The advice in this article has helped many first-time investors like yourself turn a profit in the commercial real estate market.
Initially, your investment will take up a great deal of your time. First, you will need to search for an opportunity and purchase the property, as well as perform any repairs that are required. Don’t let the amount time you need to put in during this phase discourage you. The rewards you see will be much greater at a later time.
Regardless of whether you are buying or selling the property, negotiate! Be heard so that you can get yourself a fair property price.
Location is the most important factor in commercial real estate. Think over the neighborhood your property is located in. Also review the expected growth of other similar areas. You want to know that the community will still be decent and growing 10 years from now.
When you are picking between commercial properties, think big! Regardless of which way you choose, coming up with the capital is a common factor, so often times it will be be worth digging a little bit deeper to get the larger property in order to maximize your long-term profits. Generally, this is much like the principle of buying in bulk; the more units you buy, the lower the price per unit.
If you have to choose between two different properties, remember that size matters. Generally, it’s like buying in bulk; the more you buy, the more you buy the cheaper the price of each unit.
You should try to understand the (NOI) Net Operating Income of your commercial property.
Try to keep your properties occupied. You’re the one who has to pay to keep the building maintained, and if no one’s renting them, you’re wasting your money. If you’re struggling to keep your properties rented, you should consider why that is, and try and fix anything that might be scaring away prospective tenants.
This will avoid bigger problems from occurring after the post-sale.
If you want to rent your commercial property, you should seek buildings of solid and simple construction. These will attract potential tenants because they know that these properties are well-cared for.
Make sure that any property you’re considering purchasing has access to all the utilities you’ll need. Your business may have unique utility needs, but at the very least, you probably require hookups for electric, sewer, water and most likely, gas.
Keep your rental commercial property occupied to pay the bills between tenants.If you have many open properties, think about why that is, and consider what you may be doing to drive tenants away.
You have to think seriously about the surrounding neighborhood where a piece of any commercial real estate is located. If your business services will do better in a poor neighborhood, buy in an area that fits your clientele best.
Have property professionally inspected before you decide to put it up for sale. Fix all problems that they find as soon as possible.
Have a professional do an inspection of your commercial property prior to you decide to put it up for sale.
Advertise the commercial property to both to local and distant buyers. Many sellers mistakenly presume that their property will appeal only interesting to local buyers. Many investors will consider purchasing a property outside their direct area.
If you are considering more than one property, be sure to obtain a checklist for the tour site. Accept responses to the initial proposals, but don’t go further than that unless you inform the property owners. You should feel free to let owners know that this isn’t the only property you’re looking at. This may provide you with more room for negotiation.
You should always know who takes care of emergency maintenance procedures.Know the phone numbers, and know what the response time is for them.
Dual Agency
Identify any necessary improvements before you sign on a new space. It may simply be cosmetic issues that need addressing, such as a fresh coat of paint or some furniture rearrangement. Other changes may be more significant, such as moving walls or installing new doors. Plan on negotiations with the owner of the property to see if all, or part, of the costs can be covered by said owner.
Check any disclosures a potential real estate agent that you wish to work with. Remember that dual agency could occur. This means the broker represents you and the tenant. Dual agency should be disclosed and must be agreed upon by both parties.
Find out what kind of negotiation style is used by prospective real estate agent conducts negotiations. Ask about their training and experience they have. Also be sure to ask about their style of work to ensure that they follow ethical when doing business and can get you the best deals.
Commercial real estate agents specialize in working with different types of clients. For example, some brokers represent landlords as well as tenants, while others only work with tenants. You may benefit significantly better from hiring the services of a broker working with tenants exclusively, as he has significantly more experience representing tenants successfully.
Ask potential real estate brokers to describe how they make their money before you start working with them.They should be up front about what their relations with you. You need to know if their money-making priorities are going to trump your behalf.
This is done so you can verify that the terms match the rent roll and the property’s documentation. If you fail to closely examine these terms, there may be a term that got overlooked by the rent roll, which could cause a change in the pro forma.
Check any disclosures a potential real estate agent gives you carefully. Determine if there is a possibility that he will be working as a dual agent. Dual agency means the real estate company is representing both the seller and the buyer in a property transaction. In other words, the agent is representing both you and your landlord in the same transaction. If this is the case, and the agent is a dual agent, this should be known to both parties and agreed to by both parties.
Think about any environmental hazards that you may be responsible for taking care of. A property that has issues with hazardous waste issue would be of huge concern. As owner of the property, it is your responsibility to handle these issues, regardless of their origin.
Commercial Real Estate
There are many tax benefits available for commercial investors. Investors receive depreciation benefits as well as interest deductions. However, investors sometimes get “phantom income”, this is a type of income which is taxed but it isn’t received as cash. You have to keep all of this in mind before you start to invest in real estate.
Reading this article and using the information you’ve read here, will get you off on the right foot when it comes to investing in commercial real estate. By implementing the tips that you have read, you can enjoy success with the many wonderful commercial real estate investing opportunities that are available.