Commercial real estate can be a lucrative business, providing returns which can be reinvested in various properties to build wealth for the investor.
But investing in commercial real estate doesn’t happen without risk. Performing your own analysis and research, and working with an experienced commercial real estate agent can ensure you’re making the best possible decision.
Rodos Advisors powered by eXp wants to help investors like you. Here is our brief guide on commercial real estate investing.
Step 1. Decide What Type of Property You Want to Invest In
First, you need to decide what type of commercial real estate is best for your budget, risk tolerance, operational involvement and your long-term goals. For example, are you planning on buying a commercial building for your own business or do you want to take on tenants? Will you manage the property yourself or contract with an asset and property management firm? Will you handle the leasing responsibilities? Here is a shortlist of property types to consider:
- Residential rental units (homes, duplexes, split-homes, etc.)
- Multi-family developments
- Retail stores
- Industrial and office buildings
- Warehouses
- Malls and plazas
Your choice largely depends on your investment income goals and long-term strategies. .
Step 2. Determine Your Budget
Next, consider the overall costs of your investment and how your monthly finances will be affected by this additional expense. Ideally you should select a commercial real estate investment that you can easily afford each month. You may want to seek pre-approval for a commercial real estate loan at this point in the process, so you’ll have an estimate of the debt you can realistically undertake.
But remember that owning property comes with costs other than just a monthly note. Be sure to account for costs such as taxes, insurance, utilities, maintenance and improvement costs, as well as saving for the unexpected. Assess your finances to understand what you can afford and make priorities to meet your goals.
Step 3. Hire an Experienced Commercial Real Estate Agent
When looking to buy a commercial property, work with a reputable local commercial real estate agent who will represent your interests and help you navigate the process. An experienced agent can help you find the right property based on your goals.
Real estate agents also have fantastic connections within the community. They can connect you with contractors, mortgage lenders, insurance providers, and other service providers you might need for a commercial real estate investment. Finally, an experienced real agent will help you effectively negotiate the sales transaction with the property seller.
Step 4. Find the Right Location
Working with a commercial real estate agent will also help you find the ideal location for your chosen property type.
For example, if you want to invest in a single-family rental home, you need to find an affordable neighborhood whose covenants allow for absentee ownership and long-term leasing. If you’re looking for a retail space, seek a neighborhood with plenty of foot traffic, parking and good drive-by visibility.
Step 5. Get an Inspection and Make an Offer
Now it’s time to evaluate the local commercial real estate listings that meet your parameters. Tour each space with your real estate agent until you find a contender. Once you choose a property that meets your needs, make a offer contingent upon an acceptable property inspection or appraisal.
Once the property has been inspected, you may reevaluate your offer. Based on the inspection results you may request that the seller makes repairs or renovations, yields an allowance toward repairs, or adjusts the asking price. If the inspection doesn’t uncover any unknown information, follow through with your offer as presented.
Are You Ready to Invest in Commercial Real Estate?
If you’re looking to start building wealth through commercial real estate investing, we welcome the opportunity to help. Our real estate agents are experienced in this market, and have in-depth knowledge of local neighborhoods and commercial opportunities. We are connected to community resources who can help you navigate the responsibilities of commercial real estate investing.
Contact us today to schedule an appointment or speak with one of our agents. We look forward to working with you to make your dreams a reality.