Select pieces of real estate can have tremendous commercial potential. This real estate can line your pockets with profit and might even make you rich! Yet, not everyone can do it, there is much to gain and much to lose with every investment.
Take plenty of pictures of the building. Try to make sure that your pictures shows the defects.
An essential fundamental of commercial property is location, location, location. Think about the type of neighborhood the property is in. Also, consider local growth projections. You need to be sure that in five to ten years later, the area will still be growing.
Take note that commercial transactions take more time, they are complex and they take more involvement than home purchases are. If you want things made easier, you might want to change what you’re getting yourself into. The duration and intensity is necessary if your investment is to yield a high return.
Learn to understand the commercial real estate metric called Net Operating Income (NOI). In order to be successful and stay profitable, watch this number closely, and take steps to make certain it does not fall into the negatives.
Even though you may be running a business and ultimately need to secure profits, it’s important that you don’t embellish prices in an attempt to get an extra dollar. Your property’s actual value is influenced by many factors.
If you plan to rent out a commercial property, you should do all you can to make sure they stay occupied. Empty commercial properties mean a building that you are having to maintain without any income being received. If you have multiple unoccupied properties, try to determine the reasons why, and rectify the problems that are keeping tenants from renting the spaces.
Prior to negotiating with the lease of your commercial real estate, try to decrease anything that could be a default as you can. This decreases the chances that the tenant will default on the lease. This is a bad thing, so do what you can to minimize the chance of it happening.
Dual Agency
Carefully peruse the disclosure statements issued by the real estate agency you intend to hire. Look for any disclosures regarding dual agency. In a dual agency the Realtor represents both parties of the transaction. This means that the agent is representing the interests of the lessor and lessee simultaneously. If there is a dual agency, everyone should be honest about it and find an agreement.
It’s up to the borrower, that’s you, to order an appraisal for a commercial loan. Banks do not allow the appraisal to be used at a later time. So, cover all your tracks and make sure you are the one who orders the appraisal.
If you are new to investing, focus on one investment type at a time. Select a type of property that you think would make a good place to begin, and focus on it. It is better to do your best at one type than to be average at many types.
Tax Breaks
If you want to invest in a piece of commercial real estate, think about the kind of tax breaks and benefits you might receive. You will get good tax breaks for interest and also benefits for depreciation. There is also “phantom income”, which is taxed by the government although not received by the investor as cash. Before you begin investing, you should be knowledgeable about this particular category of income.
Be sure to deal with a company where customer care is important prior to buying. If you don’t do this, you could end up with a bad deal and lose more money as time goes on.
Do your research so you know ahead of time if you will have issues with the environment surrounding your property. You are ultimately responsible for disposing of environmental waste from your building. Are you considering buying a property within a flood zone, which can effect your insurance, storm water drainage and possibly impede future growth potential? You might want to reevaluate your decision. There are things you can do, like contact the environmental assessment agencies, so that you can gain insight knowledge about the area you plan on investing into.
Commercial real estate is immensely profitable for some. If you want a chance of succeeding, you will need a big down payment, time and effort. To achieve this, heed this advice.