Updated almost 8 years ago on . Most recent reply
1% rule (or equivalent) for commercial property???
I own several residential multi-family properties, and I'm interested in moving into the world of commercial multi-family. My problem is that when I am analyzing properties, the ROI seems very low compared to the residential buildings I'm seeing. I was expecting economies of scale to make commercial more profitable, but that doesn't seem to be the case? For example, I've been finding that I'm better off (higher ROI) buying two 4-plex buildings vs buying one 8-unit building, which is really not what I had expected!
Everyone knows about the 1% rule for residential multi-family. BUT the 1% rule just doesn't work for commercial multi-family, presumably b/c the mortgage terms are different (higher interest rate, shorter amortization, etc - I can't identify any other reason for this)???
What is a good method for your initial screening of a commercial multi-family building?