Investing in commercial properties is a very profitable venture. If you’re planning to buy commercial properties, then you’re not alone. The US spends about 8.52 billion on private commercial properties each year.
It isn’t uncommon for the wealthiest individual to own a few commercial properties. Take The Rich 200 list by Financial Review, for instance. You’ll notice most of the people on the list own at least one commercial property in the country.
Buying commercial property is a very monumental decision. As such, you should treat the process with all the gravity and due diligence it deserves. Otherwise, you may not get the return you expect after acquiring the property.
In this piece, we’ll look at seven amazing tips for anyone investing in commercial property. So you’ll make the most out of your purchase.
Benefits of Investing in Commercial Property
There are tons of benefits to investing in commercial property. Although it’s quite a costly investment, it has an incredible return on investment.
Here are a few benefits of buying commercial property
High-income potential– The annual return of a commercial property is way higher than most investments. Considering the number of tenants and the property space, you should expect continuous income for your entire period of ownership.
Security for your investment– Commercial properties value both the land itself and the establishment too. Any improvements to the building also raise the property value. The demand for commercial properties is fairly stable. Unlike bonds or stocks, you don’t stand to make huge, unprecedented losses.
Good appreciation rate– Commercial properties appreciate much greater than most forms of investment. Apart from appreciating land value, the buyer can increase property value by making improvements to the property.
More tenants equal more returns– Unlike residential properties, commercial properties can hold a good number of tenants at any given point. The more tenants, the more the returns you get from your investment.
Seven Amazing Tips for Investors Buying Commercial property
Commercial real estate is an exciting prospect and very profitable at that. But before you make such a huge investment, you might want to learn a few things about commercial properties.
Here are seven tips for anyone looking to acquire commercial property as an investment:-
- Focus on the Investment Part Not the Acquisition of Property
The purpose of any investment is to generate income that surpasses the actual investment cost. With this in mind, remember that you’re acquiring property, not just for the sake of it. You are buying commercial property to make money from it.
So make sure you don’t buy property that just sits there. You should acquire property that is bound to generate returns. No matter how beautiful the property is, if it doesn’t make a profit, you’re better off without it.
Remember, you are an investor and not an accumulator of property. Ultimately, your turnover will determine your investment acumen and not the number and size of your commercial property.
- Acknowledge the Risk Factor
Before any investment in commercial property, you must realize that there is some degree of risk involved. So before acquiring property, take into account all the possible risks.
Don’t be too optimistic. In fact, being pessimistic and circumspect is way better than optimism in this situation. Be prepared to have a few months without any rent payment. Also, be open to the possibility that tenants may not completely occupy your property.
Take into account market trends, the geographical location, and the building’s history to gauge the risk involved in buying the property.
- Have Your Financing on Lock
We all know that commercial properties are certainly not cheap. As such, most people require a bit of financing to acquire commercial property successfully.
When seeking financing, consider every viable option available. Don’t limit yourself to a particular method of financing. Consider a hard money lender to finance your acquisition or to top off your cash.
- Protect Your Assets
Do all you can to protect yourself from any liability or legal issues when buying commercial property. Here are a few guiding questions to consider to ensure you don’t have any liability:
- Does your commercial property have any legal protection?
- What is the legal history of the property you’ve acquired?
- Are your other assets protected?
- Are your current investments separate? So that one lawsuit doesn’t touch on your other investments.
- Assess the Suitability of Your Commercial property
It is not uncommon for commercial property investors to encounter major problems after their acquisition or construction. To avoid such, check with the local authority on the suitability of your commercial property.
Ask crucial questions like the traffic situation in the area, the security, and such. Also, find out whether the area has any overlay zones.
There are plenty of ticks to check before the local authority gives you the heads up. Consider stuff like if you anticipate any noise disruption, or whether your commercial property satisfies all area building codes.
- Acknowledge that Property Has a Lifetime
Nothing lasts forever, and property certainly doesn’t last forever too. You have to realize that along the way, you’ll have to pay for property upkeep.
Depending on the building type, maintenance costs vary. Don’t spend all your money on the property and forget to leave some for upkeep. Keep in mind that without proper maintenance, the value of your property decreases.
- Remember Environmental Concerns
Plenty of commercial properties are notorious for dumping waste carelessly. It’s your primary responsibility as the commercial property owner to ensure your activities are environmentally conscious.
Ensure that all tenants carry out proper waste-disposal even if it was the previous owner’s fault. As the current owner, it’s up to you to ensure no activities are detrimental to the environment.
Take Your Time When Buying Commercial Property
Buying commercial property is a pretty exciting prospect. It’s easy to get caught up in the excitement and forget to be keen when settling for commercial property.
Take your time and follow due diligence when buying your commercial property. Take these tips to heart, and you’re set to make a killing from your commercial property.