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Commercial Real Estate
Commercial real estate is a different market with different factors to consider than you would for resident investment. It is, however, a very valid and potentially lucrative investment opportunity. Here are some of the factors you should consider when you are thinking about commercial property investing. One of the single most important factors for any real estate investors is the location of the property. You want to be in a vibrant area, or at least one that is up and coming. Your building location should also match the type of business you want to attract. It should be easily accessible by delivery truck and by customers, with proper parking available. It is a building you will be able to fill quickly so it doesn’t stand vacant for too long? Also, what is the crime rate in the area?
Property in areas where land is scarce will continue to increase in value. This may also be a factor in your decision-making process unless you want to derive all of your income from rents and leases.
Common Commercial Real Estate Questions
You should also review the building itself to see what kind of state it is in. Is it an older building that may need a lot of work to come up to code? Is it structurally sound? A structural engineer will be able to look at key parts of the buildings. Does your building need any lead paint or asbestos abatement? What kind of zoning is is under? You may or may be able to do certain things to the building depending on its zone regulation. You might also be in a historic building that has its own set of rules.
If you elect to buy a property big enough to subdivide for multiple tenants, be sure all of them are zoned eligible. You may not be able to put a commercial warehouse in back of a retail storefront.
Your city or other municipality will have the current permits for your buildings, so you can see if any need renewing soon. There will also be a list of any violations you will need to correct as the new owner.
Does your building have current tenants? If so, are any leases set to expire any time soon?vWere any special arrangement made for those tenants?
Do you have enough money for the down payment? On a commercial building, this may be as much as 20% of the cost of the property. A lender will be willing to finance as much as 90% of the total cost, after an official appraisal. The appraiser will make sure your building is in line with similar properties.
Things to Think About
You will also need to do some homework about utility costs and real estate taxes. A tax history report can be vey helpful. You should also know if any tax breaks are available for your property based what you want to do with it. All of these will have to be factored into your overall cost structure.
These are the main factors to think about when investing in commercial property. Before making any investment, make sure you hire a top-notch real estate agent who specializes in commercial properties.