Being the owner of a commercial property has the potential of being a really rewarding and exciting venture, however, it does take a lot of work to get the most out of it. Beginners may be at a loss as to how to begin and how to ensure they’ve covered all their bases. This article is for all you commercial property tycoons out there, and it is packed full of tips that will help to get you started in the commercial property market.
The location of your commercial property is key to its value and its potential suitability for what you have in mind. Pay attention to the property’s surrounding neighborhood. Compare the growth of the property’s neighborhood to similar neighborhoods around the country. If you make an investment in real estate, it is in your best interest to ensure that your property is in an area that will still be growing in five to ten years.
Make sure that you know and understand what “NOI” (Net Operating Income) is. As long as you get positive numbers, you will be successful.
Always have an inspector look over your commercial property before you put it out on the market. If there is anything wrong with your property, have it fixed right away.
Keep letters of intent simple by tackling large issues before sweating the small stuff. It will be less stressful to negotiate and can also make it easier to come to terms on the smaller things as well.
There isn’t just one type of broker for commercial real estate. So-called “full service” brokers represent both tenants and landlords, while there are other brokers that work exclusively with tenants. It might be more beneficial to hire a broker who works only with tenants, as he has more experience working with those searching for a property.
Before hiring any real estate broker, read all of his disclosures. Keep an eye out for dual agencies. In this sort of situation, the agency acts as both parts of the transaction. In other words, an agency simultaneously provides services to both the landlord and tenant. Dual agency is something that should always get disclosure, and both parties involved should be in agreement with it.
It’s up to the borrower, that’s you, to order an appraisal for a commercial loan. Your bank will refuse the appraisal if you try to submit it. Make sure you have all your paperwork in order before you even apply for your loan.
Check the company’s reputation for customer service before you deal with them. Failing to do so could result in subtle changes or unneeded payments slipping by and costing you a fortune in wasted money.
Before you make a decision on which real estate broker to use, see how they negotiate. Inquire about their background, such as how much experience they have and what type of training. You’ll also want an agent that conducts themselves professionally and ethically, and who has expertise in closing beneficial deals. It is also completely appropriate to seek examples of their past efforts to strike real estate deals for other clients.
An honest broker should be willing to answer questions about how they earn their money. They must be able to talk to you about this question openly, as they make it clear that their interest is different from yours. Make sure you understand how they are going to benefit from the transaction that they will take care of for you.
Look around at the general environment around the building. You are ultimately responsible for disposing of environmental waste from your building. Are you aware of whether or not the property is located on a flood plain? You may want to reconsider your choice. Call some agencies that assess the enviornment and find out what is up with the area your property is in.
The key terms will include the pro forma and the rent roll. If you end up finding a term which isn’t covered by the rent roll, you’ll end up changing the pro forma.
Focus on a single commercial property at one time. Focus on a single type, should it be apartments, offices, retail, land, etc. Learn more about all the different types of investment to make good decisions. It is always more advantageous to be great at one thing than sub-par with many.
As you have read, to be really successful, you do have to do your proper research, and then put in a decent amount of work and effort into it. Perseverance is also a necessity in this business. If you abide by these guidelines, you will be that much closer to securing a lucrative commercial real estate deal.