Real Estate?

I was testing out the purchase of real estate and noticed the following.

Many of the buildings I was able to purchase have:

  • Very Low Occupancy Rates at the average market price: ~30%-50% when I believe most real estate is ~80%+ occupied in the real world. The buildings with highest occupancy were only 60%-70% occupied. Not very realistic.

  • Low ROI/Cap Rates on real Estate: Seems to range between ~0.65%-1.5% Annual ROI before property tax. When it should be more like ~5%-10% per year (after tax for triple net leases). Not very realistic.

  • Low Property Tax Rates: ~0.1-0.2% of property value. When it should be more like ~1.0% of property value. Most Commercial Real Estate owners don’t pay property tax as it is passed through to tenants in triple net lease. Not very realistic.

It does not make sense to buy a building for ~$36 million to only make ~$285,000/year in rental income minus ~$50,000 Taxes ~$235,000/year for a ~0.65% Annual ROI. Should be more like ~$1.8 million/year a ~5% Annual ROI.

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