As many real estate professionals may tell you, commercial real estate is a continuously growing and evolving industry. From understanding the different areas of commercial real estate to determining the best ways to make money, commercial real estate can be a large area to try and understand, especially if one is new to the industry. For those who want to learn more about commercial real estate, here is a beginning list of terms that you should know in the industry.

Net Operating Income
When first beginning in commercial real estate, you will likely need to be able to calculate the net operating income of the property. This stands for the gross income that you would receive with the properties minus expenses. This is important to understand for a couple of reasons. To begin, the NOI will give you an idea of what your actual income is before expenses, giving you a better idea of what the minimum income needs to be to break even. If an ROI is continuing to increase, that also means that the actual property value is going up, making it better for you.

Return On Investment (ROI)
Known as a term that is commonly used within businesses, the return on investment, or also known as ROI, stands for how much of your investment you see in return. For example, if you invest $10,000 on a property, your ROI would be measured by how fast your money is coming out of the property. ROI is a measurement that is commonly used in today’s businesses and can help determine if an investment is worth it in the long run.

Usable Square Footage
While it is not surprising to learn that the square footage of a property can be used to determine the amount that a building should cost each month, it is important to examine what the usable square footage is. Usable square footage refers to the space that can be used in a commercial real estate scenario. Every commercial property will include areas that cannot be used for business, and typically include stairways, bathrooms, and utility closets. Determining the usable square footage can not only help a landlord to determine a rational monthly rate, but it can help businesses find a space that is big enough for their company.

Anyone who works in commercial real estate typically has a strong understanding of the various terms and what their significance is. While these are some of the more basic terms that you may hear in commercial real estate, they are only a few of the many terms that need to be understood to be successful.

About The Author
Jack Nourafshan is a distinguished real estate development professional and entrepreneur in Los Angeles, California. He is the President of Reliable Properties, a real estate acquisition, development and management company in the Los Angeles area. Jack has over 30 years of professional experience that has made him known as a leader in the industry. Jack Nourafshan started a blog on entrepreneurship to share his insight and experiences for aspiring entrepreneurs.

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