When it comes to investing money in hopes of getting big returns, there really is no better industry than commercial real estate. Commercial real estate is a gold mine for those looking for long-term investments. Putting into your money in commercial real estate will most definitely generate much higher returns than investing in another industry. That being said, there are some rules for investing in commercial real estate that you need to keep in mind.
Whether you’re investing in residential real estate or commercial real estate, location matters!
There are two ways of making money out of commercial real estate, rent and capital appreciation. Rental rates and capital appreciation of real estate both are heavily impacted by the location of a property.
When you’re searching for commercial real estate, look for buildings/areas where vacancy is lower than 5%; this implies that there is a steady supply of buyer/tenants which in turn will lead to better capital appreciation and more rent.
Investing in a building of poor quality will lead to unnecessary expenses. Well-maintained buildings are more likely to attract buyers/tenants than those that look old and outdated.
Landlords that offer high quality, commercial real estate spaces can charge higher rents than those who have worn out buildings.
Speak to your commercial real estate broker about buildings with impressive certifications that indicate good quality; buildings with good ratings attract high-paying tenants.
3. Market Trends
No investment should be made without carrying out a detailed analysis. Your knowledge of the real estate landscape may be limited, but real estate brokers know all about upcoming developments and other factors that are impacting market trends.
They’re well aware of the supply and demand of every commercial hub in the city. Only after assessing all factors should you decide which commercial property to invest in.
As with any investment, it helps to diversify your portfolio. Putting all your money into one building has high risks. If a tenant vacates, you’ll won’t be paid rent however, you’ll still be charged with maintenance costs and property tax. It always helps to spread your investment out instead of putting all your money in one place.
A commercial real estate broker can help you navigate through the process. They can search for properties that meet your requirements and budget, arm you with important information and guide you through negotiations.