Commercial real estate is a double edged sword. It can bring you huge profits, but it can also take away that profit away from you. Choose the property you want to purchase wisely and how to obtain funds to do it. The information from this article should shed some light on the fundamentals of commercial real estate.
Regardless of whether you are buying or selling the property, it is in your best interest to negotiate. Protect your interests by standing up for yourself regardless of who is on the other side of the table. Negotiate a fair price rather than accepting one that is too high or too low.
Pest control is an important issue to look at when you rent or lease. This is especially important when an area is known to have pest and rodent problems. Prior to signing a lease, ask your agent what the current pest control policies are.
Buying commercial property takes more time, and the process is far more labyrinthine, than buying a house. Understand, however, that this additional time and effort often translates into higher returns.
Research and learn more about the Net Operating Income, a commonly used metric for commercial real estate. In order to succeed, you should focus on keeping your figures in the positive.
Keep letters of intent simple by tackling large issues before sweating the small stuff. This will diffuse tension during negotiations and will facilitate compromise on the minor issues.
Make a checklist to compare details when looking at several properties. Be sure to take the initial proposal responses, but do not proceed without making the property owners aware of what is going on. There is nothing wrong with hinting that you have other properties in mind. It could even get you a good deal.
Dual Agency
If the agent you are thinking of hiring for your commercial real estate transaction gives you any disclosure forms, make sure you read them carefully. Remember that dual agency is also an option. Your real estate agency will represent each side of the transaction. In other words, the agency represents the landlord and the tenant simultaneously. If there is a dual agency, everyone should be honest about it and find an agreement.
Don’t feel scared to investigate your broker’s personality! For example, ask them what they consider to be success, and what constitutes failure. Ask about their methods for gathering and interpreting results. Keep asking questions until the broker’s strategies are clear to you. You need to understand what these strategies are so that you can evaluate if you are comfortable with them. You should only partner up with a broker if there is common ground in your shared beliefs and thinking.
Before you make a decision on which real estate broker to use, see how they negotiate. Know what sort of education and background they have. You can also double check that their methods are ethical, and that they have success in finding and negotiating the optimum deals. Ask for examples of successful and unsuccessful past negotiations.
When shopping for an honest brokerage, ask the representative how the company makes money. Honest brokers will be open about this, so you can tell if your interests will be at odds. Find out how your broker will benefit form the transaction you want them to work on for you.
Properties, like people, have finite life spans. It’s important to be aware of this. You have the potential of making a huge mistake by ignoring the fact that you might have to spend money in order to maintain the property. Your building may need a new roof, or updates to the plumbing or electrical systems. Every building goes through a phase like this, but some do more than others. Have long-term plans for handling these repairs.
Clearly, investing in commercial real estate will not bring you money for nothing. You will need to put in enough time, work, and have a lot of money to invest to be successful. That, though, is still not a guarantee that you will make money, and you could possibly still lose money.