Commercial Real Estate: Foundation Of Principles For Success

Real estate is not all the same and the principles of common real estate rarely apply to that of commercial. When you are just getting your feet wet in commercial real estate, it helps to have an understanding of the basic principles. This article will provide an in depth look at the different principles you need to consider when making an investment in commercial property.A letter of intent is always recommended in larger commercial real estate transactions. What a letter of intent does is enable the two parties to agree or work out details of the overall deal. Before signing contracts or laying down the foundation of a contract, a letter of intent is usually written. It is important to note that a letter of intent is considered non-binding. If you ever have to sign a letter of intent, make certain that it is non-binding before you sign anything.Rentable square footage is most commonly defined as the combination of usable square footage and a portion of a building’s common area. There is approximately a 10% to 15% difference between the usable and the rentable square footage of a property. The rentable square footage can be calculated using the formula of: usable square footage plus a certain percentage of the building’s common areas. Be aware of these different types of square footage when purchasing, selling or leasing commercial property.Commercial building leasing entails a monthly fee called the common area maintenance or CAM for short. When you are renting a retail space, you are paying for more than the given space your business is occupying. These CAM fees are often charged monthly, quarterly or annually. In some cases, CAM fees are charged when an area of the commercial building needs remodeling. When you are renting a space, always keep in mind that CAM fees are rarely at a fixed rate and can increase depending on several variables.Tenant improvements are defined as the improvements that a tenant makes in a given commercial property. These improvements can range from wall coverings and flooring to air conditioning and fire protection. The guidelines and rules for these types of accommodations are usually outlined in a given lease. Always ensure what types of changes are allowed in a contract before signing on the dotted line. It is imperative that you are able to make the necessary changes for your business in a commercial setting.A commercial real estate broker has many duties and whether you are one, or need to hire one, it is imperative that you know what these duties are. A commercial agent needs to be able to provide valid financial and analytical data relating to a given property in question. It is also vital to note that the selling or leasing of a commercial real estate takes significantly longer than leasing or purchasing a residential property.Buying and selling commercial property is a good way to make income. However, whichever side of the spectrum you’re on, you really need to be able to accommodate you and your consumers’ needs. This article discussed some of the basic principles involved in making the right decisions when it comes to commercial real estate. Use what you have learned today for optimal success!