It really is not so hard to start investing in commercial real estate. Learn some basic information before attempting to buy property. Read this article to find out more about common tricks and mistakes you should avoid to become a successful investor.
Search online for websites that provide information about real estate investments. These general interest websites can provide you with useful information whether you’re new to the world of real estate investment or have made a career out of investing. You can never know too much about commercial real estate, so keep learning!
Location is the most important factor in choosing a commercial property to buy. Find out more about the neighborhood. Look at similar neighborhoods to determine the likely growth trends over time for your property’s neighborhood. This research will help you figure out how the neighborhood you’re considering buying commercial property in is likely to grow and change over the next several years. If you aren’t comfortable with the potential growth rate or the atmosphere of the neighborhood, purchase property elsewhere.
It is a far lengthier, and more complicated, process to purchase a commercial property than a residential one. Understand, however, that this additional time and effort often translates into higher returns.
Commercial Property
When buying commercial property, think about the socioeconomic status of the neighborhood around the building. You want to try to purchase commercial property in a neighborhood that is affluent so that you know your clientele are a little bit more well off and can spend more. If the service you offer would appeal to less affluent people, you should not set up your business in an affluent neighborhood.
Before you negotiate a commercial real estate lease, you should aim to decrease the things that could be considered an event of default as much as you possibly can. That will cut down on the likelihood that the tenant defaults on a lease. Once a default happens, you’ll be in big trouble!
Know your needs before you even start looking for a commercial real estate. Draw up a list including all the features your ideal property should have, such as property size and location, or the total number of restrooms, offices, etc.
Know that there are many different kinds of brokers when it comes to commercial real estate. Some agents represent tenants only, while brokers work alongside tenants and landlords alike. If you are a tenant, you may be much better off by using a broker who only works with tenants as they have a lot more experience with successful tenant representation.
Dual Agency
Scrutinize any disclosures made by a real estate agent whom you intend to hire. Watch for possible dual agency. Dual agency in real estate is when the agency works for both parties. This will mean that the agency will work with the landlord and tenant simultaneously. 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.
Research the company and find out if they care about their customers’ best interests before you commit to working with them. Bad customer service can cost you a fortune when dealing with commercial property, so do your homework.
Speak to a tax adviser prior to buying a property. The tax lawyer will help you find out how much it will cost you and how much you will be taxed. Work with the adviser to try and locate an area where the taxes will be lower.
Always ask how a broker negotiates, before hiring him or her. You can ask them how much experience and training they actually have. Also make sure they’re ethical when doing business and can get you the best deals. A quality broker will be happy to share examples of their past work with you if you ask, including both deals that were successful and those that weren’t.
Key Terms
The key terms will include the pro forma and the rent roll. If you don’t review the key terms, you may discover terms which were not contemplated for the rent roll. This could quite possibly result in a change to the pro forma.
Properties are subject to a life-cycle similar to ours, where they will eventually parish if not ordered and maintained. A lot of people will completely ignore the fact that they may have to spend big money in maintaining the property. Make sure that you don’t fall into this trap. It might need an electrical system upgrade, or perhaps it needs a new roof. Every piece of commercial property needs maintenance sometimes; however, some buildings require more extensive or frequent repairs than others. You must consider these requirements, and have a plan in place to handle them over the long haul.
As mentioned earlier in this article, you are going to need a good bit of information at your disposal prior to entering any commercial property deal. Ideally, this article will have helped you to expand your knowledge base and improve your understanding of commercial real estate.