Commercial property is considered anything that is used for business. It can include office
buildings, warehouses, retail malls, manufacturing facilities, hotels and large residential
properties. When you invest in commercial property you make money through rental income
and appreciation in the property’s value over time. Investing in commercial real estate can be
profitable, but can also come with significant risks. Buildings don’t always hold value and
tenants don’t always renew. You think you are ready, but where do you start?
Step One: Know Your Why
Take some time to determine what your goals are for purchasing commercial real estate. Some
examples would be:
- Do you want to invest in a property that you will also occupy or are you interested in
purchasing a property to diversify your portfolio?
- Do you want to buy a property that is 100% leased and doesn’t need any immediate
improvements or do you want to purchase a vacant property that needs significant
improvements at a lower price (value add property)?
Step Two: Get Educated
Buying commercial property is complicated and it takes research, planning, and time. Eventually
you will need to call in the experts, but it never hurts to have a simple understanding of the
process. This is not like investing in stock. Commercial properties will require your time and
attention to stay on top of any issues. You need to be an involved participant for your
investment to succeed. For example, real estate markets are cyclical so you need to determine
where the market currently stands and when it is expected to change. Getting in at the right time
Step Three: Assemble an Expert Team
You know the old saying “you don’t know what you don’t know?” This is especially true when
you decide to invest in commercial real estate. You need to surround yourself with specialists
who have been there, done that and can guide you through this new venture. These specialists
- Commercial real estate broker to help you analyze the market and find potential
opportunities that meets your goals
- Mortgage broker to help with your financing needs
- Lawyer to review all documents associated with the transaction
- Accountant to advise you on tax related issues and to run the numbers before you buy.
They should also forecast your future returns.
Step Four: Find the Right Property
This is where a commercial real estate broker is essential. Their market expertise is invaluable
as you search for your first property. If you have been thinking about purchasing commercial
property, give us a call. We would welcome the opportunity to discuss your needs and
determine if the time is right to start investing in commercial real estate.
Brian Smith, CCIM, can answer any questions you have about investing in commercial real
estate. Contact him today for a complimentary consultation.