Commercial Real Estate 101: How to Buy Property
Commercial real estate is an excellent investment opportunity–if you know how to do it. In this post, we’ll walk you through the steps needed to buy your first commercial real estate property. Click here!
The business world can be tough to break into. You have to find a way to fund your ideas, manage employees, and devote a lot of time and money to your job.
If you want a better way to make money, consider investing in real estate. But instead of buying a second home or vacation property, you should consider commercial real estate.
Why? Because economists view commercial real estate as a solid investment for people of all income levels.
If you’re interested in real estate investment, you’ve come to the right place. We’ll tell you everything you need to know so you can start investing in profitable properties.
Why Invest in Commercial Real Estate?
Many choose to invest in commercial properties because of the appreciation in value. It’s important to remember that you don’t just have the physical building the property is on–you also have the land.
If you choose the location wisely, you have an investment that can continue to earn income even if it’s unoccupied. Because of this, commercial real estate investments don’t fluctuate as wildly as the stock market.
Many commercial properties tend to go up in value because of factors outside of market forces.
Pro-active management of the property can improve the overall value.
Another benefit is the ability to place debt on the property that’s several times larger than the original equity. This can give you funds to buy more assets and increase equity as the loans are paid down.
Investing in commercial real estate can also help you avoid problems with inflation.
Tips for Buying Commercial Real Estate
There’s no one right property to invest in or any kind of “sure thing.” But we can give you some tips so you can choose the right property for your investment needs.
1. Start with One
When you’re getting started in commercial property investment, it’s easy to feel tempted to scoop up every promising property you find. But if you want your property to be profitable, start with just one.
Managing commercial property takes a lot of time and money. You’ll want to spend as much time as possible getting your new property in order.
If you invest in multiple properties when you’re starting out, it can be easy to burn out and get overwhelmed.
You may find that one property will require more time and money than you thought. It’s possible that your properties won’t be rented out for a while, and you may not bring in money fast enough.
Once you get your first property squared away and profitable, you can consider investing in more. But for now, focus on one so you can have the best chance for success.
2. Know How Much You’re Willing to Invest
Commercial properties have the potential to make investors a lot of money–but potential can’t pay your bills.
When you’re thinking about how much money you want to invest, don’t just think about how much it’ll take to buy the property. Think about any repairs that you may need to have done.
Take maintenance costs into consideration.
If you plan on providing services like front desk help, janitorial services, or other benefits, think about how you’ll pay for that. Some of these costs may take a while to materialize, but they’re still costs you need to account for.
Consider speaking with a financial adviser with expertise in investment property. You should also use a mortgage or loan calculator to get an idea of what you may have to spend.
3. Know the Area
You may have been able to find a deal on a great building that needs minimal repairs. But don’t jump on that alleged “deal” until you research the area.
The building may have office space for at least two mid-sized companies, but it could also be located in an unsafe area.
The building could also be located in an inconvenient area. If your building isn’t located near major highways, some businesses may be unwilling to rent there.
Buyers take time to carefully research neighborhoods before they purchase a residential house.
You should put the same level of care into choosing an area to buy commercial real estate.
4. Speak with Local Authorities
You may not be planning to do any major construction or adding on to your building. But you should still acquaint yourself with local building laws and ordinances.
In some areas, you may be able to get a building permit in a few weeks. In other areas, it may take months or even years. That’s why it’s good to get a headstart before you find yourself delayed.
Set up a meeting with local authorities before you start making major investments. You can learn important restrictions and rules about the building and any future projects. You may also find that you’ll want to invest in a different area after the meeting.
Also be sure to talk to local builders about your upcoming project. To learn more about proper building methods, view more here.
5. Be Ready to Be Involved
Some people view commercial property investment as a turn-key operation. They expect a business to rent from them while they sit back, relax, and collect the profit.
If you take that approach to commercial property investment, you won’t be very profitable.
Successful commercial real estate investors have processes in place to ensure the property achieves its maximum earning potential. They stay up to date on development and economic trends in the local market.
They also invest in the right people to help them make their property a success.
Now that you have the right knowledge, it’s time to start investing in commercial real estate.
It’s possible that you’ll have to invest in construction if you want to invest in commercial property.
Learn about the ins and outs of construction bonding in our blog.
And remember, our blog is full of helpful resources for entrepreneurs and investors. Check out some of our business content so you can learn more about how to succeed in the business world.