Commercial real estate is a booming sub field in the real estate industry that involves properties such as offices, retail stores, warehouses, factories, etc. Investing in these opportunities can have long term benefits and create a portfolio that showcases your success, knowledge and experience.
What You Must Know about Commercial Real Estate Investing
Perks of Investing in a Commercial Property
- Commercial properties generally promise larger returns from 6 – 12% and above, whereas residential properties only pay from 1 – 4%. This is because commercial buildings are often priced higher than the average home and are usually in prime locations.
- Unlike owning multiple residential homes where you pay for all the maintenance, taxes and utilities, commercial tenants can shoulder those costs in their lease agreement.
- Lengthy contracts can also ensure steady income and increase the value of the building.
Even though commercial real estate can be a more complex venture than those of residential properties, you can expect lesser market competition, which is certainly a big benefit.
Tips to Invest in a Commercial Property
Remember these tips when making a commercial property investment:
- Know the type of commercial property you want to pursue and why. Generally, there are five types of commercial properties, which are office, retail, industrial, multifamily and special purposes.
- Think of the location and condition of the existing property. If a building has a great purchase price and needs little renovation, your investment might not succeed if the property is too far from heavily trafficked areas. Alternatively, if you find a building that has to be totally renovated but it’s in a great location, make sure you can afford the repairs and that you can achieve your anticipated return.
- Conduct thorough due diligence by considering the real estate comparables in your area and study the essential metrics, such as net operating income, the capitalization rate and cash on cash. That will help you measure your investment’s success.
- Learn about the best commercial property loans available and see which suits you best. Think of Small Business Administration loan, Certified Development Company loan, Conventional loan and Hard Money loan, among other choices.
- Lastly, be sure to connect with a seasoned commercial real estate agent. Don’t randomly choose any realtor that boasts high reliability. You must specifically go for a commercial realtor who is active and experienced in this part of the market.
Keeping all these points in mind will point you in the right direction for making a successful investment in commercial real estate. And the more wise you become, the greater the benefits!
Image Source: Canva
Call me today and have my teamwork for you. You will be thankful that you did! EdConstable.com Team Your Realtor for LIFE
Do you want your home selling experience to be made easy?
Ed Constable is a top Realtor in Fenton, MI, and surrounding areas!