Commercial real estate can be a lucrative investment. About one-third of all commercial real estate is purchased for investment purposes. But it’s essential to plan and ensure you get the most out of your purchase. Many people jump into commercial real estate without doing their homework and lose money. If you’re thinking of buying commercial real estate, here are a few tips to help you get started.
1. Know your budget
Before you start looking for commercial real estate, you need to know how much you can afford. This will help you narrow down your options and prevent you from overspending. Track your expenses for a few months to understand your monthly cash flow. Then, set aside a realistic budget for your commercial real estate purchase.
When setting a realistic budget, consider the cost of repairs, renovations, and furnishings. You’ll also need to budget for closing costs, which can be about 10 percent of the purchase price. Commercial real estate loans require a down payment of 20 percent or more. So, be sure to factor that in as well.
It would be best if you also had a contingency fund set aside in case of unexpected costs. No matter how well you plan, there’s always a chance that something will go wrong. By having a contingency fund, you can rest assured knowing that you have the financial resources to cover any unexpected costs.
2. Have a clear idea of what you want
When looking for commercial real estate, you must have a clear idea of what you want. Do you want to buy an office building, a retail space, or an industrial property? What size property do you need? How many floors do you want? What type of layout are you looking for?
Before you start your search, sit down and make a list of your must-haves. This will help you narrow down your options and find the perfect property for your needs. You should also know what you want to do with the space. You can’t just buy any commercial real estate and expect to make a profit.
For example, if you want the rental property, you need to decide if you will rent it to businesses or individuals. You may open a coworking space business that rents out office space to small businesses and entrepreneurs. Or, you may want to lease retail space to a tenant who will open a shop or restaurant. Make sure the property you choose is zoned for the type of business you want to open.
3. Research the market
When you’re ready to start searching for commercial real estate, it’s essential to do your research. You need to know what’s available in the market and what prices are typical for the type of property you want.
This information will help you negotiate a fair price for the property. It will also help you avoid overpaying for a property. There are several ways to research the market, such as online listings, real estate magazines, and speaking with a commercial real estate agent.
You can also attend commercial real estate trade shows and conferences. This is a great way to network with other professionals and learn about new properties on the market. Depending on your budget, you may even be able to take a class or two to learn more about the market.
4. Get help from a professional
Commercial real estate is more complicated than residential real estate, so getting help from a professional is essential. A real estate agent specializing in commercial properties can help you find the right property and negotiate a fair price.
A real estate attorney can also be helpful, especially if you’re unfamiliar with the legal aspects of buying commercial real estate. An attorney can review the purchase contract and help you navigate the legal process. They can also represent you in court if there are any disputes.
You may also benefit from working with a commercial lending officer who can help you get financing for your purchase. Many banks offer commercial real estate loans, but the terms can be complex. A lending officer can explain the different loan options and help you choose the best one for your needs.
5. Consider the location
The location of a commercial property is just as important as the property itself. It would be best to ensure the property is located in a safe neighborhood with a high quality of life. This will make it easier to attract and retain tenants.
The location should also be convenient for customers and employees. If your business is located in a remote area, you may have difficulty getting people to come to your store or office. And, if your employees have to commute a long distance to work, they may be less productive and more likely to quit.
When you’re ready to purchase commercial real estate, keep these tips in mind. Researching and working with a professional will help you find the perfect property and get a fair price. And, don’t forget to consider the location of the property. It’s just as important as the property itself.