If you’re looking to invest in something new or diversify your portfolio, one such avenue is commercial real estate. These types of properties typically refer to retail, industrial, office, mixed-use, and apartment buildings. It can be a lucrative investment over time but takes a lot of research and planning. Before simply buying a commercial property, it’s important for investors to make sure it aligns with their goals. Here are a few ideas to keep in mind before delving into the world of commercial real estate.
Research The Costs Involved
While buying a commercial property is not cheap, it can be worth the risk if you understand the costs involved. It’s not as simple as just putting up the money for a building; you need to research the prices of maintenance, upgrades and expenses like utilities and taxes.
Pay attention to how the property is listed. A property that’s labeled as a “value add” means it needs some work before it can be rented to tenants and/or achieve higher monthly rent values. Value add properties typically need some type of renovation whether, it’s interior, exterior or both.
Visit The Neighborhood
When it comes to investing in real estate, it’s location, location, location. You don’t want to buy in an area just because the price is right. When given the opportunity to invest in a building before a neighborhood gentrifies, you’ll likely experience a great appreciation over time.
Be sure to check out the market value and what the location offers. Take a look at the surrounding businesses, parking, demographics, and the population. Identifying a neighborhood primed for appreciation before the rest of the industry catches on is the ultimate goal for investors.
Secure Your Funding
Take the time to understand the loan options available for specific commercial real estate properties. These include conventional loans, which require at least 20% of the purchase price as a down payment, as well as government-backed loans that can require as little as 10% down. You may also consider syndication, which involves pooling money from investors to purchase the property or owner financing where the buyer finances the purchase directly through the seller.
With these tips in mind, take the time to understand the real estate investment market before deciding if it’s right for you. With hard work and some research, commercial real estate properties can really pay off in the long run.
Are you a real estate professional looking for representation in commercial transactions? Caiaccio Law Firm’s clientele includes commercial and residential developers, sponsors, investors and lenders. Our firm’s experience in commercial real estate transactions covers property types, including multifamily, single-family, retail, hotel, and office properties. We have a specific concentration in representing multifamily operators, property management firms, and commercial developers.