. Ap
lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.
rtments: this is a management intensive investment as the turn over rate is high. The leases are short-termed often at one year of month to month. As tenants move in and out, you would need to spend money to get the unit ready for occupancy. Apartment tenants tend to have higher late payments history than other tenants as they are more often have a tighter budget. If you don’t like the headaches dealing with lots of tenants, you probably want to stay away from ap
here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe
rtments. The key to successful apartment investment is to
- Control or minimize the expenses. This may sound like a trivial task until you see the expense list provided by the property manager. These expenses include: advertising, accounting, bank fees (for insufficient funds), capital improvement, coin laundry subsidy, cleaning, collection fees, garbage disposal, insurance, landscaping, legal (eviction) fees, maintenance, offsite property management, onsite property
- Control or minimize the expenses. This may sound like a trivial task until you see the expense list provided by the property manager. These expenses include: advertising, accounting, bank fees (for insufficient funds), capital improvement, coin laundry subsidy, cleaning, collection fees, garbage disposal, insurance, landscaping, legal (eviction) fees, maintenance, offsite property management, onsite property
d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.
Combination pro
Combination pro
anagement, pest control, painting, repairs, sweeping, security, property taxes, utilities and water.
- Invest only in properties in a good location with no deferred maintenance.
- Stay away from areas with rent control, e.g. Berkeley, Los Angeles.
Otherwise you may end up getting little cash flow or even having negative cash flow. If one of your investment objectives is to get high cash flow, you may want to stay away from apartments. In California, if you own a 16
- Invest only in properties in a good location with no deferred maintenance.
- Stay away from areas with rent control, e.g. Berkeley, Los Angeles.
Otherwise you may end up getting little cash flow or even having negative cash flow. If one of your investment objectives is to get high cash flow, you may want to stay away from apartments. In California, if you own a 16
ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc
r more units apartment you must have an onsite manager. This increases the expenses further. In general, apartments are easy to buy and harder to sell. There are always lots of them on any markets. The upside about apartments is they tend to have high occupancy rate as everyone needs a roof over their heads. Due to this fact the interest rate for apartments is often ?- to ? percent lower than other commercial properties.
3. Special Purpose Properties: These ar
3. Special Purpose Properties: These ar
easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi
properties designed for a specific business, e.g. restaurants, gas stations, and hotels/motels.
- Restaurants: some investors like to invest in brand name fast food restaurant like Burger King, Pizza Hut, Jack In The Box, KFC. These are single tenant properties with long term absolute triple-net lease which often require no management responsibilities from the landlord. However, the rental income or cap rate for these restaurants is often lower in the 5-7% range. Eme
- Restaurants: some investors like to invest in brand name fast food restaurant like Burger King, Pizza Hut, Jack In The Box, KFC. These are single tenant properties with long term absolute triple-net lease which often require no management responsibilities from the landlord. However, the rental income or cap rate for these restaurants is often lower in the 5-7% range. Eme
nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
ging regional brand name restaurants like Johnny Carino’s, Back Yard Burger, Zaxby’s or Tia’s TexMex tend to offer higher cap rate in the 7-8.5% range. However, when you look deeper in the financial statements they may not make a profit yet. The restaurant operators sell the real estate to investors higher cap rate and lease back the property for 20 years. They in turn use the sale proceeds to expand their business by building more restaurants. So if you are willing
and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ
o take higher risks, you will be rewarded to high income with these emerging restaurants.
- Gas stations: when you buy a gas station, you buy both real estate and the gas station business. Most gas stations also have convenience stores and sometimes several car repair bays. The profit margin for gas is fixed at 10-20 cents per gallon [many customers wrongly blame the high gas prices on the innocent gas station operators] but is pretty high for convenience store. This i
- Gas stations: when you buy a gas station, you buy both real estate and the gas station business. Most gas stations also have convenience stores and sometimes several car repair bays. The profit margin for gas is fixed at 10-20 cents per gallon [many customers wrongly blame the high gas prices on the innocent gas station operators] but is pretty high for convenience store. This i
ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
considered an owner-occupied property which qualifies you to a SBA loan with as little as 10% down payment is required. If you don’t plan to get involved in running the gas station, auto repair and convenience store business, you may want to stay away from gas stations as gasoline is a chemical that could contaminate the soil. Once a leakage occurs and contaminates the environment, it takes years and lots money to clean up the soil. You may even be liable to damages
ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.
Following aspects would a
Following aspects would a
from owners of adjacent properties as contamination may spread out to their properties. It’s almost impossible to sell your property as no lenders want to loan the buyers the money to buy it.
- Hotels/Motels: once you buy a hotel/motel, you buy the real estate and a 24-hour-a-day 365-day-a-year business. This business requires hard work, and marketing skills to get the rooms filled. The rooms are worthless if they are vacant. The business tends to be seasonal and may
- Hotels/Motels: once you buy a hotel/motel, you buy the real estate and a 24-hour-a-day 365-day-a-year business. This business requires hard work, and marketing skills to get the rooms filled. The rooms are worthless if they are vacant. The business tends to be seasonal and may
dd to the challenges in developing combination products:
Which markets to tap where the combination products can do fairly well?
Which combination prod
Which markets to tap where the combination products can do fairly well?
Which combination prod
be affected immediately by economic downturns and political events, e.g. 9-11. Many of these properties are owned by Indians with the last name Patel as they seem to work harder and know this business well.
4. Office Buildings: these properties are single or multi-story buildings. The older two-story office buildings without elevators tend to have trouble finding tenants on the upper floor as many service businesses may have physically-challenged customers who
4. Office Buildings: these properties are single or multi-story buildings. The older two-story office buildings without elevators tend to have trouble finding tenants on the upper floor as many service businesses may have physically-challenged customers who
cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
annot walk up the stairs.
- Single-tenant buildings: the properties are used as corporate headquarters of big corporations like Cisco. These big buildings tend to be more sensitive to the economy. Once vacant, it’s hard to find a replacement tenant.
- Multi-tenant buildings: these properties are leased by small businesses, e.g. real estate, tax accountants. Investors who purchase these properties want to spread out the investment risks. When one tenant vacates a uni
- Single-tenant buildings: the properties are used as corporate headquarters of big corporations like Cisco. These big buildings tend to be more sensitive to the economy. Once vacant, it’s hard to find a replacement tenant.
- Multi-tenant buildings: these properties are leased by small businesses, e.g. real estate, tax accountants. Investors who purchase these properties want to spread out the investment risks. When one tenant vacates a uni
tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
, you lose just a small percentage of rental income.
- High Quality Tenants: most of them have good credits, lot of assets and promptly pay the rent when due.
- Leases: The leases for office building vary from full service [landlords pay property tax, insurance, maintenance and utilities] to NNN [tenants pay property tax, insurance, maintenance and utilities]. The NNN lease is a litmus test on whether the office building is in high demand by tenants or not.
- Medical
- High Quality Tenants: most of them have good credits, lot of assets and promptly pay the rent when due.
- Leases: The leases for office building vary from full service [landlords pay property tax, insurance, maintenance and utilities] to NNN [tenants pay property tax, insurance, maintenance and utilities]. The NNN lease is a litmus test on whether the office building is in high demand by tenants or not.
- Medical
t?
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
uildings: these properties are leased primarily by doctors and dentists. A good medical building should be in front of or across the street from a hospital. This makes it convenient for doctors to go back and forth between hospital and their offices. Some investors prefer medical buildings as medical tenants are very recession proof.
5. Shopping/Retail Centers: These centers are mostly single-story and can accommodate wide varieties of tenants: retail and serv
5. Shopping/Retail Centers: These centers are mostly single-story and can accommodate wide varieties of tenants: retail and serv
ping new procedures for reviewing their safety, efficacy and quality.
Professional from academic institutions, pharmaceutical industries, health care indust
Professional from academic institutions, pharmaceutical industries, health care indust
ce businesses, restaurant, medical, school, and even church. As a result, this is the most popular type of commercial properties that investors look for. They are always in high demand as there are more buyers and few sellers.
- Multi-tenant strip: the advantage of this investment is when a tenant moves out, you only lose a portion of the total income while you are looking for a new tenant. So you spread out the risks in this property.
- Single-tenant building: The
- Multi-tenant strip: the advantage of this investment is when a tenant moves out, you only lose a portion of the total income while you are looking for a new tenant. So you spread out the risks in this property.
- Single-tenant building: The
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
advantage is you just have to work with one tenant. Some of the tenants, e.g. Costco, Home Deport, Walmart, CVS Pharmacy sign 10-20 year lease and guarantee with their corporate assets which could be worth billions of dollars. This makes your investment very safe.
- High Quality Tenants: most of them have good credits, lot of assets and promptly pay the rent when due. They often sign long term 5-30 year leases so you don’t have worry about finding new tenants every y
- High Quality Tenants: most of them have good credits, lot of assets and promptly pay the rent when due. They often sign long term 5-30 year leases so you don’t have worry about finding new tenants every y
.
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
ar. They keep your property in good condition and sometimes even spend their own money to make it look better in order to attract the customers to the stores.
- Triple Net (NNN) Leases: the leases for retail centers are often in favor of the landlord. The tenants pay a base rent and reimburse the landlord for property taxes, insurance, maintenance and sometimes even property management fees. This takes away a lot of risks from you as an investor. The NNN lease in a s
- Triple Net (NNN) Leases: the leases for retail centers are often in favor of the landlord. The tenants pay a base rent and reimburse the landlord for property taxes, insurance, maintenance and sometimes even property management fees. This takes away a lot of risks from you as an investor. The NNN lease in a s
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.
Companies that provide selfless information through particip
Companies that provide selfless information through particip
nse is a litmus test on whether the property is in high demand by tenants or not.
- Ground Lease: occasionally a retail center with ground lease is for sale. When you buy this center, you only own the improvement but not the land underneath. It could be a trophy property but you should think thrice about investing. Once the ground lease expires and the land owner refuses to extend the land lease, you own nothing! So it’s easy to buy this center but very hard to sell
- Ground Lease: occasionally a retail center with ground lease is for sale. When you buy this center, you only own the improvement but not the land underneath. It could be a trophy property but you should think thrice about investing. Once the ground lease expires and the land owner refuses to extend the land lease, you own nothing! So it’s easy to buy this center but very hard to sell
tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products
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