It’s one thing to invest in residential property, it’s a completely different world to consider buying commercial property as an investment.
While this may seem like the same thing, these are two separate entities and require different strategies and processes. However, if you do have the right strategy, this can be quite a lucrative investment.
If you are a beginner, there are a few things you should know about investing in commercial property before you get started. Read on to learn more!
Understand Holding Time
When it comes to investing in a commercial property, you have to consider the holding time and what works for you.
While cash flow properties are usually ready right when you want them, value add properties usually take much more time.
A cash flow property is one that brings in the cash right away. While a value-add property is one that needs some value added to it before it can be rented, such as a renovation or another type of maintenance.
Know the Potential Appreciation
Before taking the leap, you also want to consider the future. Does this property that you are looking at have the potential to appreciate over time?
Here are a few questions that can help you determine that:
- Is the local area in high demand for building more properties and commercial buildings?
- Is the population growing year after year in this area?
- Have rental prices increased over time?
- Has there been an influx in businesses in the area?
If the answers to these questions are all a resounding “yes,” then this may be the place to invest! However, if you are noticing that the population is stagnant or rental prices are decreasing, the value of the building may not appreciate over time.
You will have to weigh your pros and cons!
Understand the Finances Behind It
There is a bit more to the finance aspect of investing in a commercial property rather than a residential one.
When you go into this industry, you will have to know about the following:
- Triple net lease
- Multi-family financing
- Agency lending
- Interest rates
- Amortization and loans
If you feel comfortable with your knowledge about those five things, you could keep moving forward. But if a few of those ideas stop you in your tracks, you should do more research before continuing with the investment.
Buying Commercial Property
When you start thinking about buying commercial property, there are many different things you must consider first.
You need to know about the local area you are looking to invest in, understand all aspects of the finances surrounding the investment, and more about holding time.
With years of experience in the industry, Rodos Advisors is here to help you find a property that fits your needs. You can contact us and we can discuss it more today!