Many people are drawn to commercial real estate investing because of its potential for high profit, but the truth is that this type of investing also requires a high amount of perseverance, preparation, and research. Many people have become successful with it by reading and applying the tips below so that they can succeed in this lucrative field.
Transactions for commercial property take more time, and are a lot more complex, than the process of buying a home. Understand, however, that the intensity and duration of the process is necessary to achieve the higher return on your investment.
When choosing between two similar commercial properties, think large scale. Regardless of whether the property you decide on has twenty units or fifty, the process of obtaining financing will be the same, and in both cases will require substantial effort. Generally, this is much like the principle of buying in bulk; the more units you buy, the lower the price per unit.
Do your best to have your properties occupied at all times. If you’ve got open spaces, then the person will end up paying for maintenance and upkeep. If you discover that you have multiple properties that are unoccupied, you should attempt to ascertain the underlying reason. Further action may be required on your part to avoid scaring off potential tenants.
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. This is in your best interest.
Have a professional do an inspection of your commercial property prior to you listing it as available on the market. Fix all problems that they find as soon as possible.
When you are constructing a letter of intent, make sure that you keep it concise by focusing on larger issues first. Save the smaller issues for future negotiations. This make negotiations less contentious, as coming to agreement on minor issues is naturally easier than agreeing on the big stuff.
Establish your goals and needs before you start looking at properties. 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.
Before you move into your new space, it may need to be improved. The space may be due for some regular maintenance, or it may need something as simple as a new coat of paint. Many times, changes include reconfiguring the floor plan by moving walls. If you’re leasing or renting, you can ask the landlord to make these changes at no cost to yourself.
Full Service
Different commercial brokers represent different parties. Full service brokers speak with landlords and the tenants, while others represent tenants solely. A tenant’s-only broker may serve your needs better than a full service broker.
Borrowers are required to order the appraisal in commercial loans. The bank will disallow any appraisals ordered by other people. Spare yourself further hassle by initiating the request yourself.
If you are new to commercial real estate investing, you should investigate any tax benefits that you could be eligible for. Investors get both depreciation benefits and interest deductions. Phantom income also exists: this type of income does not cover cash benefits but is taxed. You have to keep all of this in mind before you start to invest in real estate.
Consult with your tax adviser prior to purchasing any commercial real estate property. You will find out how much this property will end up costing you and what percentage of your income will be taxed. Work with your adviser to find an area where taxes will not be as high.
The above articles should be of significant help when you begin planning your real estate investing goals. When you take the time to use the advice that has been discussed, you can enjoy a lot of the same rewards as others have who learned how to make money from commercial real estate.