Interested in investing in commercial property? Whether you’re a first-time investor or looking to expand your portfolio, read on for 5 keys to success!
1. Do Your Research
Several factors contribute to a property’s value in the commercial real estate realm. First, you need to understand the economic environment, the investment market, the property market, vacancy rates and rental rates, to name a few.
You also want to consider factors such as repair costs, return on investment expectations and the impact of taxes. When you are just starting, you should collect information from many sources before putting money into a commercial investment. It is also essential to establish how much risk you are willing to take when investing in commercial real estate.
2. Seek Professional Advice
You should be aware that there are no right or wrong answers in real estate. It is more of an art than a science, so the only way forward is to get professional help.
It is a good idea to seek professional help from a Certified Commercial Investment Member (CCIM) or a member of the National Association of Realtors.
3. Do Your Due Diligence
When looking for properties to invest in, you will need to research to find out more about each property, like how much the current owner is willing to accept as a selling price.
You should also determine how much it costs to acquire the property and factor in the costs of repairs, renovations and so on.
4. Expect The Unexpected
Unlike residential real estate, there are more factors involved in commercial investment.
- There are tax consequences if you sell your commercial property within five years.
- It is more challenging to get financing for commercial real estate investments.
- Commercial leases can be oral or written, but either way, there must be a legal agreement between the tenant and landlord.
5. Ask the right questions
Ask detailed questions about the property’s history, current condition and plans when doing your initial research. If it is an investment property that you are looking at, ask yourself these three questions.
- What are my exit strategies?
- What type of return will I get on my investment?
- What are the costs associated with this property?
Exit strategies could include selling to another investor, leasing the property, or building it out and then selling or taking in a partner with whom you can share your equity stake.
Commercial real estate can be a significant investment, but by keeping the five points we’ve outlined in mind, you can make sure that your investment is a smart one.
Are you ready to generate passive income and invest in a commercial property, but are unsure where to start or are interested in expanding upon what you already know? If so, check out our real estate education courses that will provide you with a customized learning experience. We use real life investing scenarios so our students walk away with tangible skills to apply to their businesses. If today is the day you want to start investing in your future, contact us today. We are happy to assist you.
Wishing you great success in all you do!