You cannot walk into commercial real estate blind. This means that before you venture into this arena, you should have an idea of the type of properties in which you are interested. Sinking your money into the wrong piece of property can make you lose a bundle. Keep reading for a handful of ideas and advice for making more informed commercial real estate decisions.
Before you invest heavily in a piece of property, investigate the economics of the neighborhood such as unemployment rates, income levels and local businesses. Property that is located near a large business, a college, or a hospital has better resale value and will often sell easier.
Remember that buying a commercial property and everything that goes along with it can take a lot of time. The time aspect of the investment includes finding the property and making any repairs to the property. Don’t throw in the towel because the process is taking too long to complete. You will reap the rewards in the near future.
Think larger when you’re thinking about two commercial properties that are viable. Finding adequate financing on a piece of property takes time and patience. This works in the same way as buying bulk items from Costco. You buy large numbers of items to pay less per item.
When starting out in commercial real estate, it is important you understand the measurement labeled Net Operating Income, or NOI for short. Staying in the positive is what you need to do to succeed.
Make sure you have sufficient utility to access on any commercial piece of real estate. The utilities you will need for your business go beyond electricity; you will also need water, sewer and gas, as well.
Take the neighborhood into account when purchasing commercial property. If the property is located in a prosperous area, your business is more likely to succeed because your potential customer base is going to be wealthier. If the business you run caters to a lower-income demographic, buy in an area that fits your clientele best.
When you are composing a letter of intent, you should emphasize simplicity by negotiating on the bigger issues first, then addressing the minor issues later in the negotiations. This lets you get the bigger issues out of the way first and makes small issues simpler to complete.
As a new investor you should focus on one area of investment only. Begin by selecting which type of commercial buildings you would most like to purchase and then devote all of your time to those types of properties. It is best at first to learn on one strategy than start out with many where you might not fare as well.
You can become successful in the commercial markets if you work hard and learn as much as you can. Success or failure rests squarely on your shoulders so do your homework. Not everyone gets rich off commercial real estate, but the above advice can help you to make the most of even the smallest of investments.