When Purchasing Commercial Real Estate, What To Look For
If you’re looking at commercial investment real estate, depending of what factors you are considering, you may end up feeling optimistic. But an experienced investor realizes that these factors change, some moving up and some declining. Therefore, to ensure that you are making the best decision possible, you are advised to get as much information as possible. Here are some tips.
Commercial real estate takes longer to sell, renovate and purchase. It is still a great way to make a nice profit when buying and selling it, but always keep in mind that it is a longer process than buying and selling residential real estate would be.
Much more money required for commercial investment real estate loans
Commercial loans for real estate require a higher down payment on the property that is being purchased. Spend some time learning about the different commercial lenders in your area to find the one that has the best reputation with borrowers. This is sure to make a big difference when you are trying to get a loan.
To really make money in real estate you best plan on making a profit from the first day after purchase, and not relying on prices rising. Finding property whether it’s a house, building, warehouse, etc. that requires a minimum of repairs ensures that the investment will pay for itself and be something you can sell for a profit.
You might have to make improvements to your space before you can use it. The changes could be rather cosmetic. Sometimes it is as simple as painting a wall or moving some furniture. The change could be significant like moving an entire wall to work with a new floor plan. If you’re leasing or renting, you can ask the landlord to make these changes at no cost to yourself.
Remember that when you begin to do your due diligence by getting an inspection, an appraisal and whatever other tests you need, you may find that you’re spent a lot, sometimes thousands of dollars. You may also find that doing all this required investigations about a particular property may yield information indicating that you should not purchase the property. So while it might feel like wasted expenses, isn’t it better than losing ten or hundred times more in a property that didn’t work out. Realize that this is part of the risks in looking at commercial real estate property seriously.
Consider the property tax rate of the commercial real estate you are interested in. Determining the costs annually for owning the commercial property can help you decide whether the annual costs are within your budget. There are several factors that can increase your costs as well, including MUD’s, various other U.D.’s, and even Property Owner Association fees.
Patience, determination, expertise required for successful commercial real estate investment
Being a serious investor in commercial real estate requires considerable patience, determination and expertise, the last factor not being quickly or easily acquired. Without doing thorough due diligence which takes time and money, you can easily get into a losing situation. Regret or remorse cannot make up for your investment losses.
If you are searching through the commercial real estate market you should know what it is that you are looking for prior to beginning your search. Know the location that you want the property to be in. Is this an investment or somewhere you may live? Are you paying cash or will you need to find financing for the property?
Another factor to be aware of when shopping for property to lease or rent is who pays for pest control. Obviously if you’re in a less than optimum location, you may have problems with rodents, bugs, etc. finding a solid house that doesn’t require Have your rental agent inform you of any associated policies for pest control.
Always remember to keep them occupied if you rent out your commercial properties. Without occupants you are not meeting your monthly expenses for maintenance and upkeep. And obviously if are having an occupancy problem, you need to take a serious look at your properties to learn what needs to be corrected before you aren’t able to keep a balance going in your favor.
It is wiser to have a business partner in your adventures in commercial real estate. With help from someone else you’ll have more money available to invest in properties. Also, it certainly can’t hurt to have someone with whom to discuss important real estate decisions. The input of another person can really help you make the best possible business moves.
A real estate professional is essential
If you are going to buy a car you always look at several options. The same should go for choosing a real estate agent. Do several interviews by phone and then make a short list of 2 or 3 of your favorites. Meet these agents in person to see if you have a good chemistry with them.
Utilize an agent or broker to ensure documentation and legalization is correct. There are several documents and a great deal of legal work that has to be put into obtaining commercial real estate. When you have a qualified agent or broker to assist with these steps, it is much easier.
Understand the environmental responsibilities associated with commercial real estate. There are many new environmental laws that require commercial properties to comply with certain regulations. Learn about the rules. in your area and become familiar with the actions you will need to take to avoid fees. It may be helpful to have someone assess new properties for environmental concerns before making a purchase.
You should be looking at restrictions when you are negotiating a lease for a commercial real estate such as those that limit or prohibit subleasing, signage and types of use. They may hamper you in how you want to use the property.
Caution and much research required for successful commercial real estate investment
As much as you may be reassured with commercial real estate, though, you still need to be very realistic. It’s probably a sad fact that most who invest in commercial real estate today ultimately lose their money. It’s somewhat like gambling: the odds are against you. The demand side of the market has shrunk. This situation is definitely a case of buyer beware.