Commercial Real Estate is a great investment tool. Investments include vacant properties that can be leased to provide an income stream. These properties cost less than an occupied property that is already brining in a monthly rent for a set term. This is the type of investment that will bring the largest return if a lease can be secured. It is not for the faint of heart.
Investments that have income are valued based on the going cap rate for the market. The quality of the tenant and the length of the lease term are elements that determine the cap rate value. The cap rate is figured based on the annual net operating income divided by the asking price. The lower the cap rate, the higher the property price. Likewise, the higher the cap rate, the lower the property price. The cap rate can be compared to a CD interest rate. The cap rate is a good measure of return on investment if the property is paid for with cash and has no debt. It is always higher and has more risk than a CD interest rate.
