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WHAT ARE THE
COSTS INVOLVED
IN OWNING
A COMMERCIAL
PROPERTY
Most of the time
commercial property
buyers consider it as a
single expense that is the
purchase price of the
property.
However, if one truly analyzes
the situation, commercial
property ownership consists
of several expenses.
Generally, people do not
pay any heed to these
costs involved in owning a
commercial property and
are surprised at the last
moment.
Here are the expenses
that arise when you buy a
commercial property.
INTEREST PAID
Most of the commercial
properties that are
purchased today are
bought using borrowed
money by keeping some
asset as a mortgage.
Whenever there is a
mortgage there are
mortgage payments and
these mortgage payments
also include an interest
component.
Moreover, the schedule of
payments is designed in
such a way that banks
collect all the interest first
and then collect principal
outstanding.
Thus, if these expenses
are capitalized that is
added to the value of
your property, then the
amount you pay for the
property is significantly
higher.
NOTIONAL
INTEREST
Besides the interest
paid, which is an out of
pocket expense for the
owners, there is also a
notional interest
involved in commercial
properties investing.
Most of the real estate
investments require the
investor to put a down
payment on the property
and this payment is 10% to
15% of the cost of the
property.
Experts opine that
there is an opportunity
cost in making this
payment because if the
money was not used for
the down payment,
then it would be
earning interest in a
bank.
Consequently, when it
is used to make a down
payment, it earns no
interest.
PROPERTY TAXES
When you are buying real
estate property, you agree
to make continuous
payments to the
government every year.
These payments are
known as property taxes
and every government
collects these taxes.
Therefore, these taxes
contribute significantly to
the cost of commercial
property ownership and
these costs are adjusted in
value over time.
Furthermore, these
costs rise with inflation
at the same rate and
while thinking to buy a
commercial property,
you must take all these
costs into account.
THANK YOU
www.landwin.com

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What are the Costs Involved in Owning a Property

  • 1. WHAT ARE THE COSTS INVOLVED IN OWNING A COMMERCIAL PROPERTY
  • 2. Most of the time commercial property buyers consider it as a single expense that is the purchase price of the property.
  • 3. However, if one truly analyzes the situation, commercial property ownership consists of several expenses.
  • 4. Generally, people do not pay any heed to these costs involved in owning a commercial property and are surprised at the last moment.
  • 5. Here are the expenses that arise when you buy a commercial property.
  • 7. Most of the commercial properties that are purchased today are bought using borrowed money by keeping some asset as a mortgage.
  • 8. Whenever there is a mortgage there are mortgage payments and these mortgage payments also include an interest component.
  • 9. Moreover, the schedule of payments is designed in such a way that banks collect all the interest first and then collect principal outstanding.
  • 10. Thus, if these expenses are capitalized that is added to the value of your property, then the amount you pay for the property is significantly higher.
  • 12. Besides the interest paid, which is an out of pocket expense for the owners, there is also a notional interest involved in commercial properties investing.
  • 13. Most of the real estate investments require the investor to put a down payment on the property and this payment is 10% to 15% of the cost of the property.
  • 14. Experts opine that there is an opportunity cost in making this payment because if the money was not used for the down payment, then it would be earning interest in a bank.
  • 15. Consequently, when it is used to make a down payment, it earns no interest.
  • 17. When you are buying real estate property, you agree to make continuous payments to the government every year.
  • 18. These payments are known as property taxes and every government collects these taxes.
  • 19. Therefore, these taxes contribute significantly to the cost of commercial property ownership and these costs are adjusted in value over time.
  • 20. Furthermore, these costs rise with inflation at the same rate and while thinking to buy a commercial property, you must take all these costs into account.