Investing in commercial real estate does not necessarily mean buying a store in a well-known commercial area in the city center. It can also take other forms like buying a restaurant, hotel or any commercial asset that gives you a good investment return. Investing in commercial real estate for experts is the most important type of real estate investment Opportunities.
Experts say that investment in commercial real estate has higher risks compared to residential properties. However, it provides high monthly return on investment, guarantees high rents, long and guaranteed rent, monthly expenses and the investor’s deep knowledge of these risks. The more investment in commercial real estate is the better the options.
Why should you invest in commercial real estate?
Highest investment return
Commercial real estate offers a greater return on investment than residential real estate, especially on the recent years, where real estate prices are rising significantly. According to Corelogic Corporation, the average rental income for commercial properties, such as a commercial store, ranges from 8-10% Rental income for residential properties is 3.6% on average and this ratio varies by region and country.
For some real estate experts, commercial real estate is the safest type of investment because of the guaranteed return on investment provided to the investor, which is not available in residential properties.
Longer rental period
The average rent for commercial properties is between 3 and 10 years, while rent for a tenant may be only 6-12 months without a guarantee of renewal. Commercial tenants tend to stay in the workplace longer, especially if they invest some capital in getting the property from the start. For example, if the tenant decides to raise the space by investing $ 50,000 in the project, this will provide you with some certainty and security for rental income that can facilitate you to calculate the return on investment over the coming years.The commercial asset for the lessee is the most important thing, so renewing the tenancy contract is a priority to maintain the value of its commercial asset, ensuring the investor a constant investment return while the tenant in the commercial property can change the place of residence under any circumstances.
Low monthly expenses
For commercial properties, tenants usually cover the overhead of the property such as revenue. Water, insurance or corporate fees, so there are lower costs compared to the management of residential properties that are usually the property owner.
For well-selected commercial properties, tenants are likely to make improvements to the structure and layout of the area, which can increase the value of the property. The rent is reviewed annually and the rent is increased by a certain amount, which makes your investment a success.
One of the potential opportunities to invest in commercial real estate is the high value of the property during the period that the investor holds the property. This does not mean that the property can not lose value. The biggest investment strategies do not guarantee profit. This depends on the study of the area in which the property is located. In general, commercial real estate is a unique opportunity and when it is located in the center of the city where demand is increasing, it will undoubtedly be profitable and the value of the property will increase year after year.
Do you want to invest in commercial real estate, here are some tips?
Invest with your mind and not your heart
When it comes to investing in commercial real estate, the data that must be studied is very large as the investor begins to summarize and start to reduce the research list and think about the advantages of the property from a personal or emotional perspective and this is the biggest mistake that can the investor fall in .
Like any investment, investing in commercial real estate has some risks but awareness and understanding lessens them. Investing a huge amount in a commercial property requires you to study the investment property and calculate the expected return on investment by exploring the area and rising prices, Real Estate Safety.
Be prepared to stay in the field for a long time
It is important to know that you should not move capital for the long term to be a successful investment, and you should get used to managing your investment without moving the capital, although there will be some periodic expenses for your investment and if you are thinking of selling in the short term. Achieve the investment return you aspire to.
Bad periods of real estate
Commercial properties are exposed to periods of risk for a period of time where demand is lacking and the property remains without returns for months or even years, which means that you may have to cover expenses during the interim period until you can find another tenant. The more you study the area and the location of the property, the deeper you are from the beginning whenever you avoid this danger.
The vulnerability of economic factors
The risks to property owners such as economic downturn, rising interest rates, high unemployment or poor business confidence may mean that demand for commercial real estate is lower, which may mean finding high-quality tenants. Here, investment returns can be reduced.
Any Important steps to get the best offer?
It is very good to deal with an intermediary in the area of real estate in the area you want to invest in, and this is for many reasons you can review in our previous articles on the reasons for dealing with a real estate company during the purchase of the property, and like any field, success starts from good planning and these steps of the most important steps, You must follow them in order to get a successful business deal.
Know what your broker knows
To be a professional investor in commercial real estate, you should think like a real estate broker and master what you do. For example, you should know that the valuation of commercial properties is quite different from the assessment of residential properties and that income in commercial real estate is related to usable space, unlike residential properties, Commercial property leases are longer. You have to change the effort to know the secrets of the market because this is the factor that will reduce your risk.
Develop an action plan
Setting up metrics is an initial step in commercial real estate deals. For example, you should know how much money you can provide for the initial payment and then start calculating the monthly payments in the case of a mortgage loan or installment payment, and using online tools such as mortgage calculators, Mortgage Calculator may give you a clear picture of the total cost of your deal.
Learn how to recognize the good deal
Senior real estate investors recognize the good deal when they meet one. The secret is that they have a third eye, which calculates the damage of the property, the cost of maintaining it and the return of it, in addition to studying the area where the property is located.
Find motivated sellers
Like any sector, customers are the movers of the real estate sector, your job is to find a seller with certain motives to sell his property as soon as possible and get the lowest prices in the market. In fact, nothing important happens in the real estate investment sector before finding the seller who holds Motivated to sell his property and if the seller does not have these motives you can not negotiate with him.
The decisive step
Getting a good deal in commercial real estate does not just depend on evaluating the property, studying the area or getting a good price and many other things, it also depends on the human factor, on communication. You have to build a good relationship with the commercial real estate owners and this gives them the desire to negotiate with you and agree on the offer that suits you.