Commercial property and the Rule of Two
The next distinction to be made here is that this formula does not apply to commercial property. When you look at commercial property, your outgoings are normally paid by your tenant. Sometimes even your insurances are paid by your tenant, depending on what the lease says.
In a lot of commercial dealings you do not have a managing agent in there, so basically whatever they are paying in rent is the cash flow coming in. Normally speaking, your management agent is not as essential. The only real expense that you have got against the income is the interest that you are paying on the mortgage. So when you take out all of those other expenses, you will find that a commercial property is going to be positive a lot sooner than a residential property because you don’t have all the extras. Sometimes those extras can be exorbitant. Sometimes the rates as a proportion of rent coming in is enormous on residential property, especially now with most areas having water meters, and the rising cost of water.
We always recommend that you seek professional advice as this blog is for general information only