Investing in commercial real estate is a lot different than owning a few residential rentals. There are a lot more factors that you need to consider before you take the plunge on a commercial property.
Here are some of the things you need to keep in mind as you move forward:
- What type of property is it? Commercial property comes in all different shapes and sizes and has many different uses. It can be industrial, retail, multifamily, office or special purpose, but even those have subcategories that are important to note, like storage units, flex warehouses and coin-operated buildings. You want to make sure that you’re investing in a property that has a strong potential for growth given the current economy.
- What are the demands of the local market area? Even if office buildings are performing well in the national economy, they may not be doing so hot in the local area — leaving a lot of office spaces empty. If you only look at how well office buildings are doing in the national market and overlook the local one, you could be in for an unpleasant surprise.
- Where is the current real estate market cycle? You want to buy low and sell high, not the other way around. If you’re jumping onto what seems like a hot market when the prices are soaring, you could find your money tied up for longer than you’d like once real estate prices level back out.
- What’s the zoning? One of the worst (and most expensive) things you can do when you’re investing is pour a lot of money into a property with the dreams of developing it only to find out that zoning regulations have you shut out of your goal.
Investing in commercial real estate is popular because it can be so profitable — but you don’t want to take chances during this process. Make sure that you get the right assistance as you do your due diligence on the property and cut a deal.