Commercial real estate is a booming subfield of the housing market. It covers properties that serve commercial purposes such as offices, retail stores, warehouses and factories among other buildings. And it’s largely different than residential properties especially in terms of investing or business. Hence, you must learn the perks it offers, and few valuable tips to begin such investment.
Valuable Points you must know about Commercial Real Estate Investing
Perks of Investing in a Commercial Property
- Commercial properties generally promise larger returns from 6 to 12% and above, whereas residential properties only play from 1 to 4%. That’s because of the primary commercial purpose of such property, hence you can ask more either from selling or leasing. But you can generally earn more if you offer lease of units on the optimal condition, and on a sweet location for business. That’s because commercial leases typically have higher prices, and are longer in duration.
- You’d get to enjoy more owner’s benefits from such property as well. Your tenants would pay for property tax, maintenance, and utilities among other payments. So, a bigger chunk of the profit would go straight to you.
- It’s actually much more convenient to run than residential properties. Aside from having a good source of paying utilities, maintenance, tax, and other necessities, it has lengthy contracts too. Tenant wants to stay on a fixed location for longer years, so customers won’t have a hard time finding them. In other words, you can be confident of a steady income for many years throughout a lease agreement.
- Now, you probably think that a commercial real estate investment is a more complex venture than those of residential properties. Other real estate investors think the same too. That’s why you can expect lesser market competition, which is certainly a big benefit.
Tips to Invest in a Commercial Property
Remember these tips to guide you in making a commercial property investment:
- Know the type of commercial property you want to build. Generally, there are five types of commercial properties, which are the offices, retail, industrial, multifamily and special purposes.
Do your homework and search thoroughly about each type.
- Think of the location and the existing property you want to invest upon. Are you planning to buy a land area near a business district? Are you looking for a relatively old building to renovate? Whatever you choose, be sure it fits the needs of the property you’re planning to build.
- Conduct thorough due diligence and be sure you’d make a reasonable investment. Consider the real estate comparables around the areas, and watch out for certain urban developments as well. Of course, study the essential metrics for commercial property investing, such as net operating income, the capitalization rate and cash on cash. That would give you a glimpse of your investment’s success.
- Learn 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 knows how to navigate such a field of the real estate market.
Keep these points in mind as you begin a commercial real estate investment. The right start would lead you to big returns later on.
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