By Jeff Tormey
Regardless of whether you are new to commercial real estate or already have a significant level of experience, there are always times when the business becomes stressful and overwhelming. Read this article to find out how you can approach a transaction efficiently, and stay in control of the situation with less stress.
Before you start out on your search for the perfect commercial property, you should be fully attuned to the specifics of your business needs. Know just what type of office space that you are going to use. If you plan to make your company grow, it will be a good idea to buy more space than you need while the market is low to save you some money later.
|Take time to learn what the firm considers to be good results. How do they determine the space requirements? What is their property selection criteria? How do they negotiate? This and many other little details will all affect your dealings. Understanding how the firm works is beneficial prior to signing an exclusive agency with them.
|When investing in commercial real estate, go bigger. You may find that upkeep and operations for a twenty-unit property may actually be comparable to those required of a five-unit property. Both sizes of buildings need commercial financing, but buildings with more units are cheaper per unit.
|There is much more time and work involved in purchasing a commercial property rather than a residential property. You should understand that although this is a huge undertaking, when all is said and done you will receive a big return on the investment.
|Talk to a good tax adviser before buying anything. Such an expert can inform you of what a building will cost you, and the tax impact of your income from a property. Try to find a location that does not have high taxes, you can consult with an adviser for more information.
|When searching for a real estate agent, keep their disclosures in mind so you know who they are working for. Dual agency is a possibility that you need to be aware of. Your real estate agency will represent each side of the transaction. In other words, the agent is representing both you and your landlord in the same transaction. If dual agency is the case, it should be out in the open and both the landlord and the tenant should be in agreement with the arrangement.
|Location is key in commercial real estate. When investing in a property, consider what type of neighborhood it is located in. Compare its growth to similar areas. You need to be reasonably certain that the area will still be decent and growing 10 years from now.
|Whenever you are considering a commercial lease, you need to think about pest control. Look over your rental or lease agreement, and know if you are covered, especially if you live in an area with known infestations.
|When you buy a commercial property, have a specific use for the property in mind. What are you plans for the property, your own business or leasing it? You should sit down and make specific and straightforward goals for your commercial property, as it will save you time and effort.
|Check a commercial property for access to electricity and other utilities; make sure there is good access. Every business requires certain utilities, most commonly things like water, sewage and electricity.
|To find a trustworthy real estate firm, inquire about their methods on how they make a lot of their money. Honest brokers will be open about this, so you can tell if your interests will be at odds. See to it that you realize how they benefit from a certain transaction that involves you.
|When buying commercial property, think about the socioeconomic status of the neighborhood around the building. Buying property in an affluent neighborhood is likely to mean that any business which opens there will be successful thanks to having a clientele with a large disposable income. However, if your products or services correspond to a specific social category, make sure you find a property in an area that corresponds to your target audience.
|NOI, also known as Net Operating Income, is a crucial metric to understand in the world of commercial real estate dealings. Staying in the positive is what you need to do to succeed.
|Take photographs of the property. Make sure your pictures clearly show any damage or defects, including carpet stains, holes in the walls or discoloration of plumbing and counter tops.
|Find out specifically how a real estate broker negotiates prior to choosing them. Discuss each potential broker's experience and relevant education with him before hiring a broker. In addition, you should ensure that the methods they employ are ethical and that they know how to go about obtaining the best deals. Ask to see examples of past successful and unsuccessful negotiations.
Be sure to only focus on one investment at a time. Your center of attention should be placed on a specific investment, whether it is an office building, land, apartments, retail, etc. Each of these investments will need to be closely monitored and given your full attention. Becoming a guru in one investment category is preferable to minimal success spread across multiple investments.
|To ensure that you are doing business with the most suitable real estate broker, have them describe to you what a success or a failure is. Ask the person what criteria is used to gauge the success of results. You need to be able to comprehend their strategies and methods. Do not partner up with a broker who is completely the opposite to you in beliefs and the way matters are addressed.
|You have to think seriously about the neighborhood where a piece of commercial real estate is located. In general, it's better to locate a business in a richer area because rich customers obviously have more discretionary income. On the other hand, if you are going to offer a product or service more popular with working class individuals, a less affluent neighborhood might be a better choice.
|Doing so means that you can confirm that all terms match up with the rent roll, as well as the pro forma. If you don't review the key terms, you may discover terms which were not contemplated for the rent roll. This could quite possibly result in a change to the pro forma.
|A property to be rented out commercially should be one that is soundly built and simple in design. A well-built building will attract tenants quickly because tenants want a property that is solid. In addition, these properties are low maintenance because they don't frequently need repairs, a benefit to the owners, as well as the tenants.
|Reach out to your investors and brokers through newsletters, or on social networking sites to show your continued thanks and interest in them. Once you have locked up a deal, make sure to keep your online presence.
|Make certain that you know how to both recognize and benefit from good deals that present themselves. Veterans in the commercial real estate market can spot a lucrative deal very quickly. Part of their expert knowledge includes knowing when not to make a deal and preparing an exit strategy to extricate themselves. To be a professional real estate investor, you need to learn how to determine the risks inherent in every investment. Professionals can figure out the hidden costs of an investment, such as the need for extensive repairs, and only invest in properties that help them reach their financial goals.
|There are certain differences between commercial and residential property loans. One example is that commercial loans require you to pay a larger percentage for the down payment. To find a good commercial loan, work your network of professional contacts to learn which lenders are best and whether there are any investment possibilities available in your area.
|When renting out your own commercial properties, keep in mind that is always best to have them occupied. Maintenance and upkeep costs for commercial property can be substantial and rental income is essential for paying those costs. If you have more than one empty property, think about why that may be, and consider what you may be doing to drive tenants away.
|Have a professional inspector look at your property before selling it. If the inspections turn up any problems, remediate them before listing the property for sale.
|Find out what kind of negotiation style is used by prospective real estate brokers. Find out about their experience and training. When choosing a real estate broker, make sure that they are ethical when doing business. Ask for examples of successful and unsuccessful past negotiations.
|Advertise your property for sale locally and outside your region. Too many people assume that only the locals are interested in buying property in the area. There are many private investors who will buy affordable priced property in any area.
|It is easy to get emotional when you are venturing into the commercial real estate market, but is is very important to stay patient and remain calm. Don't rush to make an investment. If the property turns out to be wrong for you, you will regret your decision. Stay patient; it could take a year or more for the perfect property to materialize.
|Make sure you never underestimate anyone when it comes to real estate, not your private lenders or your investors, know what everyone is capable of. For example, those in your network can give you the "inside scoop" on properties, even those that are unlisted.
|Remember that size is everything when you are shopping for a permanent space for a growing business. You should rent commercial properties that will allow your business to grow.
Make certain everyone is on the same page in regards to square footage. The square footage of a commercial property may represent one of two things; it may represent the usable space of that property, or it may represent the total square footage of that property. By knowing both measurements, you will have a smoother time dealing with the property.
|Establish an online presence before jumping into the market. You can set up a basic LinkedIn profile or even an entire website. Strive to improve the search engine rank of your website through search engine optimization. You want people to find you by just typing your name into the search bar.
|When selecting a broker, find out the amount of experience they have with the commercial market. Make sure they have their own expertise in the area of your curiosity or it could be an endeavor wasted. Allow the broker to acknowledge your wish for an exclusive agreement between the two of you.
|When selling a property, you should make certain that whatever price you set is realistic. Many things alter the value of your property./
|When you're shopping multiple properties, prepare a checklist to make the task easier. Accept responses to the initial proposals, but don't go further than that unless you inform the property owners. You should not have any hangups about letting the owners know that you are still deciding on other properties. This may help you snag a better deal, ultimately.
|If you are considering purchasing an apartment complex, be aware that smaller complexes can be more problematic than larger ones. In fact, veterans in the field typically advise avoiding any complex with fewer than 10 units. However, every situation is unique. Do your research, and make an educated decision.
|In a new lease, you need to be aware of how the rent price will affect your investment. Decide on a rent amount before your first meeting with prospective new tenants. Having a good rent plan will enable you to meet the goals you have established for your investment, and allow you to easily analyze how well your investment is performing.
|Fluctuating interest rates are responsible for the greatest threat to investors in commercial real estate. Today's economic climate encourages wild, and sometimes unpredictable, swings in interest rates. This situation leaves investors vulnerable to interest rate hikes. Be sure to consider the current and long-term economic conditions when shopping for property.
|Every property will have a lifespan. If a property is well past its prime, you could end up putting a fortune into maintenance and renovations. Because of this, it's always important to consider the prime lifetime of any property you are considering and to factor in any additional upkeep costs in determining what you are willing to pay. Updates, such as a new roof or fresh coat of paint, might be necessary. All buildings degrade over time, but some building types are more prone to it than others. Make sure that you budget future repairs and maintenance work into your budget.
|You must be patient to succeed as a real estate investor. Make decisions calmly and slowly--don't be in a rush to buy a piece of property. Do not invest into anything before thinking carefully. Going too fast could result in a loss that you could have seen coming had you stopped, researched, analyzed, evaluated, and cross-checked the potential with your desired goals. It could take you twelve months or longer to get the deal that fits you perfectly.
|Know your business goals before starting the search for commercial property! You should have a good idea of the kind of space you will need. Perhaps you could buy more than you need right now if you can afford to and you plan on expanding your business.
|As you view prospective commercial properties, it pays to think on a larger scale. If you were considering purchasing a five-unit building, recognize that managing fifty units is no more difficult than five. A small building requires the same paperwork and financing as a larger building, and larger buildings end up costing less per unit.
|If you are renting or leasing, be sure to know about pest control arrangements. This is especially true when renting in an area that has a lot of bugs or rodents, so be sure to talk to the rental agent about some pest control policies.
|Start drafting letters of intent by focusing on the more central issues. Once you have agreement on those, broaden the negotiations to include any smaller issues that remain. The negotiations will go much better and be less stressful if you keep the small stuff out of the way and can focus on the larger issues first.
|Learn how to spot a good deal and when to seize it. Those in the know can pick up on a good deal instantly. Their secret entails that they have an exit strategy, meaning that they know when to walk away from a deal. In addition, they have a keen eye for observing any areas of the property that will require costly repair, and they have the ability to calculate the risk and the financial ramifications in order to successfully meet their goals.
Be sure to consider any kinds of environmental problems. For example, the previous property owners might not have disposed of hazardous waste appropriately. As an owner of property, you must have these issues corrected no matter if you caused the problem or not.
|If inspections are part of the deal on your real estate, be sure to check all the credentials of the hired inspectors. Pest removal companies should be closely checked because many non-professionals do this work. By hiring an experienced professional, you're less likely to run into problems after you buy the property.
|Inflation should be at the top of your mind when considering purchasing commercial real estate. Years ago, it was common for leases to protect people from inflation via adjustments made through Consumer Price Index. This particular practice is practically extinct today, leaving you at far more risk of losing money, thanks to inflation.
|Take tours of the properties that are potential purchases. Think about having a contractor as a companion to help evaluate the property. Make the preliminary proposals, and open the negotiating table. Judge the counteroffers prior to making a decision either way.
|Think about using feng shui to enhance your commercial properties and business. If you provide a lot of open space in your units and avoid clutter as much as possible, buyers are more likely to be interested in your property.
|Arrange a number of fellow investors ranging from trusted family and friends to professional financers who can make sure you have access to cash flow prior to buying commercial property. The best way to establish a solid group of partners is to have preset contracts in place that document the rate of repayment or how they can earn a portion of your profits from the real estate.
|Always ensure that the areas around your property are well taken care of. The one who'll have to clean up any environmental waste on your property is you. Are you considering a purchase of property in an area that is prone to flooding? Make sure you think it over! There are many resources that can give you local weather patterns, flood patterns and insurance risk ratings, which can all tell you about the area you are thinking about buying in.
|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 go much better and be less stressful if you keep the small stuff out of the way and can focus on the larger issues first.
|Think about any environmental concerns that the property poses. One huge concern is when the property you currently own has problems with hazardous waste materials. It is your job and responsibility as a property owner to have these problems fixed, whether or not you are the one who caused them.
|If you are new to commercial real estate investing, you should investigate any tax benefits that you could be eligible for. In addition to depreciation benefits, investors can receive interest deductions. However, investors sometimes get "phantom income", this is a type of income which is taxed but it isn't received as cash. You need to know this kind of income prior to investing.
|Advertising your property to parties locally and abroad is important to ensure you get the best price possible. Many sellers mistakenly presume that their property will appeal only to local buyers. In fact, the interest level can expand far beyond the local scene as private investors expand their interest. These investors are searching for affordable property and may be interested in yours.
|When purchasing commercial real estate, it's important that you understand the property you're purchasing may be a lifelong investment. You could make a big mistake by ignoring what you may eventually have to spend in order to keep up with the upkeep of the property. The property might be in need of new roofing, or utility upgrades like wiring. All building require maintenance, and some buildings require more expensive maintenance than others. Make sure you develop a plan for the long term to manage repairs such as these.
|When going into commercial real estate deals, make sure that you are using a top grade lawyer who goes over everything side by side with you. It is good to have the best lawyer possible in your corner to protect your name in case of problems in your real estate dealings.
|Find an appropriate lender before beginning your search for investments. Getting a commercial loan is quite different than getting a loan for a home. They are better in a number of ways. While commercial loans generally require a more significant down payment, lenders are usually more flexible about where or from whom you get that down payment.
|If you desire commercial property for rental purposes, locate buildings that are simply yet solidly constructed. These units draw in the best tenants because they are higher in quality and have nicer appearances. Since these properties probably do not need many repairs, they will require less maintenance from the owner and tenants.
Keep in mind that any new lease, strategies, or rent consideration are necessary for your investment's future. You should know exactly what you'll be charging for rent before you speak with any possible tenants. This will give you a foundation for meeting the goals that you set for yourself and your investment.
|There are many things to consider when determining the best option between two commercial properties. When choosing between the two, think big! Financing may be no more difficult for the large apartment building than the small one. Generally, this is the same situation as if you were buying something in bulk, the more you buy the cheaper the price of each unit.
|There are many benefits to building a personal relationship with your area real estate brokers, lenders and other investors. For example, commercial real estate commonly sells without being listed. However, the larger your network, the greater your savvy, and the more likely you are to be informed about outstanding opportunities.
|Your investment might prove to be time-consuming in the beginning. Finding a good opportunity, going through the transaction and making any necessary repairs to the property takes time. However, don't give up just because this will take time. Your rewards are down the road, and they are worth it.
|Just focus on one specific investment and narrow your time to that if you're new to investing. Select one type of property that appeals to you, and devote your undivided attention to it. It is better to do your best at one type than to be average at many types.
|Be clearheaded about what amount of square footage is really usable. Properties are measured in term of usable square feet or the total square footage which includes uninhabitable space. It's important that you know both measurements for any property on your short list, as this will affect what you offer for the property.
|Make sure you are dealing with a company that cares about their customers before you make a purchase. If not, you may eventually pay dearly for an easily avoided mistake.
|You probably do not want to sign a lease form that is standard when you are leasing a commercial piece of real estate. It is not uncommon for real estate brokers to include detailed, confusing terms and clauses into the lease. Ensuring that you read this paperwork in it's entirety will ensure that you know exactly what you're signing up for.
|You should have a necessary-to-know list, and emergency maintenance must always have a place on that list. Talk to the building's landlord about the person who currently handles emergency repairs. Have the phone numbers on speed dial, and know how long it generally takes stuff to get fixed. Utilize the information given by your landlord to develop a plan for emergencies. This will help you ensure your reputation or customer service is not tarnished while your business is disrupted.
|Use of a digital camera is a simple and effective strategy. Make certain that the pictures show irregularities, such as holes or bad paint on walls, carpet stains, and bathtub or sink discoloration.
|Writing a blog on the Internet, ideally on your own website, is a great way to prove your expertise to others. You will then have a better chance of locating people who want to purchase your properties or lease space from you.
|When you begin to invest, it is wise to only have one investment in mind at a time. Choose one property type you would like to start with and give it your undivided attention. It is far better to dominate one area of the commercial real estate market than to spread your investing order many different types of commercial buildings.
|There are ways to save on repair costs associated with property cleanup. If you hold an ownership interest you are responsible for the cleanup of a property. Environmental cleanup and waste disposal can rack up a massive and costly bill. Look for an environmental assessment facility that can generate a report of the property They might cost a bit more up front, but they can end up saving you much in the long run.
|Transactions for commercial property take more time, and are a lot more complex, than the process of buying a home. Remember that the time and efforts you are investing will pay off.
|Have your business needs in line before looking for commercial real estate! You should know what kind of space you will need for your business. If you intend to expand your business quickly, buy a bigger place during this dip in the market to save money over the long term.
Write down your goals before you start to search out the perfect commercial property. Do you want to use the property for your own business or do you want to lease the property? It will help you more easily find an appropriate piece of property to purchase if you know exactly what you plan to do with the property after you acquire it.
|When you are buying or selling commercial real estate, always negotiate. Make sure that you are heard and that you fight for a fair price for the property.
|Always stay on the lookout for sellers who are motivated to sell. Finding them should be your goal, particularly the ones most ready to offer you a below market deal. Nothing happens at all in the world of real estate unless you unearth a potential deal, which is a discovery typically promptly followed by meeting a motivated seller.
|When financing for commercial real estate investments, you need to make sure that you have your financial statements on hand. If you don't have these, financial institutions are unable to determine your fiscal responsibility, meaning they're within reason to pass you over.
|The new space you purchase might need some upgrades and repairs prior to occupation. In some cases, all that is required are simple changes like moving the furniture around or giving the walls a new coat of paint. Oftentimes, moving walls and other fixtures is required to redistribute the floorplan. The contract you negotiate should clearly spell out whether you or your landlord will pay for these changes, or whether the cost will be shared and in what proportions.
|Invest in real estate that has a large number of units. If there are many units, it would be easier for you to spread the income that you are getting from each unit. A lot of people who invest in real estate do not even give consideration to properties that contain fewer than ten units. It is generally accepted that a higher number of units correlates to higher profits.
|Search online for websites that provide information about real estate investments. These general interest websites can provide you with useful information whether you're new to the world of real estate investment or have made a career out of investing. It is always best to work with as much information as possible, so take the time to absorb everything you can when working with commercial real estate.
|There are a lot of ways to save money on repair costs when it comes to property cleanup. You are potentially responsible in paying for cleanup if you have an ownership interest pertaining to the property. Cleaning up the property and the surrounding area, and commissioning the safe, legal disposal of any waste can be very expensive. Speak with an environmental assessment company about getting a report from them. Even if this is expensive, consider it as an investment.
|If you are looking for a business property, always think larger than you currently need. You want to invest into commercial property that has the potential to grow so that you don't have to shop for you business again a few years down the line.
|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.
|You may have to make some repairs or improvements to your property before you can move in. This might include superficial improvements such as repainting a wall or arranging the furniture more efficiently. However, you might have to remove or relocate some of your walls so that you can get the most out of your space. If you're leasing or renting, you can ask the landlord to make these changes at no cost to yourself.
|Before you invest heavily in a piece of property, investigate the economics of the neighborhood such as unemployment rates, income levels and local businesses. If you're house is close to a university, hospital, or large employment center, they sell quick and at increased values.
|Create an online presence for your company before you start investing. Creating a LinkedIn profile is one good way to accomplish this; another approach would be to develop your own professional website. Make sure that you use search engine optimization on your website so that people can find you easily. Ideally, people who want to learn more about you on the Internet should be able to quickly find you by doing a simple search using one of the search engines.
|Stay on the lookout for sellers who are enthusiastic about making a deal. You have to look for them, particularly the sellers who are willing to sell for less than the market price. This is real estate and until you are able to land that seller, you will never land that deal, and that means never landing that profit.
|Consider any tax deductions you might get from your commercial real estate investment. Investors typically receive interest deductions in addition to depreciation benefits. However, investors sometimes get "phantom income", this is a type of income which is taxed but it isn't received as cash. You should be mindful of phantom income prior to investing.
Select your financing before you do anything else. Don't make the mistake of thinking that commercial lending is the same as residential lending. Commercial loan products actually offer some benefits that residential loans don't. Commercial loans require a larger down payment, but you can avoid personal liability if the deal goes bad, and banks are more relaxed about allowing you to borrow some of your down payment money from a friend or partner.
|There are many factors to consider as you view available properties. For example, you should take note of statistics regarding local employers, workforce availability and the accessibility of skilled labor. If you're looking at a property that's close to things like a university, employment centers, or a hospital, they're likely to sell fast, and at a high value.
|Commercial real estate agents come in different types. Some agents will represent only the tenant while a full service broker will represent both parties. A broker who works only with tenants should have more experience and should represent a better choice for you.
|It's up to the borrower, that's you, to order an appraisal for a commercial loan. The bank will not allow you to use it later. Plan for this eventuality and arrange for the appraisal on your own.
|You may wish to focus your efforts on only one property type at a time. You will get better results if you stick to a single type of investment rather than doing land leasing, apartments, and offices all at once. You can't be successful if you try to focus on more than one type of real estate investment at a time. Choose one type of investment and put all your attention on making it successful. You are better served by mastering one investment than floundering with many.
|If you are looking into a commercial property, always consider any investments where you can purchase a larger piece of property rather than a smaller one. Often, it is equally expensive to maintain either a small or large property. As a result, you are able to achieve an economy of scale.
|Make sure to find your lender before making an offer on any commercial property. Consult with friends who have experience along with other investors in order to compile a list of lenders that you should consider using. Instead of moving forward with a deal, you must first conduct extensive research on prospective lenders. If you take the time to be fully prepared, your loan process will be more efficient, and the odds of qualifying for the loan are higher.
|Before you negotiate a commercial real estate lease, you should aim to decrease the things that could be considered an event of default as much as you possibly can. This will lessen the possibility of a lease default by your tenant. You want to avoid any circumstances that could lead to this occurrence.
|Hire a qualified commercial real estate attorney to avoid legal problems later. It is best to always be protected by a trustworthy, knowledgeable legal professional who can help you to resolve any issues that may arise.
|Make sure that you know and understand what "NOI" (Net Operating Income) is. In order to be successful and stay profitable, watch this number closely, and take steps to make certain it does not fall into the negatives.
|When looking to invest in a piece of real estate, you should always be aware that prices may inflate dramatically in the years to come. Years ago, it was common for leases to protect people from inflation via adjustments made through Consumer Price Index. However, these days, this is rarely done, which means inflation could hit you where it hurts the most.
|You may find that you spend a large amount of time at first on your investment. Not only will you have to search out the right property, you'll likely have to make repairs or renovations to it after the purchase. However, don't give up just because this will take time. Stick with it and you'll be rewarded.
|Ensure you have the best real estate agent, ask if they are successful and judge their response. Also inquire how they personally measure their results. Understand exactly how they do business with their clients, and which strategies and methods they employ. Only work with them if you feel you are a good match, and have a similar philosophy about the strategies they use.
|Before you negotiate a commercial real estate lease, you should aim to decrease the things that could be considered an event of default as much as you possibly can. Your tenant will be less likely to default on the lease if you do this. You want to ensure this doesn't happen at all costs.
|Take into account how the establishment of an ideal rent expectation can affect your future business prospects. Find out how much the rent will be before you look for tenants. This will keep you from straying from your overall business plan, ensuring an increased chance for future success in regard to your investment.
Put the tips in this article into practice to begin making money by investing in commercial real estate. By implementing the tips that you have read, you can enjoy success with the many wonderful commercial real estate investing opportunities that are available.
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