Commercial Property Case Study
A property on the net is $675,000 and 9.49% ROI based on a 70% loan with 7.5% interest rate, therefore the quick calculation or estimation of the passive income on the property is $13,477. There are no rates because you’re assuming the tenants are paying it and no management fees because it’s commercial and you are going to do it yourself. There is also a contingency for insurance but you can also pass that onto the tenants.
On a deal like this, it’s pure commercial, it doesn’t really matter what your insurances are. You’d be making sure they were in the leases. Just in terms of the quick calculation, because it’s a commercial property you just look at the ROI which is 9.49%, take off your interest rate and that’s your percentage split. It’s that percentage-point split multiplied by the purchase price. Remember with commercial if you’re not paying for anything along the way it’s the percentage-point split.
We always recommend that you seek professional advice as this blog is for general information only