The US commercial real estate market is predicted to stay strong in 2020, so it’s understandable if you’re tempted to put your finances to good use by investing in commercial property.
However, despite the appeal of this lucrative investment opportunity, there are some things that you should be aware of—before you invest.
What You Should Know
– There’s No One Type of Commercial Property
In fact, there are five, and even they are sub-categorized into a range of other property types.
Each has its own supply, demand, and overall profitability metrics, and some properties even perform differently if they’re in different locations.
If you want to invest in a certain property, it might be wise to brush up on all the different types of assets, including which one would be the most profitable investment in your area.
– Understand the Importance of Geography for Supply and Demand
Every market is different, after all. A certain property type may work well on a macro level, but if there’s an oversupply in your area, you won’t find any feasible investors or tenants who’d want to utilize it in the long-term.
So before investing, do your research thoroughly. Find out what’s undersupplied and whether certain property types lack in features in that area. Fill in any blank spaces you find.
– Thorough Due Diligence is Important
You don’t want to end up missing something important because you got caught up in the excitement of buying your first commercial property.
Especially if you’re a beginner, it’s crucial that you conduct thorough due diligence to all aspects of your purchasing process. Review your financials, check your tax returns, and find additional documentation.
Conduct your own surveys on location and property maintenance, property inspections and more. This will save you from making costly mistakes.
– Set Up Funds for Contingency and Capital Reserve
With any sort of investment where you’re paying a substantial amount, it pays to have some sort of account set aside that will help with unexpected expenses.
Cost contingencies and capital reserves are funds that help you cover your debt or pay for any long-term improvements that may be beyond your budget.
When buying any property (residential or commercial), budget for both and find out if you can, in fact, afford the property after that amount has been taken out.
Work with a Reliable Real Estate Firm
Macomb Commercial Real Estate is a trusted commercial real estate broker in Sterling Heights, MI. If you’re looking for industries buildings or office spaces in the MI area, contact us. We’ll guide you!