Commercial real estate is one of the best investments you can make. That’s because, on top of giving you value appreciation, you also get to enjoy predictable long leases that come with commercial tenants. It is also a perfect way to diversify your portfolio, and protect yourself from a slowdown in the residential real estate market. Unfortunately, finding a good commercial property can be a daunting task. It’s so complex that if you are not careful, you might burn your fingers in the process. To help make your commercial real estate investment smooth and profitable, here are 4 tips to help you find the best commercial investment property.
- Put financial calculations into consideration
Before you commit your money into commercial real estate, take into consideration financial aspects such as the cap rate, and the net operating income. To give you context, let’s use the cap rate as an example. The cap rate stands for the maximum profits that a property can generate in the future. If you get the cap rate right, you will in a position to understand the true value of a property. The best ones are those whose maximum possible returns are way higher than the price that the seller is asking.
- Be patient
This is undoubtedly the most essential tip for someone considering to invest in commercial real estate. That’s because rushing to buy the first property that you come across, might not be the best value for your money. Patience helps you gather as much information as possible about market cycles in the commercial real estate sector. For instance, you get to learn that buying at a time when interest rates are low might mean buying way above the property’s true value. This is an important factor that you might miss out on, if you rush to buy.
- Try and buy big
Unlike in the residential property subsector, a small commercial property may not give you a good return on investment in the long run. That’s because the costs of owning and running such a property are also higher. To get value for your money, you need to go big. You may do this by partnering with other investors, or by seeking leverage from a financial institution. Just keep in mind that when it comes to commercial real estate, bigger is always the best, both in returns and maintenance.
- Engage a good real estate agent
Real estate agents know the market better than you. They know which commercial properties are up for sale, and which ones are well priced, relative to the expected returns. The catch is to find a genuine and reputable real estate agent, and you guaranteed of a great real estate investment. To find out the credibility and reliability of an agent, you may check out their customer feedback online. If the feedback is largely negative, avoid them. The last thing you want is to lose your hard earned cash to some dubious real estate agent.