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  • Will You Add? - Should You Consider Investing in Retail Condos?

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    need to lease it at $3.50/SF plus NNN. This is on the high side of fair market rent for retail space. So you experience high turn over rate.
  • To maximize profits, the developer tends to provide a minimum number of parking
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    Q: What’s your thought on retail condos for sale in San Jose, CA?

    A: There are a couple retail condo projects in San Jose. The price is about $600-700/SF. The upside is they are in good location where there is a shortage of retail spaces. Retail condos are also available in Florida. The developer targets small business owners who wish to own their own unit. This is a good marketing strategy and market niche to get top price for a retail property. However, there are some drawbacks:

    1. Most likely you will have problems financing your purchase because the unit is vacant initially. So you need to purchase in all cash. Even for owner-occupied units, the SBA financing is not favorably low, e.g. 7.5-8% interest as the loan amount is relatively small.
    2. With tenant improvement credit to tenant and leasing fee, the cost is close to $700/SF. To get 6% cap, you will need to lease it at $3.50/SF plus NNN. This is on the high side of fair market rent for retail space. So you experience high turn over rate.
    3. To maximize profits, the developer tends to provide a minimum number of parking
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      here is a shortage of retail spaces. Retail condos are also available in Florida. The developer targets small business owners who wish to own their own unit. This is a good marketing strategy and market niche to get top price for a retail property. However, there are some drawbacks:

      1. Most likely you will have problems financing your purchase because the unit is vacant initially. So you need to purchase in all cash. Even for owner-occupied units, the SBA financing is not favorably low, e.g. 7.5-8% interest as the loan amount is relatively small.
      2. With tenant improvement credit to tenant and leasing fee, the cost is close to $700/SF. To get 6% cap, you will need to lease it at $3.50/SF plus NNN. This is on the high side of fair market rent for retail space. So you experience high turn over rate.
      3. To maximize profits, the developer tends to provide a minimum number of parking
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        r a retail property. However, there are some drawbacks:

        1. Most likely you will have problems financing your purchase because the unit is vacant initially. So you need to purchase in all cash. Even for owner-occupied units, the SBA financing is not favorably low, e.g. 7.5-8% interest as the loan amount is relatively small.
        2. With tenant improvement credit to tenant and leasing fee, the cost is close to $700/SF. To get 6% cap, you will need to lease it at $3.50/SF plus NNN. This is on the high side of fair market rent for retail space. So you experience high turn over rate.
        3. To maximize profits, the developer tends to provide a minimum number of parking
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          ed units, the SBA financing is not favorably low, e.g. 7.5-8% interest as the loan amount is relatively small.
        4. With tenant improvement credit to tenant and leasing fee, the cost is close to $700/SF. To get 6% cap, you will need to lease it at $3.50/SF plus NNN. This is on the high side of fair market rent for retail space. So you experience high turn over rate.
        5. To maximize profits, the developer tends to provide a minimum number of parking
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          need to lease it at $3.50/SF plus NNN. This is on the high side of fair market rent for retail space. So you experience high turn over rate.
        6. To maximize profits, the developer tends to provide a minimum number of parking spaces, e.g. 4/1000 SF. The parking spaces tend to be 6.5’ wide for compact cars. As a result, the center may not attract affluent customers driving big expensive cars like Benz or Lexus.
        7. In a retail condo project, you don’t have control about other tenants’ businesses. If your tenant has a good business, others can open the same business next door to compete & take your tenant out of business. So you may see 2 nail salons, 4 real estate offices, and 3 cellular phone tenants in a 20 unit retail condo complex. Besides, if other units around your unit have businesses that need a lot of parking spaces like restaurants, you may have problem leasing your unit. Your tenants could also lose business because the customers cannot find parking spaces.

        Have a question about commercial real estate investment? Email to davidvtran@yahoo.com.

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