commercial (non apt.) cash flow target?

[Cam11]

Hello all,

The $100/unit cash flow target seems to be the standard minimum around these parts for all residential investments.

Can anyone recommend a comparable target for commercial (non apartment) properties? $/square foot?

Thanks very much for your consideration.
-Cam

[Rich_in_CT]

Investment properties are usually evaluated based on ROI and what is acceptable to the investors individual needs. Something like $100/door really doesn’t work that well when dealing with commercial as every investment is completely different, there is no one number that will work. Office space is one price range, industrial another and retail another. Where you might get $5/sq foot with industrial it might be $25/sqft for a retail property. Think about it, using those numbers a common number like $1/sqft profit means 2 different things. On the industrial space you’d be getting 20% of the gross in your pocket, on the retail with the same dollars per sqft profit you’d pocket 4%.

Ultimately you need to figure out what an acceptable return is to you per year, a number that makes it worth the time and trouble do invest in real estate. Maybe that number for you is 5%. Maybe you get 5% on your zero risk CD and you think you need to make at least 15% to justify the risk.

[Cam11]

Thanks for your comments, Rich–very helpful. I have only one follow up question.

@Rich_in_CT post:2

On the industrial space you’d be getting 20% of the gross in your pocket, on the retail with the same dollars per sqft profit you’d pocket 4%.

To what “gross” are you referring? Are you referring to cash flow as a percent of gross rents?

Thanks again for your time.
-Cam

[Rich_in_CT]

@Cam post:3

Thanks for your comments, Rich–very helpful. I have only one follow up question.

@Rich_in_CT post:2

On the industrial space you’d be getting 20% of the gross in your pocket, on the retail with the same dollars per sqft profit you’d pocket 4%.

To what “gross” are you referring? Are you referring to cash flow as a percent of gross rents?

Thanks again for your time.
-Cam

I was talking about the gross rent, the rent before expenses. Regardless I am using made up numbers to illustrate a point that you need to evaluate the ROI rather than the profit per door with commericial as it paints a better picture of the situation.