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5 Factors to Consider Before Investing In Commercial Real Estate

 |  3 April 2019

If you have a knack for real estate and are considering getting into the world of real estate investing, congratulations! It can be a very rewarding experience. And for seasoned commercial landlords, the efforts to build upon existing wealth by growing your portfolio is doubly as rewarding. Before the good, though, comes the planning. Proper planning – especially before you dive in head first – is crucial in finding success as a new investor.

Whether you intend to invest yourself or take a more passive, alternative route by joining an online investing platform, it is good to have a thorough understanding of real estate investing basics.

Without it, you may fall into a pattern of having action paralysis when a good deal comes along, simply because you are unsure of how to approach the process and finalise the deal. Hesitation is not necessarily a bad thing – it is good to consider your gut reaction to a deal or commercial investment opportunity – but having the confidence to move swiftly is also critical for building a solid portfolio of promising properties.

To help you get started, here are five important factors to consider before deciding which form of real estate investing makes the most sense for you.

1. Nail Down a Strategy for Searching Through Listings

When you first decide to get into the market with your first commercial property, you will just be getting your feet wet. To get into a routine and be able to scope out good deals, you will want to develop a strategy for finding listings or sales you think are worth pursuing.

A few items to include in your strategy are building prices in the areas surrounding your target properties, the average amount of time a property stays on the market in that area, the average rental rates, etc.

It is also a good idea to research the sales data for your target area as well. Knowing what properties were sold for before you came into the picture is a good way to learn the sales climate of the market there. For instance, you would not want to buy a property that has historical data suggesting an alarmingly high tenant turnover rate (or low yields).

2. Choose a Property Type That Suits You

Have you considered what kind of property type may be the best investment option for you? There are quite a few options available, especially nowadays with online platforms, but the main ones to consider are: office spaces, retail spaces, factories, and medium-density multi-purpose spaces. You may find you would like to be a completely hands-off investor, in which case any of these options could be good, viable choices.

3. Touch Base With a Commercial Property Expert

If you have not already, starting researching experts in the area who may be able to help you source the right investment property. Remember, this is your rodeo, so you can be choosy with who you pick to work with, and the final decision will always be yours to make.

Hiring and thus partnering with an expert is not necessarily a make or break detail in becoming a successful investor, but it can help make everything about the process more streamlined and lucrative overall.

4. Find Your Lender Partner

Similar to connecting with a solid commercial property expert, you will also want to find a reliable lender to partner with for your investing transactions. There are no laws saying you must partner with the same lender for each property you invest in, but if you are able to, building and maintaining a business relationship with one lender is often easier to work on than juggling multiple lenders on your speed dial whenever a good deal comes along.

Feel free to ask your potential lender for a meeting to see whether or not your partnership may be a good fit for one another.

5. Stay on Top of the Numbers

When you make the decision to get into this form of building wealth, you may come across a property that seems like a once-in-a-lifetime dream come true investment opportunity. The only problem? If it is far outside of your initial price range.

Another potential pitfall is related to costs that may unexpectedly spring up. When it comes to real estate, or investing in nearly any tangible asset, expect the unexpected. It is always better to plan to something unexpected and have the funds to invest to get the most out of the asset, instead of vice versa.

Buying commercial property can be a highly personal, emotional investment, but try your hardest to keep an objective eye on the numbers you have planned for and are comfortable with – you are far less likely to regret being cautious than you are jumping on a deal that may not be the right fit for you.


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