Should You Invest in Office Warehouses?

Investing in Office Warehouses takes a different strategy than investing in single-family homes. For example, you could have units that will rent, for between $6.50 and $8 a square foot depending on location, so it's probably $7.50 a square foot. So, $7.50 on a 1,000 square foot building equates to $7,500 per year rental on one unit, at a cost to build of $60,000 with incidentals factored in above the $40 per square foot build price.

Compare buying a $60,000 house and trying to get $7,500 per year rent for it! Again, one of the great things about dealing in commercial, industrial, and investment type property in the commercial arena is the higher possible cash flow per square foot. Even if you're buying this building already built, the price is factored on the income.

Tip: The rule of thumb in the commercial arena, when assessing the purchase of a property, is that you look at the income and calculate the return on the investment (ROl) that you anticipate making from the money you invested.  If you're investing in a single-family residential property, you can't apply that same rule of thumb. It just doesn't work, because there are too many variables.  However, when you deal in commercial and industrial property, the competition is other investors who want to invest in cash flow property. Since they have some return on investment criteria, they're applying their criteria to this building.

Your competition in investing in office warehouses, are people who are looking for a return on the money they invest. When that return is 5% to 15%, it doesn't matter. What does matter is who your competition is, and what returns they are looking for, because those are the other people who might be competing with you to buy this property.

Most of the time when purchasing a single-family house, the competition is someone else who is looking for a home. They don't evaluate their property based on cash flow, but on personal utility and emotional desires. This has no relationship whatsoever to whether a property has income cash flow or not.

So, one of the great things about getting into the commercial property arena, especially investing in office warehouses, is that most of your competition is thinking the same way that you think. For example, if you see properties that are overpriced, most of the time those properties are on the market longer. They're still there, because they are overpriced and the market place dictates that there has to be some return on the investment being made. Since everyone among your competition in the commercial arena to buy (those that know what they're doing at least!) stays away from properties that are overpriced or are offering much less than the asking price. If you learn the market and your competition, you can be invest in office warehouses successfully.

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