Real estate investors can attain a very nice incoming cash flow from commercial properties such as office buildings. This is especially the case by getting tenants of office buildings locked into long term leases of at least three years – which is fairly common for this type of commercial property.
One of the most popular types of leases for use with commercial office buildings is the “full service” lease. Here, the lease will charge the tenant one single monthly fee. This fee is inclusive of the base rental amount, along with all other operating expenses. Such expenses may include cleaning, utilities, and use of the building’s amenities.
Another type of commercial office building lease that may be used is the “triple net” lease, or NNN lease. With this type of lease, the tenant will pay the monthly base rent amount, along with all other operating expenses, including the office building’s real estate taxes, maintenance, and utilities.
Financing Office Buildings
When investors initially go to purchase an office building, the financing will oftentimes require that they put between 20 to 25 percent down at closing. Due to the large down payment, however, the income that is brought in from tenants can generally cover all of the mortgage costs, plus other building expenses.
Factors to Consider Before Purchase
When investing in Orlando office buildings for income, there are several important factors to consider. One of the keys is the building’s location. Therefore, look for buildings that have excellent foot traffic. This should help to keep rents strong – even during recessionary times.
It is also important to seek buildings that already have at least some tenants in place – and preferably tenants that have longer term existing leases. This is because office building tenants can at times be difficult to replace.
You will typically want to turn over the management of the property to a property manager. This will entail taking care of the day to day duties of dealing with tenants, as well as taking care of any issues such as maintenance and repairs – freeing up your time to do other things, while still enjoying the income from the property.
If you would like more information, give us a call. We will walk you through the many options that you have for managing both commercial and residential properties for investment in the Orlando and surrounding area.