Did you know that commercial investments can actually provide you with very good returns? But as is the case with many other investments, investing in commercial property can go either way (PropList). Although some investors certainly end-up making a fortune from commercial properties as compared to residential investments, there exist some factors that can greatly impact your property investment.
Consider the following factors before making a commercial investment:
- Surrounding Area
Traditionally, an investor will choose to purchase a property located in an area experiencing an upturn. Ideally, the perfect commercial property should play to the strengths in the area. What this means is that it ought to play a certain role in serving some of the trends that have been forecasted in that region. This is especially important when you will be the one conducting the development work.
2. The Tenants
When purchasing a building or set of buildings that have already been occupied, you will need to consider the current occupants. Look into the kind of businesses that they are involved in before committing to buy. This will involve looking into the business’s financial stability to determine whether they are in a position to cover their expenses or not.
3. Total Work Involved
By choosing to go commercial, you may assume that you have dodged a bullet by not becoming a landlord. But the reality is that a commercial property will also require some level of investment from its owners.
Try to consider the length of time that the businesses in that property will remain open. While at it, ensure you confirm their working hours as well. The working hours dictate when problems, e.g., utility damage, failures, and structural problems are likely to occur.
4. Prevailing Market Conditions
Businesses tend to use professional real estate agents when looking for the best space to let. As such, when in search of the best space to lease or buy, you will need to consider the current market conditions.
What does the market suggest about the property you want to acquire? If you intend to go retail, will online shopping have any effect on your ability to attract and retain the best tenants?
Are the types of businesses that will be attracted to your property apt to shift online as well?
5. Time and Money
At the end of it all, your overall involvement in the management of your property will determine whether it will be profitable or not. At the start, you will need to exercise a lot of patience.
Commercial properties are not the same as the other kinds of real estate. It takes a while for them to start coming together. If the property you have purchased also involves some apartments, this might be a bit easier to fill.
But note that keeping a tenant in your retail section and being able to perform additions and renovations will not be an easy task.
Experienced commercial investors often choose to use the services of a property manager to avoid the risks associated with owning a real estate property. The important thing is to carefully consider the area you want to invest in, the local industry, and the time you will need to spend on the property before it becomes profitable.