Purchasing Commercial Real Estate? Consider These 5 Things Before You Buy
By : Taro Chellaram, CCIM
Whether you are a seasoned investor, or you're researching for your first property there is always a certain risk factor that makes us hesitate before signing the dotted line. Likely, you're looking to make money, and you've found that commercial real estate has the potential to expand your business. However, if not careful you could find yourself shelling out much more money than you had ever anticipated.
So how can one determine whether they're making a good decision? First, like any investment, commercial real estate does have a certain risk factor attached, but those who are most successful know to look for when purchasing.
We have rounded up the best advice shared by top real estate investors. Take a look at what tips they urged investors to consider before purchasing:
Larger Properties show more Rent Growth
Go Big or Go home; larger properties have a greater opportunity over smaller properties according to recent studies conducted by CoStar. After taking a careful analysis of retail properties, apartments, and oﬃce buildings, CoStar found that oﬃce buildings had the largest rent increase. Oﬃce assets that have a property size increase by 50% there is a $1.20 increase per square foot. This is a tidbit worth considering when deciding which type of property you would prefer to purchase.
Know Your Market
The market is ever changing, that’s why it’s important to stay up to date on market trends. For instance, investors interested in oﬃce space may consider looking at Texas. In 2017 Austin averaged 11-15% in oﬃce vacancy in parallel of having 15 oﬃce properties with approximately 2.57 million in square footage. Because Austin is expected to grow its tech industry it is a number one consideration for investors. Staying up to date on market trends, like this can allow you to invest wisely, sooner.
Consider Area Demographics And Trends
Imagine purchasing commercial property just to drown in bureaucratic red tape? Know your area-the culture of the neighborhood, the condition of the land, everything. If you plan to develop and maintain a long term relationship at the property don't fail to do your due diligence. A local broker may be a worthy investment, helping you navigate local authoritative agencies and giving you a briefing on what to expect a long Th. way.
In comparison to other investments, like residential, Commercial Real Estate takes much longer. This is not something to rush into, take your time, do your homework and ask a lot of questions. It does take longer, but the payout is much larger.
Consider Hiring a Commercial Real Estate Agent
You can navigate the deal yourself of course, but sometimes the process can be overwhelming. Don't underestimate the benefits of a commercial agent. They can help you find a great property and walk you through the negotiation process.
All in all, Commercial real estate is a worthy market to place your interests. But like any good investment, it can withstand the test of research. Take your time and be knowledgeable of what you are getting into. We urge you to subscribe to our monthly newsletter complete with market updates, property listings, and area trends. Subscribe today!