Generally speaking, there is a much better potential for larger profits in commercial real estate than with residential properties. Sometimes it can be difficult to find the appropriate opportunities. These tips will help you understand the different aspects of the commercial real estate market, in order to turn a nice profit.
Negotiate, whether you’re the seller or the buyer. Be certain your needs are met, your concerns are heard, and you champion a fair, honest price for the real estate.
Learn about Net Operating Income, or NOI, a metric in commercial real estate. To succeed, have positive numbers.
If you’d like to rent out the properties you purchase, it’s best to buy a simple building with solid construction. These are the most likely to quickly invite tenants into the space, because they know it is well-cared for. Since these properties probably do not need many repairs, they will require less maintenance from the owner and tenants.
Make sure that the commercial property has access to all utilities needed. Your business may have unique utility needs, but at the very least, you probably require hookups for electric, sewer, water and most likely, gas.
Lower the risk of default by eliminating as many things that can be labeled “event of default” as you can prior to negotiating a commercial property lease. This decreases the chances that the tenant will default on the lease. You don’t want tenants defaulting on your leases.
Before making a commitment, you should request tours of any potential properties. Consider taking a professional contractor along with you as you look over the properties that you consider buying. Set the stage for future negotiations by putting forth the preliminary proposals. Before you choose, make sure you look over your offers a few times.
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. Doing it this way will allow the negotiations to be less intense and get them to agree faster.
If there is more then one property you are considering, acquire the house survey checklist for each one during your site tour. Do not proceed past initial proposal responses, unless you inform the property owners. Make sure that the owners are aware that you have other options available. This may ensure that you get a much more viable deal.
Before you begin seeking commercial real estate property, be sure to identify your requirements. Write down what features are most important to you when you look a piece of property, like the square footage, the number of offices and conference rooms, and bathrooms.
You should always know how to get in touch with emergency maintenance. Speak with the landlord about handling of emergency repairs just so you know who to call in that situation. You should not only commit emergency numbers to memory and post them in a conspicuous location, but you should also know how long it takes various workers to get to your office in an emergency. 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.
Full Service
You can find different kinds of brokers. For example, full service brokers will work with landlords and tenants, while other brokers only represent tenants. A tenant’s-only broker may serve your needs better than a full service broker.
Ensure your legal and financial safety by thoroughly examining the disclosures of a potential real estate agent. Look for any disclosures regarding dual agency. Dual agency is when a real estate agency is responsible for the representation of both parties involved in a transaction. This will mean that the agency will work with the landlord and tenant simultaneously. Both parties need to clearly understand that the transaction is being handled by a dual agent and consent to this fact.
Commercial Loan
You have to purchase a real estate appraisal yourself before you can qualify for a commercial loan. If someone else orders the appraisal, the bank cannot use it for the commercial loan. Protect yourself from this problem and get the appraisal done on your own dime.
If you are just starting out as an investor, you would be well-advised to work on just one investment deal at a time. For example, concentrate your efforts on working with a single type of property. It is better to do your best at one type than to be average at many types.
After reading this article, you should be familiar with commercial real estate basics. Maintain flexibility and think fast so you can steer your way through the constantly changing market of commercial real estate. This way, you will be ready to jump on opportunities as soon as they arise so you can get the best return from your investment.