Any endeavor in commercial real estate can be challenging and involves considerable risk. When done right, though, this form of investing can be very profitable. Carefully apply the advice in the below article to provide you with assistance in succeeding in commercial real estate.
Real Estate
When you are choosing real estate brokers, you should find out the brokers’ experience level in commercial real estate. Make sure that they are experts in the area in which you are selling or buying. With that broker, you also want to enter into exclusive agreements.
Net Operating Income, or NOI, is one of the most important metrics used in commercial real estate. You must understand what it means, and how it’s used. In order to succeed, you should focus on keeping your figures in the positive.
Ensure that the amount of money you want for your commercial property makes sense, given local market conditions. A wide variety of factors exist that influence how valuable your lot actually is.
Always rent out all the available space in your commercial rental properties. If you have any open spaces, then you are losing money. If you have multiple properties available, you need to figure out what the reason is behind this, and address anything that is causing tenants to look elsewhere.
Make sure that you explicitly welcome both local and non-local buyers when you sell a piece of commercial property. Too many sellers assume that their property is likely to only sell to someone local. This is a way of thinking you should avoid. In many cases, a private investor will be interested in a property even if it’s not in their area, so long as its price is a good one.
Before making a commitment, you should request tours of any potential properties. As you tour each property, you should bring along an experienced contractor who can offer helpful input. Make preliminary proposals to break the ice and open negotiations. Give a bit of thought to the counteroffers before deciding to accept the offer, make a counteroffer yourself or walk away.
The commercial space you want to rent may need some changes before you can move in. These may be simply applying new paint or a change in furnishings. In many cases, walls must be moved and floorplans rearranged. Negotiate in advance who pays for these improvements or try to get the landlord to pay for at least a portion of the costs.
It is essential to develop a list of emergency maintenance service providers. Ask in advance who will be handling any emergencies that arise. Have the phone numbers on speed dial, and know how long it generally takes stuff to get fixed. 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.
Commercial Real Estate
Commercial real estate has many brokers to offer. You have a full service broker who works on behalf of both the tenant and landlord, then you have brokers who only work with tenants. Consider hiring a broker who only works with tenants. This type of broker may have more experience with helping tenants successfully enter the commercial real estate market.
Before settling on a broker, determine if they negotiate aggressively or rationally. Inquire into their specific credentials and training; do not be afraid to ask for references. You should also make sure that they use ethical methods and know how to get the best deals. Go ahead and ask them for examples of any past negotiations, including those that were successful and those that were failures.
As you have seen, commercial real estate can be a very lucrative investment. The suggestions presented in this article should help you avoid some of the most common pitfalls, and move forward toward success.