Are you thinking about investing in commercial property for the very first time? Do you wonder what kind of thought should go into this process before you do so? If so, then you need to learn all you can about the finer workings of commercial property investing.
Doing so can give you a distinct advantage as you enter the market. Instead of scratching your head, you’ll be able to use that knowledge to make a decisive choice on the right way to invest.
See below for several a beginner’s guide to commercial property rental and how to invest in a safe way that will give you a higher ROI.
What Is Commercial Property Investing?
Perhaps you’re just looking for different avenues of investing and have come across commercial property investing for the first time. Maybe you’ve heard the term tossed around, but aren’t sure what it means.
Commercial property investing is when you decide to purchase a property that’s dedicated to business (such as a corporate building or strip mall), then lease it out to tenants who can run their companies out of it.
Essentially, you would be the owner of the place where business owners pay to rent out space for their businesses. It’s a highly profitable business with tremendous upside, as long as you make the right choice on investing.
What to Consider When Investing in Commercial Property
If you’ve already begun your search for commercial properties to invest in your area, you might’ve been surprised by the available amount. A smart investor always knows to take calculated risks with the real estate they purchase.
See below for several factors that you will want to consider before you invest in a commercial property.
- Loan Opportunities
Very few people can invest in commercial property with cash-in-hand. That’s not what this is about.
This is about finding an opportunity for you to set yourself up with a profitable piece of commercial real estate. You have the chance to do so by simply looking through commercial property loans and finding one that makes sense for you.
Before you set your eyes on one property, in particular, you should consider getting pre-approved for a commercial property loan. That way, you know exactly how much you can invest in the property that you gain control of.
This will also hold you more accountable during your search. Again, it’s all about calculations, so finding one that makes financial sense for you and your family is highly important.
We’ve all heard it before: “location, location, location”. But this is especially true for commercial property investing—it’s all about location. The more that you learn about the demographic and area that the property is in, the better you’ll understand its value.
Ideally, you want to find a property in an area that’s on the come-up. That’s where the most money is because you can purchase low and charge your renters a higher lease.
Be sure to look into things like the age of the demographic, accessibility of the property, proximity to neighborhoods, and up-and-coming attractions around it. If everything else around it seems to be on the decline, don’t invest.
- Learn of Regulations
Commercial real estate certainly doesn’t come without its fair share of technicalities. Each property has federal, state, and local regulations that it must adhere to.
Most people aren’t well-educated on the local laws, which is why it never hurts to have a lawyer look over the terms of any property that you’re wanting to invest money into.
If there’s even so much as a zoning law that was out of place before you purchased the property, it can lead to massive for you and your tenants. Make sure everything is in order before you sink your teeth into anything.
What Are the Different Types of Commercial Real Estate?
Even if you’ve decided “I’m going to invest in commercial real estate”, there are more decisions that await you.
Whether you realize it or not, there are actually 5 different types of commercial property for you to invest in. Here’s a brief overview of each:
- Office- As the name would imply, this refers to any property that a business might rent out to use as their front office space. These properties are segmented in 3 ways depending on their age, appearance, location, and current condition.
- Special Purpose- These are any properties that are specifically made for a specialized form of business. They’re often considered a riskier investment since they can’t easily be occupied by another business if the current tenant moves out (such as a car wash or a gas station).
- Industrial- This term refers to any property used for manufacturing, processing, freight storage, etc. They’re great investments because so many companies are after the wide storage and high ceilings.
- Retail- These properties are used to promote in-store business such as a restaurant, sporting goods store, etc.
- Multifamily- A term that refers to any property used for residence such as apartments, condos, duplexes, and so on. They have a higher rate of tenant turnover than all others on this list.
Take Advantage of Commercial Property Investing Today
Now that you have seen an in-depth guide on commercial property investing and how it can be such a huge success, be sure to unlock that fortune for yourself.
Surround yourself with experienced people so that you can hone-in on an opportunity and seize it for yourself.
Be sure to browse our website for more articles on commercial investing, as well as many other helpful topics.