Last Updated on March 4, 2019 by
When investing in commercial real estate, it is important to seek the help of professionals to guide your decision. After all, buying commercial properties is a huge imposition that should not be taken lightly.
Q: How Do I Make Sure That a Commercial Property Is Potentially Profitable?
A: When choosing the right commercial property to invest in, real estate’s old adage “location, location, location” holds true. After all, it will determine which types of business are allowed and will do well in a specific area, whether it is accessible to your potential customers, and if it will make a lot of profit should you decide to resell the property.
Therefore, in evaluating the financial viability of a commercial property, a careful study of its catchment area—defined as the area and the population from which your business will attract visitors or customers—should be done. The bigger the catchment area, the higher the probability for the business to attract customers. For example, convenience stores will do well in an area with high population. In addition, as an investor you should be aware that local government units place restrictions on certain businesses, such as gasoline stations. Although these businesses offer high returns, you will be competing against other investors for a very limited space available.
Real estate experts also recommend a detailed research on the title of property. This will help you decide to stay away from potentially litigious ones that will give you problems later on.
Another important consideration is the potential benefits of buying real estate to your business. If you are buying one, it will help you maximize the return of investment and the break even faster. Buying also adds to your asset appreciation over time, and this will increase your company’s equity. The downside, however, is that your asset will be illiquid, which you may not be able to tap into immediately should you need cash.
To help you navigate commercial real estate, you should assemble a team of experts. An accountant will advise you on the financial aspects of buying commercial real estate; a lawyer will guide you on contracts pertaining to buying; and a licensed real estate consultant will help you on your overall real estate strategy.
Finally, securing financing for your purchase is important. Start by shopping around for the best mortgage rate, ready your down payment, and make sure you have proven income to cover monthly payments.
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