Percentage Split on Commercial Property
When you look at commercial property and you are looking at buying a piece of commercial property that is a cash positive, look at the percentage split.
Your percentage split basically is the cap rate or the yield that you are getting on the property versus the interest rate that you are paying on the mortgage.
If you are going to get a property that has got a 9% cap rate that is giving you a 9% yield on the property, (that is what it is returning you), and you have got a property that when you borrow against it – for example you are paying 7% – you have got a 2% split point which means basically your positive-cash flow on that property is 2%.
We always recommend that you seek professional advice as this blog is for general information only