Many consider real estate as one of the best long-term investments as it offers more control over where your money is being spent and how well it is performing. Commercial Real Estate (CRE) is just one type of commercial property investment available to you, but you must understand that it is very different from residential real estate.
As with the purchase of any real estate, commercial property comes with some potentially great benefits.
Benefits of Investing In CRE
You can be really confident in knowing that your commercial property investment is going to bring you some long-term gain. However, this doesn’t mean that every piece of commercial property is ideal for this. You need to do some research as to how well the businesses within the area are doing.
You should also check to see if there are any future plans for the area with respect to its growth. Getting in early on the first stages of an area growing commercially can quickly increase the value of your property for future investors.
With the right investment, you should be able to glean some income from the rental of the property you have invested in. Keep in mind that the cash flow from this type of rental is based on square footage. Even if your investment has been in a multi-family home or a small apartment building it is totally different than renting out an average one family home.
But before you dive head first into your first commercial investment there are many things to consider….
Familiarize Yourself with the Terminology
When you are investing in CRE it comes with its own jargon. For example, NOI = net operating income, NPV = net present value, TI = tenant improvements, PSF = price per square foot, and the list goes on and on. These are all terms that you are going to want to become familiar with.
Rely on the Right Professionals
Making an investment in CRE means relying on those professionals that are going to be able to find you the best deals. They also need to be professionals who are experienced in the selling and purchasing of commercial property. Make sure you do your research and find one of the top CRE brokers in your area.
Do Your Due Diligence
It’s always a good idea to make sure there aren’t environmental or structural issues with the property. You should perform a Phase I Environmental Assessment to make sure the subject property and surrounding properties don’t have any environmental issues that can come back to haunt you.
You can also order a Property Condition Assessment to identify any structural or deferred maintenance issues. Other reports to consider are Title Insurance, an Appraisal, and an ALTA Survey.
Some Commercial Property Investment Stories
One woman went from having no CRE income to making $20,000 a month. This was done by selling her initial residential property that was in need of real repair but still had a high investment value. She then took this money and invested it into a selection of turn-key properties. These were then renovated, rented out and the woman took on the role of offering property management services.
Some individuals are content with investing in just one commercial property and letting this investment grow, while others want to become diversified in their commercial property purchases and for a lot of investors it turns out to be a great success.
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