Investing in commercial real estate has proven to be a profitable venture and has numerous advantages, including tax benefits, capital gains, and portfolio diversification. However, purchasing and managing a commercial real estate property is a pricy endeavor, and you must be careful along the way.
You risk facing many problems with no planning, including poor building layout, unexpected construction costs, and, worse, environmental changes.
That said, here are six steps to help you get your first commercial real estate property:
Step 1: Understand Why You Are Investing
The first thing you should do is identify why you’re investing in a commercial property. Doing this will greatly assist you in choosing the type of property to invest in and the market. Besides, what is the point of investing in something when you don’t know what you hope to achieve? So, instead of buying a commercial property and determining what you want later, consider identifying why you are investing first.
Step 2: Determine Your Investing Options
The commercial real estate industry is an extensive term covering industrial complexes, retail shops, and many other types of commercial real estate. In simple words, commercial real estate is buying property and using it for business commitments. So, it will be best to determine which type of commercial real estate you want to focus on. To determine this, remember your reason for investing.
Step 3: Secure Financing
It’s essential to secure financing for your commercial property well in advance. Search for lenders and compare their rates before you settle for one. And while you might want to secure financing quickly, make sure that the lender offers what you need. Their offers must be according to your credit score and at affordable interests.
Don’t forget to ask them if there are any additional fees or penalties. Also, check out the loan to value ratio or the amount the lender can loan you and inquire about securities. Certain loans allow the lender to go after your assets if you default, while others allow them only to seize agreement–particular collateral.
Therefore, when buying a commercial property, think about the lending options, including SBA loans, hard money loans, permanent loans, and bridge loans.
Step 4: Work with the Right People
The commercial real estate field is never a single work. You will need a team to help you identify, purchase and manage your commercial real estate property. You’ll also need to work with a reputable commercial property manager to help you reduce property maintenance costs and improve your income. It means you’ll have more time to find other investment opportunities. With Showcase IDX now available in Washington, real estate software portals are able to provide more real-time data to the users. You can make use of such platforms which use such good IDX and look for your dream property.
In addition, consider hiring an attorney that specializes in real estate or even an accountant to help make the deals go smoothly. Remember that many professionals can help you out through the acquisition process, so don’t be afraid to ask for help. Having the right people in your corner is key to owning the right commercial property.
Step 5: Mind Due Diligence
Considering that purchasing a commercial real estate property is very different from buying a single-family home, you should mind due diligence before you proceed. Run your digits and evaluate the deal in general. Are the intrinsic risks worth the potential rewards? Is there another property that will best suit your needs, budget, and goals? Proceed to buy only when you are sure the property will be profitable to your portfolio.
Step 6: Make an Offer and Close the Deal
Once you are sure, you found the property you want, make an offer with a contingency phrase. An inspection contingency will be best as it will give you an exit out of the deal once the property fails to pass the inspection.
Bottom Line
Investing in commercial real estate can be overwhelming and confusing. Therefore, know why you are investing in the first place, determine your investment options, secure financing, hire the right people, complete due diligence, and then make an offer.
