Commercial real estate is an industry that holds true to the saying “with great risk comes great reward.” Now, it is true that commercial real estate can obtain a quicker, higher return on your capital; yet, it can be tricky to navigate. Here are some things to keep in mind when investing in commercial real estate.
Do Your Research
Whether you are considering purchasing an apartment building/ complex, office, or retail, take the time to think about which one will help achieve your goals. For example, if you are not wanting to be that involved with a property, an apartment complex might not be the best option. Also, research the surrounding area. Visit local retail and restaurants to speak with the people in the community to get an inside scoop of the area. Take advantage of market and trend reports that are usually produced by large commercial real estate companies. The more research you do, the better chance you have on obtaining an asset that will work and increase in value; therefore, maximizing your returns.
Save to Spend
In order to purchase a commercial real estate property, a larger down payment will be needed compared to purchasing a home. The upside is that there is often no personal liability if the deal does not work out and it is easier to borrow money to put the down payment sometimes giving you the option to use a partner or private lender to help finance the deal. However, you should be prepared to lose due diligence money. You can spend over $10,000 on a deal, only to find out that it might not be a smart investment. Yet, it’s better to lose out on the $10,000 then purchase a deal that could fail and cost you a lot more in the long run.
Real estate in general is an industry where networking is crucial. Even more so if you are just entering the CRE realm. Building relationships with other people can lead to finding new deals, having someone to ask questions or get advice from, or even finding a partner to help finance the deal. With many commercial properties being sold without being listed to the public, the more people you have on the inside, the better chance you have of finding the right deal that works for you.
While these tips can’t ensure 100% success, when it comes to commercial real estate, these are valid points that need to be taken into consideration before purchasing your first property. Good luck!