Investors often choose real estate as one of the best types of investment to make. Property investment can include both residential and commercial property. Many investors begin with buying residential homes because that is what they know the best. However, buying commercial real estate could bring much bigger profits even though it costs more initially than most residential houses.
Here are some tips and hints on property investment in commercial real estate:
#1: Don’t Think Small, Buy Big
When it comes right down to it, managing an apartment building with 50 apartments isn’t really that much harder than managing one with only 5 apartments. Most investors believe that bigger is better, so if you get the chance to buy a large apartment complex or a large business office, if you can afford the investment, then do it. In order to handle those large buildings or office complexes that could be a great deal for property investment, be sure you have a partner or two to share the expenses and help you to make the deal.
#2: Don’t Rush Your Transactions
Property investment deals involving commercial real estate tend to take more time than when you are buying residential real estate. That means you need to not get impatient and to take the proper amount of time to check things out, make your deal, and then do the proper research to get it fixed up and sold. Time is money, but if you rush things you could also lose money. It’s best to know exactly what you are doing and do it right the first time so you won’t lose all your hard earned money.
Tip #3: Don’t Buy Just Apartments
Many people’s minds go to apartments when they think of property investment. However, when buying commercial property as an investment, you should branch out and look at things like business offices, strip malls, industrial areas, etc. Pick one as your niche and then learn to be the best investor in your field. However, if you truly like dealing in apartments, there is nothing wrong with property investment in apartment complexes.
#4: Learn all the formulas for commercial vs. residential real estate
When purchasing residential properties you may have memorized certain formulas like purchasing a house at 75 percent of its after repaired value. However, property investment in commercial property has different kinds of formulas than residential housing and you have to learn them and get savvy in them or you will look stupid.
#5: Relationships Are Vital
If you want to succeed in property investment deals in commercial real estate then your relationships with fellow investors, along with lenders and anyone in the housing world are vital. A lot of times commercial real estate isn’t even advertised in the normal ways and you will only find out about the great deals by knowing and talking with others. Plus, you may need someone to go in with you on property investment deals since commercial properties can be very expensive and it helps to have some financial help.
#6: Get Your Financing Set Up In Advance
Speaking of financing for property investment in commercial real estate, getting a loan for them is different than getting one for residential property investment. Of course, the down payment is higher since the properties cost more, but many times there isn’t any personal liability if there ends up being a bad deal. Still, it works far more in your favor if you get your financing all approved and ready before you start trying to make any deals or offers when you are doing commercial property investment.
#7: Be Ready to Lose Your Due Diligence Money
When you submit and have an offer for property investment in commercial real estate you will get a certain amount of time for due diligence tasks. You need to do things like get the property inspected, get an appraisal, and there can also be required tests that have to be done on certain kinds of commercial real estate properties. It is possible to spend a few thousand dollars, and then suddenly discover that it’s not a good deal after all and you want to back out. Of course you don’t want to be stuck with a bad property, but to avoid this try to find out as much about the property in advance.
#8: Having Good Partners Helps You Get the Deal
It is difficult for just one person to have enough money or credit to be able to get a loan on a commercial real estate property investment deal. That’s why it is a good idea to have a partner or two for those big deals. That way you can pool your money and buy the property that you both want to own. It also helps later on because you can split the costs of things like maintenance or other expenses.
#9: Know How to Get Your Questions Answered
Then, it’s also important in any kind of property investment situation to know where to go to get any type of questions you have answered correctly. Things like knowing what regulations cover the business property you want to buy or knowing about environmental studies or all kinds of other things big and small can really help you when it comes to property investment in commercial real estate.
Know where to go to get these answers such as to the local state or government offices, real estate offices, or similar places. It can mean the difference between making a good deal and getting stuck in a bad one.
If you follow these hints and tips, you may not always have total success in your property investment deals in commercial property, but it can help you to have a better chance to do so. In all cases it is always a good idea to do your homework, be prepared for anything, watch your back and make sure you totally understand everything that goes into property investment in commercial real estate.