Commercial Real Estate Investing Guide: 8 Things You Should Know

Business Finance

Commercial Real Estate Investing Guide: 8 Things You Should Know

Investing in real estate can be a challenging, yet very rewarding, decision. When you own a commercial property, whether it’s a retail building, office space, or warehouse, you can benefit from a steady income, great relationships with businesses, and flexibility in work. But before you make your first investment, here are a few important things you should keep in mind.

Gather Information About The Market

Before making any investments, you need to have a good understanding of the market. If you buy a property in an area with low demand, you’re going to have a difficult time finding tenants. Also, you need to understand market cycles—you want to avoid buying property when the market is high, which can be impacted by things like the overall economy and unemployment rates. 

Be Prepared For Lack Of Income

You should never go into real estate expecting to have a steady income every month. If something happens and you’re without a tenant for a few months, you need to be prepared. So before you make a purchase, make sure you’ll have enough savings to pay your expenses for at least a few months.

Choose The Right Property

Choosing the right property can make a huge difference in your investment. It’s crucial to think about your target audience when choosing a property so you can ensure you’re buying something people will actually want to rent. 

The best type of property for investment will depend on your wants and needs—figure out which types of businesses you want to market towards and research the types of properties they could use.  Additionally, you want to ensure you get a great loan so you can afford the best property possible for your situation. Look for lenders who offer reasonable rates and flexible terms. 

Understand Your Role As The Property Owner

Being a property owner comes with many benefits, including having a pretty hands-off role. But there are a few things property owners are responsible for and it’s important to know what jobs you’re willing to do as a property owner before writing up a lease contract. You may also need to invest in services like lawn mowing in New Braunfels, TX—this is something you may have to do before you find a tenant as well. Maintaining an attractive exterior is important for any property investor and if you want to attract potential tenants, and keep them happy, you need to keep up with the landscaping.

Make Sure You Follow The Law

You should make sure you have a thorough understanding of all of the legalities and regulations you need to follow when buying and leasing a commercial property. You should hire a good lawyer to go over the purchasing paperwork, your loan paperwork, as well as the lease you draft up for tenants.

Have A Good Understanding Of Financing Options

There are several different financing options for commercial properties and you should know about them all before making a purchase. There are Triple Net Lease financing options, which require a 25-35% down payment but have a lower interest rate, and there are commercial financing options, which typically have a longer amortization period and higher interest rates. Make sure to explore all of your financing options before signing the paperwork to ensure you’re making the smartest financial choices.

Be Mindful When Choosing Tenants

When it comes time to look for tenants, make sure you choose one who is going to be a good fit. You can run background checks, ask for references, and do some other research to help you make your decision. You’ll need to see business models and financial information to ensure whoever you’re renting to can afford to pay the monthly rates. By taking the time to ensure a potential tenant is going to work out, you’ll save yourself trouble in the long run.

Don’t Bite Off More Than You Can Chew

Investing in real estate is a big financial decision and it’s not always guaranteed that you’ll succeed. This is why it can be beneficial to start small—if you have some investment experience, start slowly and don’t buy a building with hundreds of offices to rent out. Going slow and gaining experience along the way will help you learn, grow your business, and feel more confident making larger purchases.

When done right, commercial real estate investment can be extremely rewarding. So keep this information in mind to ensure you make the best decisions possible as you start your commercial real estate career.

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