Getting involved in commercial real estate means going through a door that swings both ways. There is a lot of money that can be made; but, if you are not careful, there is also a lot of money you can lose. Wise purchasing and funding decisions are essential if you are to profit. This article will help you make an educated decision in most property matters.
Whether you are buying or selling, don't shy away from negotiation. Protect your interests by standing up for yourself regardless of who is on the other side of the table. Negotiate a fair price rather than accepting one that is too high or too low.
Location is the most important factor in choosing a commercial property to buy. Find out more about the neighborhood. Check out the growth, both economically and physically, in the areas you're considering. You'll want to choose an area that is on the upswing and will continue growing for at least a decade into the future.
Commercial real estate involves more complex and longer transactions than buying a home. You need to understand, you have to be diligent in order to get a profit.
Be prepared to put a large amount of time into a real estate investment right from the start. It will take time to find a lucrative opportunity, and after purchasing a property, it may need repairs or remodeling. Even though this work takes time, don't lose heart! The rewards you see will be much greater at a later time.
Educate yourself about the measurements of NOI: Net Operating Income. To be successful, you must stay profitable.
Be certain the commercial property you are considering has good utilities access. Your business has its own utility needs, but you are most likely going to need water, sewer, electric and possibly even gas.
Be sure to have a professional building inspector go through your property before you put it up for sale. Any problems or necessary repair identified by a professional inspector should be addressed and fixed as soon as possible.
Plan on doing some improvements to your new commercial space before you can inhabit it. In some cases, these may be minor changes, such as a new coat of paint for the walls or a new arrangement of furniture. Oftentimes, moving walls and other fixtures is required to redistribute the floorplan. If you're leasing or renting, you can ask the landlord to make these changes at no cost to yourself.
Different commercial brokers represent different parties. A full service broker works with both the tenants and the landlord. Some agents represent only the tenants. If you're going to be a tenant, working with a tenant-exclusive broker benefits you because of their relevant and deep expertise.
If you are new to commercial real estate investing, you should investigate any tax benefits that you could be eligible for. Investors can get interest deductions and depreciation benefits too. However, investors are sometimes taxed on income that they do not actually receive in the form of cash. This is known as "phantom income." Prior to investing in commercial real estate, you should familiarize yourself with this form of income.
Research the company and find out if they care about their customers' best interests before you commit to working with them. If you do not take the time to be sure they are a good company, you run the risk of entering into a bad deal.
Don't ignore the environment that a property you're considering is in. You are required to clean up any environmental waste on your property. Perhaps you are looking at property located in a flood plain. Reconsider the wisdom of that plan. There are companies that will do environmental studies to evaluate the risk of incremental hazards in the area that the property is located in.
When purchasing commercial real estate, it's important that you understand the property you're purchasing may be a lifelong investment. If you don't realize that eventually you are going to have to put money into the property for maintenance or repairs, you will be very disappointed when that times and the associated bills come. Updates, such as a new roof or fresh coat of paint, might be necessary. All buildings periodically need maintenance and remodeling. Make sure all these repairs are included in a long-term plan for the property.
Build an online presence for yourself prior to stepping into the commercial real estate world. These days, a website is a must as are accounts on professional networking sites like LinkedIn. Try using SEO to help yourself place higher in the search results. People should be able to locate your online presence simply by searching with your name.
Keep your center of attention on one investment property at a time. Whether it's an office building, land, or apartments, you should focus on just one kind of investment. It takes an entire dedication to one individual type to really become masterful and reach your maximum income potential. It is better to be a master of just one, than a novice with many.
A large commercial property may be a better buy than a smaller one. Managing five units might seem far less complicated than fifty, but the work that you put into financing and setting up lease agreements will be the same no matter how many units you manage. A small building requires the same paperwork and financing as a larger building, and larger buildings end up costing less per unit.
If you are considering purchasing an apartment complex, be aware that smaller complexes can be more problematic than larger ones. In fact, veterans in the field typically advise avoiding any complex with fewer than 10 units. This is far from a hard and fast rule however. If careful research leads you to believe a given small complex will be profitable, don't rule it out simply because of its size alone.
Clearly, investing in commercial real estate will not bring you money for nothing. You will need to invest considerable time, money and effort to have a good shot at profitability. Even doing that, you may still lose money.