What is Commercial Property?
Real estate property that is used for business activities. Commercial properties fall into many categories and include including industrial properties, shopping centers, farms, offices, or even vacant land.
Commercial Property – Summarized
Common examples of commercial property include the grocery store you regularly visit and the office buildings found near major urban centers. It is possible to monitor the trend in nationwide commercial property prices by following the Moody’s Real Commercial Property Index.
Retail investors can profit from commercial real estate by investing in various real estate investment trusts (REIT).
Alligator Property
In real estate, when the cost of mortgage payments, property taxes, insurance and maintenance on a rental property is greater than the income it brings in. If this situation is not corrected, it will eat up all of the owner’s profit, leaving him or her with negative cash flow.
Alligator Property – Summarized
This occurs more often when a rental property is purchased near the peak of the real estate cycle. In this case, the investor buys the overvalued building and rents it out, but as interest rates rise and maintenance costs add up, the owner is forced to either sell the building or suffer a negative cash flow.
One way to get around the negative cash flow situation is to buy property with a large down payment, thereby reducing the mortgage payment.