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COMMERCIAL

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Buying or investing in commercial properties in New York State involves different rules, processes, and considerations than residential real estate.

  • Types of Commercial Properties

    In NY State, commercial properties are typically classified as:

    • Office Buildings

    • Retail Spaces (malls, storefronts, shopping centers)

    • Industrial Properties (warehouses, manufacturing plants)

    • Multi-Family Properties (5+ units)

    • Mixed-Use Properties (a combination of residential and commercial)

    • Special Purpose Properties (hotels, schools, medical facilities)

    • Zoning Laws: Local zoning ordinances regulate how properties can be used. Ensure the property is zoned for your intended use (e.g., retail, industrial, mixed-use).

    • Building Permits: If you plan to renovate or make structural changes, you'll need permits from the local building department.

    • Environmental Regulations: Some properties may require environmental assessments, especially if they’re in areas with prior industrial use.

  • Financing a commercial property is different from a residential mortgage:

    • Higher Down Payments: Typically, lenders require 20% to 30% down.

    • Shorter Loan Terms: Commercial loans often have terms of 5 to 10 years, with amortization periods of up to 25 years.

    • Interest Rates: Rates are usually higher than residential loans, and they may be fixed or variable.

    • Small Business Loans: If you're purchasing the property for your business, you may qualify for a SBA 504 or 7(a) loan, which offers competitive terms and lower down payments.

  • Commercial property value is determined differently than residential property:

    • Income Approach: The property’s value is based on its income-generating potential.

      • Net Operating Income (NOI): Calculate by subtracting operating expenses from gross income.

      • Capitalization Rate (Cap Rate): A key metric used to determine the property’s value based on its NOI.

    • Comparable Sales: Looking at recently sold similar properties in the area.

    • Replacement Cost: Estimating the cost to rebuild the property from scratch.

    • Property Taxes: NY State has some of the highest property taxes in the country. Be sure to factor this into your operating expenses.

    • Tax Incentives: Certain areas in NY offer tax abatements or incentives for commercial property owners, especially in Opportunity Zones or if the property will be used for economic development.

    • Depreciation: Commercial property owners can depreciate the building (not the land) over 39 years, reducing taxable income.