If you are considering a commercial real estate investment, you’ll need to know what type of property will meet your needs. If you choose real estate randomly, you might lose money on bad deals or on investments that don’t truly interest you. Review these tips to learn to make good choices when seeking a commercial real estate property for investment.
Before purchasing any property, you should investigate its area to determine the average income level, unemployment rate and whether or not that area is growing. For example, buying a home near a large employment center, such as a university or hospital, will lead to a higher value and faster sale down the road.
Bugs and rodents are always looking to ruin your property, so factor pest control into your business strategy when renting commercial property. Talk about pest control with your agent if the area is known for rodents and bugs.
Think larger when you’re thinking about two commercial properties that are viable. Obtaining adequate financing is a major undertaking, whether you opt for a ten-unit apartment complex or a twenty-unit apartment complex. This just reflects the general advantage of buying anything in bulk; when you buy a property with more units, you get a lower average price for each one.
Make sure that you know and understand what “NOI” (Net Operating Income) is. 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.
Don’t become greedy and over-inflate your real estate asking price. Different variables can have an impact of the value of a lot.
If you rent out your commercial properties, always remember to keep them occupied. If you have units that are unoccupied, you will not only lose money due to lack of rent, but also the upkeep of the space. If you have multiple properties open, figure out why, and try to correct the issue that could be causing a loss of tenants.
Prior to listing your commercial property for sale, have it checked out by an inspector with at least five years of experience. If they should discover even a single issue with the property, repair or resolve it immediately.
Do a walk-through and close evaluation of each property you are considering. Look into having a professional contractor accompany you as you take a look at the properties you’ve been thinking about purchasing. Once you have all the details, start drafting proposals and enter negotiations with the seller. Evaluate counteroffers against the information you collected on your tours, and use that information to justify your own counteroffers.
When you are writing up the letters of intent, keep it simple by going for agreement on the larger issues first and let the smaller issues wait for a later time in the negotiations. The negotiations will become less tense and you will be able to better get an agreement on the more small problems.
Your new space may need improvements before you can occupy it. It may simply be cosmetic issues that need addressing, such as a fresh coat of paint or some furniture rearrangement. Sometimes a new business will need to alter the floor space by moving interior walls. Negotiate payment for these improvements ahead of time, and attempt to have the landlord pay at least part of the costs.
You should always know how to get in touch with emergency maintenance. Find out from the landlord who you should call if the worst happens, and you need immediate repairs. Know their phone numbers and also what their likely response time is going to be. Your landlord should be able to provide you a list of emergency contacts so that you can map out a safe and well organized emergency plan, in case an emergency happens during normal business hours.
Make sure you try to read any disclosures for your agent. It is important that you realize that you may be entering a dual agency transaction. In this situation, the agent will represent the buyer and seller. The real estate agency will represent both the seller and the buyer. An agent should always disclose dual agency, and it must be acceptable to both parties.
As you’ve seen from these tips, it is very possible to achieve success in real estate investing. While luck can’t hurt, success in this venture will require significant work and research on your part. Of course, not everyone can succeed at commercial real estate investment, but following our tips will certainly increase your chances!