Commercial real estate can be a savvy investment due to its potential for steady cash flow and income growth, provided you take the proper steps to help ensure it.
In fact, as a new investor in commercial real estate, some of the most important things to consider before putting your money down to help ensure a successful endeavor include:
Decide How you Want to Invest in Commercial Real Estate
One main reason to invest in commercial real estate is it enables you to purchase your own business space while also renting out other offices in the building to other businesses, which helps make it easier to pay the mortgage.
However, you can also own commercial real estate as part of a group or REIT for fractional ownership, which helps eliminate the large sum needed to invest in commercial real estate.
Determine What Type of Commercial Real Estate You Want to Invest In
Commercial real estate includes warehouses, apartment buildings, mixed-use buildings, and retail properties. However, they each come with their own investment risk and income potential.
Therefore, be sure to conduct a financial analysis of the building, including its cash flow, value add, holding time, appreciation, etc., and then pick one based on your investment strategy for peace of mind.
Consider Market Fluctuations
Changes in the market affect the occupancy rate of commercial properties, which, in turn, leads to decreased rental returns.
Hence, pay attention to what businesses survive in any economy to help you understand which commercial properties make the most sound investments.
Diversifying your commercial property investments can also help protect against market fluctuations.
Choose Properties in Good Locations
Location plays a significant role in a property’s value, how much it can appreciate over time, and its occupancy rate.
For instance, a commercial property located near a port, railroad, airport, or a major highway may be good for tenants in manufacturing and trade industries; however, these may not be desirable features for tenants in residential properties or companies that deal in other types of business.
So pay attention to the location of the commercial property in regards to its use to help ensure a high occupancy rate and a more profitable investment.
Obtain Legal Support
Having legal support when getting into commercial real estate means you have someone to help walk you through all the legal paperwork for a more favorable contract.
However, when you invest in a REIT, the legal paperwork is handled by the company handling the investment, sale, or resale of the property.
You can also hire a commercial real estate professional to help you find the property you want and determine how much you can afford and how much profit you can expect from the investment.
Know Your Financing Options
It’s also a good idea to understand your financial options before you begin your property search because it will help make it much easier to complete the deal.
Meanwhile, according to MRI Software, “you can use residential building management software…to help market properties to attract quality renters…make rent payments easier…centralize your accounting and property management” and more for an open and flexible approach to managing your investment.
Ayesha completed her Doctor of Philosophy in Biochemistry and started her career as a College Lecturer in 2013. Today, she’s a happy mom of 2 Kids in the field of digital marketing. She loves reading books, spending time with her family, and making delicious food for her husband.
Shammy Peterson says
It sure was nice that you pointed out that tenants in manufacturing and trade industries could benefit from commercial properties located near the airport, port, or a major highway. This is something that business owners must consider when renting a property for their operations. I could imagine how they could get the help of a real estate professional to easily determine the available locations that will benefit their business operations.