If you’re a business investor who is curious about the commercial real estate market, you probably have a lot of questions about how to choose the right property, which investment strategy is right for you, and which professionals you should turn to for guidance.
Taking a thorough online course created by an industry veteran like John Highman can prepare you for your first commercial property investment. In the meantime, these tips will help you brush up on your commercial real estate knowledge.
The Following Article is from Contributing Specialist Real Estate Investment Author Ted James
This article is from specialist property investment author, Ted James. Ted James is a husband, father, dog owner, and rock climber living in the Pacific Northwest who devotes a large chunk of his time helping people get back in the driver’s seat of their finances. A professional financial counsellor and coach holding an MBA in Finance, he created Ted Knows Money, to share money tips and help people get complete control of their finances.
Research Investment Strategies
First, you’ll need to learn about the differences between popular commercial real estate investment strategies, such as core investing, core-plus, value-added strategies, or opportunistic investing.
If you’re a first-time commercial investor, VTS recommends prioritizing core investing, which involves buying and holding stable properties in strong markets that are likely to enjoy low vacancies. While other investment strategies might give you the chance to earn larger profits, they also come with higher levels of risk.
Choose Your Property Types
The term “commercial real estate” applies to a wide variety of property types that have been built for various uses. Real Commercial states that you might choose to invest in one of three primary sub-sections in the commercial market: office space, retail property, or industrial property.
Investing in office property is generally a safe bet for high yields, while profits on retail property can fluctuate with the economy and industrial property can be expensive to maintain.
Assemble a Team
Once you’ve decided on the type of property you want to look for, you’ll want to find a trustworthy commercial real estate agent who can help you make a smart investment. You may want to ask other investors about agents or brokers they have worked with.
In addition, you will need to find a property lawyer — making such a hefty transaction without professional legal guidance can be unnecessarily risky. In the future, once you’ve closed on a property, you may want to seek out a property manager so that you can outsource day-to-day operations and free up time in your own schedule.
Financing Commercial Real Estate
How do you finance a commercial property? You’ll likely need to qualify for a commercial real estate loan, which will cover about 60 to 70 percent of the property’s value. This means that you will generally be responsible for a down payment of approximately 30 percent. To have your loan application approved, you will typically have to provide proof of income verification.
If you want to boost your chances of approval, consider a few different lenders in advance and aim to choose one that specializes in the type of property you intend to purchase. Learn the basics of loan underwriting before submitting your application, and don’t be afraid to negotiate the terms of your loan in the process!
Renovate Your Property
Maybe you want to update your commercial space to add in-demand features, improve the aesthetic appeal, or fix structural issues. Perhaps you want to completely transform your property, and you need an architect to create mockups or blueprints. To get the job done, you’ll need to hire the right contractors.
You can search for professionals in your area by browsing an online job board. Whether you’re looking for an architect, interior designer, renderer, and the like, help is easily available! Plus, it’s easy enough to vet candidates by comparing rates, reviews, timelines, etc.
Investing in commercial real estate can be quite lucrative. But investing in the wrong property can be a very costly mistake, so it’s important to do your research first and make sure you fully understand the process before diving in. With these tips, you’ll be ready to start hunting for your first commercial property!
Ready to start learning more about commercial real estate investing? Take a comprehensive online course created by industry expert John Highman! Enroll today through our website.