There are thousands of commercial real estate investors in the U.S. and for good reason. Investing in commercial real estate has proven to be an appealing way to invest due to the earnings potential, generally consistent returns, and property value growth potential of real estate properties.
How to Invest in Commercial Real Estate
Commercial real estate is not as simple as residential real estate. Use these tips to become a successful investor:
Ask yourself why you want to invest and know what you want to accomplish.
Understand the potential risks and liabilities of real estate property ownership.
Get a detailed understanding of the market. Secure the services of a trusted real estate broker and listen carefully to his/her advice. You’ll also want to utilize the services of a real estate lawyer who will understand the codes and regulations of the market.
Understand your business relationship with and obligations to the government.
Find properties that meet your investment objectives, then do thorough due diligence on them.
Figure out your financing needs so you know what you can afford and then secure adequate funding.
Close the deal.
How to Analyze Commercial Real Estate Deals
First, evaluate general market trends. Markets generally move in cycles of around 10 years so use the prevailing market conditions as a rough guide before proceeding. Factors to consider include population growth, population age composition, median household income for the area, and area economic drivers.
Second, conduct a commercial property analysis. That will include construction trends for the property type, vacancy rates, and demand factors for the property type.
Third, look at the specific property’s history. Including when it was built and its operating condition, vacancy rates, and current rents. Carefully review property comparables.
Fourth, examine all the numbers including an assumed sales price, potential rents, remodeling, and operating costs.
Seek Expert Financial Assistance
Contact Capital Finance Partners, based in Longmont, CO, your premier source for growth capital solutions. We provide access to a diverse range of solutions for commercial real estate and business financing.