Benefits of Commercial Property Investments & Where to Start

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

Long-Term Gain

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.

Cash Flow

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.  Just look at Donald Trump!

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While there may be a lot of mixed feelings as to whether Denver would be a good fit for the new Amazon second Headquarters, Amazon no doubt has its own ideas as to why it would consider Denver for its new location. Even the New York Time’s agreed Denver is the best choice.

Amazon’s Familiarity With Colorado

It began when Amazon opened up a sorting center in Colorado last year. The objective was to allow Amazon to increase their trucking delivery speed to the surrounding post offices.

Amazon then followed with the decision to open an Amazon fulfillment center in Aurora that is certainly not considered to be small in size or stature. It comes in at one million square feet and is meant to stock larger Amazon items.

During the announcement of the opening of this new facility there were indicators from Amazon that they intended to increase benefits to their prime market. Doing this led them to the expansion of the logistics network in Colorado.

Amazon was not prepared to take their eyes off the viability of using Denver for other needs which was proven with their plans to open a robotics fulfillment center in Thornton. This time the space will cater to housing the smaller Amazon items.

On these three occasions, Amazon has given detailed thought and consideration to the benefits of operating a portion of their business out of Denver. They have done their homework prior to making these moves. Analytical data and research that was conducted prior to these decisions will most likely play a role in the decision making as to whether or not Denver will be chosen for the second headquarters of Amazon.

It’s All About The Incentives

Some may raise the question as to whether factors aside from Demographics and the right location enticing Amazon. These incentives still loom across the country. Colorado’s Enterprise Zone is one such perk that should help.

This is a different incentive that entices businesses to relocate here by offering them an impressive selection of tax credits, including $1,100 for each new job opening, a 3% tax credit on equipment purchases and job training credits.

Although Denver is being considered by Amazon it sits in a list of top twenty so nothing is set in stone. Denver is going to have to prove its worth to Amazon above what it has been able to do to date.

Both Sides Of The Argument

The mixed feelings about Amazon choosing Denver for its second headquarters are diversified. Some feel that the infrastructure cannot handle the traffic issues that would only compound. Others feel that the number of job openings that the new Amazon headquarters would create trumps any negatives that may be raised.

From the real estate point of view the new Headquarters could drive the market into a seller’s market because the housing market is already sitting at a inventory that is being classed as being close to a record low. So for buyers this may not be ideal, but for sellers it is a positive.

Whichever side of the HQ2 argument you land on, there’s sure to be plenty more to discuss in the coming months. The only guarantee is that the hype and fanfare will only continue to grow leading up to the big announcement.

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