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. A number of newcomers to commercial real estate investing have successfully learned the ropes and turned a tidy profit. The purpose of this article is to educate you about some of those basics so you too can experience success.
Use a digital camera to document the conditions. Make sure the picture shows the defects (such as spots on the carpet, holes on the wall or discoloration on the sink or bathtub).
Take into consideration the local unemployment levels, average income, and job market before investing in real estate. Your house will sell more quickly and at a higher value if it is near a university, hospital or any large employment center.
Transactions for commercial property take more time, and are a lot more complex, than the process of buying a home. Remember that the time and efforts you are investing will pay off.
If you are selecting a broker, ascertain the amount of experience they have had within the commercial real estate market. Look for someone who knows the area you are interested in. Also, consider entering into an agreement that will be exclusive between you and that broker.
Location is key in commercial real estate. Consider the neighborhood of the property. Also review the expected growth of other similar communities. If you make an investment in real estate, it is in your best interest to ensure that your property is in an area that will still be growing in five to ten years.
Make sure that the commercial real estate you want to purchase is equipped with connections to all of the utilities you’ll need. Water and sewer access will be needed in addition to electricity. You may want the option to use natural gas, as well.
When choosing between two similar commercial properties, think large scale. Finding the right bank to finance you might be hard, even if you are going for a smaller building. You may have a better price, figured per unit, on the larger apartment complex than on the smaller one.
Thoroughly tour every potential property. Consider going with a contractor when you are looking at places you want to buy. Submit a first offer and solicit counteroffers. Take your time and really explore your offers before you decide to buy or pass.
Inspections are necessary before buying any piece of real estate. When arranging an inspection, be sure to check both credentials and reputation before hiring an inspector. This should be especially noted for those who work in pest removal since there are actually a number of non-licensed people who work in this area. This will avoid bigger problems in the post-sale.
You might need to make improvements to your new space before you can use it. The changes could be rather cosmetic. Sometimes it is as simple as painting a wall or moving some furniture. However, you might have to remove or relocate some of your walls so that you can get the most out of your space. Plan on negotiations with the owner of the property to see if all, or part, of the costs can be covered by said owner.
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.
Consider any tax deductions you might get from your commercial real estate investment. Depreciation benefits and interest reductions are given to investors in commercial real estate. Sometimes an investor will get a bit of money that is taxed even though it is not received. You need to know this kind of income prior to investing.
Do a walk-through and close evaluation of each property you are considering. It’s a good idea to hire a building contractor to come with you and do on-the-spot inspections of properties you are considering. Make the preliminary proposals, and open the negotiating table. Closely review any counteroffers you receive prior to making a final decision. Remember the decision is an important one, so take your time.
You should do this to ensure that the terms are the same as the pro forma and the rent roll. If you fail to check out the terms, you might find something that is at odds with the rent roll and make the pro forma unreliable.
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. The negotiations will become less tense and you will be able to better get an agreement on the more small problems.
Get yourself set up online before you buy any property. Creating a LinkedIn profile is one good way to accomplish this; another approach would be to develop your own professional website. Make sure that you use search engine optimization on your website so that people can find you easily. Ideally, people who want to learn more about you on the Internet should be able to quickly find you by doing a simple search using one of the search engines.
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. It will likely be to your advantage to informally mention that you are looking at more than one property. Making them aware you have other options may get them to accept a lower offer.
Try to consider all the kinds of environment problems that could raise their heads. Hazardous waste materials emitted from property can be a real headache for property owners, so identify the problems before they start with a thorough inspection. Once you purchase a commercial property, hazardous wastes and environmental issues become your problem.
The new space you purchase might need some upgrades and repairs prior to occupation. It could be as simple as a coat of paint or replacing some carpet. However, you might have to remove or relocate some of your walls so that you can get the most out of your space. Plan on negotiations with the owner of the property to see if all, or part, of the costs can be covered by said owner.
Take into account how the establishment of an ideal rent expectation can affect your future business prospects. Don’t talk to potential tenants until you have figured out your rental fee structure. This will enable you to achieve the benchmarks and goals that you calculated on your investment’s performance.
If you are financing your commercial properties, you need to ensure that you have the proper financial statements for both yourself and your business. If you do not have these, banks will not know how responsible you are with your money, which makes it very likely that they will not lend you the money you need.
Before hiring any real estate broker, read all of his disclosures. Be aware of the possibility of dual agency. Dual agency in real estate is when the agency works for both parties. This means the real estate agency will work as the landlord and the tenant. An agent should always disclose dual agency, and it must be acceptable to both parties.
When you buy a commercial property, have a specific use for the property in mind. Are you going to use it to run your business, or are you going to lease it? Have some clear goals before you look for commercial property, it will save you time and a lot of work.
Don’t be afraid to question any potential real estate agents, and ask for references. Find out what criteria they use to determine their results. Strive to understand the various strategies that they employ. Only work with them if you feel you are a good match, and have a similar philosophy about the strategies they use.
If you read the preceding paragraphs with care and apply the points to your life, you’re going to start off well. By implementing the tips that you have read, you can enjoy success with the many wonderful commercial real estate investing opportunities that are available.
You now know more about Mortgage and can continue with plans. Keep a copy of this article so that you can turn to it whenever you become confused. You will be more successful that you ever imagined.