Buying commercial properties can be a dichotomy. There is a lot of money that can be made; but, if you are not careful, there is also a lot of money you can lose. Carefully consider the specific type of property that you are most interested in working with, and line up possible sources of funding. Read on to find some ideas to help you make sound decisions when it comes to property purchases.
Regardless of which side of the negotiations you’re on, learn to haggle. Both the buyer and seller should attempt to negotiate a fair price rather than accepting the other’s first offer. Be heard and fight to get a fair property price.
Prior to making a large investment on a property, look at the local income, unemployment rates, and contraction of the local employers. If you’re looking at a property that’s close to things like a university, employment centers, or a hospital, they’re likely to sell fast, and at a high value.
An essential fundamental of commercial property is location, location, location. Take into consideration the class level of the neighborhood, other commercial properties surrounding it, and accessibility. Look at the growth in similar areas. This is important, as you don’t want to be in a current growth area only to have the neighborhood stagnate in a few years.
Less Wealthy
Look at the surrounding neighborhood before you decide on purchasing a specific commercial property. Purchasing in neighborhoods that are in the upper price per square foot range will help for successful business because the surrounding owners have more money to spend. However, if you’re offering services that less wealthy people may be more interested in, you probably want to purchase property in a less wealthy area.
Always have an inspector look over your commercial property before you put it out on the market. If they do find anything amiss, get it fixed immediately.
Commercial Real Estate
Advertise your commercial real estate far and wide. A lot of people do not think that people from out of town will want to buy their commercial real estate. Private investors will purchase properties outside of their area if the prices are low enough.
Write an easy-to-understand letter of intent, focusing on the biggest issues. You can worry about the little things later on. This make negotiations less contentious, as coming to agreement on minor issues is naturally easier than agreeing on the big stuff.
Create or purchase an inspection checklist before starting to evaluate properties. Tour each potential property, and check how well it meets the requirements on the list. Allow yourself to consider the initial proposal responses, but avoid carrying it any further without informing the current owners. Don’t be shy about telling the owners that you are thinking about purchasing another property. Making them aware you have other options may get them to accept a lower offer.
You might need to reconfigure the interior of your property before you can use it properly. It could be something simple, such as paining walls, rearranging appliances or furniture or hanging things. However, you might have to remove or relocate some of your walls so that you can get the most out of your space. When negotiating, you should discuss who will pay for the improvements you’ll have to make, and should see if the current owner will cover some of your costs.
If you are novice investor, you should start off with just one single type of investment. Find one property type to focus on and devote your undivided attention to it. It is in your best interest to stay focused on one type and do your best, than to spread yourself too thin and just do average at multiple investments.
Tax Breaks
If you want to spend some money on commercial real estate, consider tax breaks you may get. Investors will receive tax breaks for both interest and depreciation of property. However, investors are sometimes taxed on income that they do not actually receive in the form of cash. This is known as “phantom income.” You need to be aware of this type of income before investing.
As previously noted, the business of commercial real estate can be challenging to succeed in. It takes money to make money in this industry, not to mention a fair time and work investment too. You may still lose money if you go ahead with all of those things.