If you want to invest in commercial property, there are a few things you might want to consider before you dive in. While investing is a great way to make a passive income and learn new financial strategies, you have a lot to think over.
Everyone is different, from the budget to the priorities. And while you might already know some of these considerations, some of them could be new to you.
No matter where you are in your investment journey, here are some considerations you might want to think about if you’re considering going into commercial property investment.
1. Your Investing Strategy
Real estate investment is a business, at the end of the day. While investing is about making the initial investment and profiting on the return, there’s a lot more to it than sitting and waiting for your investments to grow.
You know that real estate investment is a business, and you should treat it like a business. Know your tools and think about what you’re using the property for.
2. Market Cycles
Speaking of your strategy, it can be helpful to learn the market cycles. Things like the health of the current economy, the unemployment rate and the GDP can all have an impact on property values.
Learning the indicator of market cycles and how they impact commercial property can help.
3. Commercial or Residential?
If you’re moving from commercial to residential, it can be helpful to evaluate the differences and make sure you’re in the right sector for your needs.
Commercial real estate can be a bit more high maintenance than residential, so doing your research can be especially useful.
4. Time Commitment
You’ll often find yourself with much longer lease agreements in commercial real estate than in residential. You’ll also find that commercial real estate will demand more of your time on a regular basis.
With commercial real estate, you’re dealing with annual CAM adjustments, upkeep and public safety concerns. That’s much more than a private residence.
5. Parking
While the structure itself is a large part of the game when it comes to commercial real estate, you also need to think about the surroundings, too. Namely, having a place for customers to park, whether it’s a lot, ample street parking or a parking lot structure can mean a lot for businesses looking to sign on.
If your property is in a city or a neighborhood with a lot of walkability, this may not apply to your situation. But for moderately trafficked areas, having parking can increase business for your tenants. Commercial real estate is about public-facing function, and this is a part of it.
6. Professional Maintenance Required
While owning residential property requires maintenance, commercial real estate requires a lot more elbow grease.
Specifically, when you switch tenants to a different kind of business or when your tenants need upkeep on larger structures, it’s likely that you’ll need to have a professional on hand to do the job. Most laypeople aren’t equipped or qualified to make large repairs or renovations. Many commercial landlords have a maintenance person on staff to handle any repairs that come up.
7. Upfront Investment
One last thing you’ll need to consider if you’re thinking about investing in commercial property is the requirement for an upfront investment.
In general, commercial properties cost more in an upfront investment than residential property, and that doesn’t yet include the maintenance and repairs you’ll likely need to do when a tenant signs on — or in order to ready the property for tenants.
If you have the capital upfront, it can definitely pay off over time — transactions for commercial buildings tend to move slowly, even with the illiquid nature of real estate investments — but you simply need to be willing to invest.
Remember These Considerations for Commercial Property Investors
If you’re looking into buying a property, commercial real estate might be in your future. However, there are considerations for commercial property investors you need to give thought to.
From the market cycles to the investment strategy, preparing to invest in commercial property is just like any other investment you might be looking to make.
Whether you’re diversifying or moving from residential to commercial property investment, you can find exactly what you need.
Oscar Collins is the managing editor at Modded. He writes about cars, fitness, the outdoors and more. Follow @TModded on Twitter for more articles from the Modded team.
