You can make large amounts of profit which can leave you wealthy for years to come when it comes to commercial real estate. However, it’s not for everybody, the stakes are large and so is the investment.
Commercial real estate is more time consuming, confusing and involves more than just buying a home. Remember that the time and efforts you are investing will pay off.
If you trying to choose between two or more potential properties, it’s good to think bigger in terms of perspective. Regardless of whether the property you decide on has twenty units or fifty, the process of obtaining financing will be the same, and in both cases will require substantial effort. Generally, this is similar to the principle of purchasing in bulk; if you purchase more units, you will end up getting a better price per unit.
Don’t become greedy and over-inflate your real estate asking price. The value of your property is determined by an entire series of different factors.
Choose simple, strongly constructed buildings if your plan is to purchase real estate for the sole purpose of renting or leasing it. A well-built building will attract tenants quickly because tenants want a property that is solid. Since these properties probably do not need many repairs, they will require less maintenance from the owner and tenants.
Keep your commercial property occupied to pay the bills between tenants. If no one is paying you rent, you’ll be the one footing the bills. If you have multiple properties open, figure out why, and try to correct the issue that could be causing a loss of tenants.
Be certain the commercial property you are considering has good utilities access. Water and sewer access will be needed in addition to electricity. You may want the option to use natural gas, as well.
Consider the surrounding area when you buy a piece of commercial real estate. Purchasing in neighborhoods that are in the upper price per square foot range will help for successful business because the surrounding owners have more money to spend. Or if your services are for the less wealthy, purchase in this type of area.
Take tours of the properties that are potential purchases. As you tour each property, you should bring along an experienced contractor who can offer helpful input. Make preliminary proposals to break the ice and open negotiations. Give a bit of thought to the counteroffers before deciding to accept the offer, make a counteroffer yourself or walk away.
When you’re writing letters of intent, try to keep it brief by agreeing with the bigger issues initially and let the lesser issues be resolved at a later time. The negotiations will become less tense and you will be able to better get an agreement on the more small problems.
It’s critical to have emergency maintenance contact information very accessible. Speak with the landlord about handling of emergency repairs just so you know who to call in that situation. Keep the phone numbers in a convenient place, and know how long it will take them to respond if needed. Use any advice you can gather from a landlord to protect your customers with properly configured emergency plans.
When hiring a real estate agent, read the disclosures completely before signing a contract with a realtor. Remember that dual agency is also an option. What this means is that your chosen agency has an interest in buying and selling the property. In effect, while you are paying the agency, they also work for the opposite side; if you are a prospective tenant, for example, the dual agency represents the landlord, as well. An agent should always disclose dual agency, and it must be acceptable to both parties.
In a commercial loan, the borrower must order the appraisal. The bank will disallow any appraisals ordered by other people. Cover yourself and your interests by ordering it yourself.
If you are thinking about commercial real estate investing, consider the many tax breaks you will receive. You will get good tax breaks for interest and also benefits for depreciation. There is also “phantom income”, which is taxed by the government although not received by the investor as cash. Before you make any investments, be sure you are aware of this kind of investing.
Always assure yourself of any company’s intentions, making sure they take a primary focus on your own needs, rather than an apparent consideration for only their firm’s income. Bad customer service can cost you a fortune when dealing with commercial property, so do your homework.
To find a trustworthy real estate firm, inquire about their methods on how they make a lot of their money. The firm should answer your questions directly and let you know that what is best for them, might not be best for you. You should know exactly how they will benefit from any transaction they take care of on your behalf.
Commercial real estate offers the potential for huge profits. Not only do you have to come up with a large amount of money to use as a down payment, but you also have to put time and energy into researching each investment opportunity. Follow these tips to success.