The economy may be struggling, but investors that have been adding commercial real estate to their portfolios are finding success. Commercial properties are popular with buyers because they can provide both an immediate and long-term source of income, depending on how they are leveraged. Purchase amounts can be higher and owners face somewhat higher risks, but commercial property growth forecasts have been extremely positive. Those that want to real estate in the commercial market will need to apply several skills and use multiple tools in order to get the most financial benefit out of each investment.
Think Financing First
Unless you are in a position to fund each commercial real estate sale out of pocket, you will need to find and be approved for financing, preferably in advance. Think about how much faster and easier it will be if you knew that you were approved to purchase a certain amount of commercial property before you looked at a single listing? This would allow you to streamline your search, make an offer and finalize the sale in little time.
Target a Niche
Determining a specific type of commercial real estate that you want to target will also help you in saving time. Commercial office buildings might be a good choice if you are investing in an area where prominent firms have been flocking. Likewise, multi family residential buildings can be an appropriate choice for investors that have found this niche to be promising. Choosing a niche in the commercial property industry isn’t restrictive. Focus on the types of properties that make up the majority of your portfolio, but still remain open to other opportunities.
Do the Math
Calculating financing interest rates, taxes and renovation costs against rent rates, surcharges and the number of units will give you an idea of how profitable each deal is in advance. There will always be variables that can change projected profit amounts or even change the direction of a deal. However, sitting down and breaking down the math is a requirement if you want to do well in the commercial property industry.
Short Sales and Auctions
Commercial real estate being offered at any type of discount can often leave the buyer at risk. These properties might need considerable renovations or potentially come with liens attached. On the other hand, investors know that sometimes these types of costs can be well worth the additional work. Make sure that you research each property thoroughly, paying careful attention to commercial properties that are being acquired through non-traditional means. This will also help you to avoid facing unanticipated delays when it comes time to cash in on your commercial investments.