Most important aspect of a commerical property

[hastalavista]

The question is IF a property were OWNER OCCUPIED ... could it still not be a commercial property even though it has no income either from an historical perspective or for a forecasted future?

Are ALL commercial properties income producing???

Ok, I think I get it-
Yes- if a property were owner-occupied it can be considered a commercial property if it is capable of becoming income-producing. So, the fact that it hasn't been, isn't, or may not isn't the litmus test. The test is "is it or can it be" capable of producing income?

Again, from the Dictionary of RE:
"...and owner-occupied properties that are capable of becoming income-producing should the owner so decide..."

So, do I get a passing grade? :new_smile-l:

 

[collateralappr]

Thank you to everyone and Denis. I guess I was wrong, but you learn something new everyday. So much for Location. location, location being the main factor for real estate, it is only for Residential.

 

[DTB]

Mike

Yes

Scott J. Lanz

Are you really saying that the location of the property plays a limited role in its ability to generate income? Wonder why all the major chains have real estate departments scouring for premium locations?

Seems these chains have similar management systems in place throughout their firms?

Don't certain locational factors such as traffic count, curb cut outs, traffic lights patternas and traffic flow etc. all play a part in what type of enterprise can use the property and what income it may generate?

 

[collateralappr]

I find it hard to believe that income is #1 for a commercial property. If you have a 2 identical properties. 1 located with limited access from a main road and 1 on a main road, the commercial on the main road would have more/higher income. This is based on the location of each of the properties.

But I will go with what AI says

 

[hastalavista]

I find it hard to believe that income is #1 for a commercial property. If you have a 2 identical properties. 1 located with limited access from a main road and 1 on a main road, the commercial on the main road would have more/higher income. This is based on the location of each of the properties.

But I will go with what AI says

I think you may be comparing apples and oranges here.
Location would be an influence to consider explicitly in the Sales Comparison Approach (SCA).
Location is considered implicitly in the Income Approach.

Location is a significant element of value and that can be analyzed in the SCA. If it influences the rental (income) potential, then location differences are already implicitly included in rent differences. Assuming similar cap rates, a buyer would pay less for the building with the lower rents (inferior location).
So location is accounted for in both approaches.
But the most significant consideration of a commercial property is its income (or income-producing potential).

At least, according to me! :new_smile-l:
PE and the other Cert. Gens are the experts here so disregard anything I say if it is contradicts what they say!

 

[Michigan CG]

Interesting points, however income is still number one.

An example in my community of 360,000 ppl. A group of doctors owned a bunch of land right near a new hospital. They bought franchises for two restaurants. Another local guy built a restaurant on the same street and a successful local guy leased a space just north of that. A hip coffee place also opened up.

Then Buffalo Wild Wings bought land in the middle of all of it, and a large steakhouse chain bought land north of them all on the same street close to the busy street with 35,000 car traffic counts. The street where all of these buys built has a traffic count of about 9,000 cars, and the street is not really a destination point except for the hospital.

The two doctor restaurants are gone, as well as the two local guys and the coffee place. BWW is very successful despite the low traffic count and the steakhouse is doing well.

The doctors also built a Fuddruckers at a corner location a mile away with traffic counts at 50,000 cars per day. Went out of business.

Location doesn't seem to be everything, but rather management and the reliability of the income stream in addition to the quantity and quality and durability of it.

 

[john snyder]

Maximum return - or the last detail of highest and best use study which may look at the current income but is current income the highest and best income that can be derived?

If it isn't generating the max income how come?? So look at current and the present worth of future benefits.

jbs

 

[Scott Lanz]

Mike,

I understood "help the income" to mean increase above market.

Scott J. Lanz

 

[Howard Klahr]

John Snyder

generating the max income "does not equal" Maximum return

Remember the capital required to produce the income needs to be addressed. I can have a property with a moderate and lower capital investment producing a higher return than one that produces maximum income but requires significant capital investment to produce that income.

Denis DeSaix

How about government buidlings (i.e. - city hall, fire nd police stations), religious facilities, schools? Would these owner occupied properties that produce no income be charcterized as commercial?

 

[PropertyEconomics]

Remember everyone ... when we talk of commercial there are a vast number of participants in this market .. many of which do not require heavy traffic flow or major street frontage but are more locational type businesses .. ie a body shop, a vet clinic, a day care center .... most of which have loyal clients.
These types of real estate may produce as much income as a well located office building but yet have vastly differing locations.

Commercial is so interesting because of the so many different types of uses and properties that fall within the classification.

Remember maximally productive would also consider surplus productivity ....

Principle of surplus productivity

A principle that holds that the net income that remains after the proper costs of labor, organization and capital have been paid and to which the surplus or remainder is imputable or attributable to the value of the land.