The average ROI for commercial real estate in the US is 9.5%. Commercial property is generally considered one of the best assets you can invest in.
With that in mind, investing in even just one commercial building is a big commitment. It's not something you should rush into without thinking about first.
There are plenty of great opportunities, but some commercial property investments are far better than others. You also need to think about a range of factors to make sure you invest in real estate that's right for you.
To find out more, keep reading.
Determine Why You Want to Invest
Before you can get started as a real estate investor, you need to know why you're doing it. Knowing what your goals are will allow you to make choices that can help you achieve them.
For some, it's a retirement plan, while others do it to diversify their investment portfolio. Different types of properties are better suited for different goals, so you want to determine this before you make any commitments.
Take Your Time
Don't rush in and buy the first property you like the look of. It's a big choice, so take your time and only buy a property when you're certain that it's right for you.
Working with a property manager can be beneficial here. They can show you a range of properties based on your needs. While doing so, they can also provide information, advice, and guidance that could prove invaluable.
Run the Numbers
With a rental property, you can make money through rent or capital gains. Either way, you should do calculations before purchasing to see how profitable a property is.
Factor in interest rates, improvement costs, vacancy costs, and any other financial factors. This can be very difficult to do alone, so this is another reason to work with a property manager. They understand how to run such calculations so they can make things much easier for you.
Consider Building Classification
Commercial properties can be Class A, B, or C. You need to know what these mean before making investments.
Class A properties are the best quality - newly built and in prime locations. Class B is older, but perfect for investors that want to carry out restorations. Class C buildings are very old and need a lot of work - but are the cheapest.
Inspect Property Condition
Regardless of building class, you shouldn't buy any commercial property without thoroughly inspecting it first. It's important to make sure that there aren't any issues you're unaware of before buying a property. The last thing you want is to settle on a price and then find out you need to pay more for unexpected repairs.
Think About Location
The location of a property is one of the most important factors. Think about the tenants in this aspect.
A building that gets a lot of foot traffic will attract more customers. This will benefit your tenants, which is better for you.
Making the Right Commercial Property Investments
Commercial property investments can be daunting, as you don't want to make the wrong decision. PMI Beverly Hills is a full-service property management company, and we can help you with every aspect of commercial property investment. Contact us today to find out more.
