In fact, there is often more potential for profit in commercial properties than in residential properties. It can be a little harder to find the good opportunities, though. Thus, read on to learn how to understand the profit potential of any piece of commercial property and how to make wise investment decisions.
Use a digital camera to take pictures. In the “before” photos, especially, make sure that the pictures clearly show defects such as stains on the carpet, discolorations in the tub and sink, and holes in the walls.
Take the time to be certain you are satisfied with a piece of real estate before you purchase it. Do not make impulsive decisions. You will be full of regrets if you are stuck with a property that is not what you expected. Be patient, as it could take as long as a year for just the right investment property to turn up.
Pest control is a very important issue that you need to be aware of when renting or leasing. Getting pest control covered is especially important if you are renting in a building or area that has had previous pest issues.
Pay attention to the location of a property. Consider the neighborhood of the property. Compare the growth of the property’s neighborhood to similar neighborhoods around the country. By calculating growth in similar areas, you will be able to ascertain whether the piece of property you are looking at is going to continue growing.
If you are trying to choose between two good commercial properties, think big. Finding the right bank to finance you might be hard, even if you are going for a smaller building. Generally, it’s like buying in bulk. As the number of units purchased goes up, the cost per until will go down.
The Net Operating Income, or NOI, is one metric you need to master for success in commercial real estate. To be a success, you need to be able to stay on the positive number side.
Confirm that basic utility services are already situated at the commercial property. Your business is sure to have unique utility requirements, but services typically required by most include sewage, water, power, telecommunications and maybe even natural gas.
Advertise commercial property both to local and distant buyers. Don’t be mistaken by the thought that locals will be the only people interested in your sale. Many investors will consider purchasing a property outside their own region if the price is right.
You will need to know what you are looking for in a commercial property prior to beginning your search. Write down what features are most important to you when you look a piece of property, like the square footage, the number of offices and conference rooms, and bathrooms.
Read the disclosures of the real estate agent you are planning to hire. Make sure you understand the potential for the existence of dual agency. In this case, the agent is two-faced: she is representing both parties to the transaction. In other words, the agent is representing both you and your landlord in the same transaction. Dual agency is something that should always get disclosure, and both parties involved should be in agreement with it.
A borrower must be the one who orders an appraisal in a commercial real estate loan. There is a good chance that the bank may not validate it otherwise. Make sure you have all your paperwork in order before you even apply for your loan.
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.
Speak to a tax adviser prior to buying a property. You will find out how much this property will end up costing you and what percentage of your income will be taxed. An adviser could even help you find an area with lower taxes.
Now you should be aware of all the fundamentals involved with investing in commercial real estate. However, you can’t succeed if you stick rigidly to the rules outlined above. Be open to changing market conditions and think quickly to make the best investment decisions for yourself. When doing this, you give yourself the best opportunity to realize a good investment opportunity that other people might not see, resulting in you maximizing your profits.