If you are considering a commercial real estate investment, you’ll need to know what type of property will meet your needs. It’s important to carefully consider all your options, because investing in the wrong type can end up costing you more than you intended to pay. Keep reading for a handful of ideas and advice for making more informed commercial real estate decisions.
Never be afraid to negotiate, no matter which side of the table you are on. Let people know what you want and make sure you are asking for a realistic price.
You should take digital photos of the condition. In the “before” photos, especially, make sure that the pictures clearly show defects such as stains on the carpet, discolorations in the tub and sink, and holes in the walls.
Pest Control
Pest control is a very important issue that you need to be aware of when renting or leasing. This is important in less desirable locations where rodents and/or bugs are an issue. Have your rental agent inform you of any associated policies for pest control.
When choosing between two similar commercial properties, think large scale. It’s just as difficult to obtain adequate financing for a 10 unit apartment complex as it is for a 20 unit building. Generally, this is much like the principle of buying in bulk; the more units you buy, the lower the price per unit.
When choosing a broker, ask about their experience specifically in the commercial real estate market. Look for brokers who specialize in commercial real estate. Most brokers will require you to have an agreement to work exclusively with them.
Net Operating Income, or NOI, is one of the most important metrics used in commercial real estate. You must understand what it means, and how it’s used. Success is about staying in the green.
Double-check that you are seeking a realistic amount of money for your property. Market conditions can vary greatly; therefore, an appraisal may not be the best indicator of true market value.
Check out where the utility hook-ups are on any commercial property. Water and sewer access will be needed in addition to electricity. You may want the option to use natural gas, as well.
Aim to avoid default before you sign a real estate lease. This will lessen the possibility of a lease default by your tenant. This is something you want to avoid.
Dual Agency
Read the disclosures when you’re ready to hire a real estate agent. Be aware of the possibility of dual agency. In a dual agency the Realtor represents both parties of the transaction. In other words, an agency simultaneously provides services to both the landlord and tenant. If dual agency is the case, it should be out in the open and both the landlord and the tenant should be in agreement with the arrangement.
Borrowers are required to order the appraisal in commercial loans. Banks do not allow the appraisal to be used at a later time. Order it yourself to cover your bases.
If you are just getting started investing, focus on just one category of investments. Begin by selecting which type of commercial buildings you would most like to purchase and then devote all of your time to those types of properties. If you try to divide your attention very much, you will not excel in any area.
Customer Service
Check the company’s reputation for customer service before you deal with them. Bad customer service can cost you a fortune when dealing with commercial property, so do your homework.
You should meet with a tax adviser before you buy anything. Not only can your tax adviser help you determine the total cost of your potential investment, but he can provide you information about the taxes on your investment and advise you about deductions you may be entitled to. Try to find a location that does not have high taxes, you can consult with an adviser for more information.
In conclusion, it should be apparent that commercial property investments have the potential to be profitable. To be successful in commercial real estate means you need to do a lot of research, have some skills, and even be a tiny bit lucky. Of course, not everyone who enters the commercial real estate market will strike it big, but if you do your homework and adhere to the advice of this article, you have a pretty good shot.