If you are interested in investing in property but don’t want to deal with all of the hassles that go with residential real estate, you might want to consider investing in commercial real estate. Commercial real estate investing often gives you a better return since you are leasing the building to commercial tenants who are going to be more responsible and often rent the space much longer than a person would. You also get to build equity in the building at the same time. Read on to learn how to get started investing in commercial real estate.
Get Your Financing In Place
Investing in commercial real estate is going to require more money than residential real estate investing since the cost of the buildings is going to be higher and so is the cost of maintaining them. You are going to need to get a commercial loan, and the requirements are going to be even more stringent that they would be with a residential loan.
You are going to need to have a high credit score and you are also going to need a good business plan that you are going to need to present to the bank to get the loan. You might need an accountant to draft the plan for you and you need to show that you have cash in reserve to deal with any of the repairs or unexpected maintenance that you need to deal with.
It is important that you know how much income you expect to get and what the expenses are going to be. A good business plan is much more likely to end in a positive result and you are going to increase your chances of getting the loan when you have a great business plan that is going to get you noticed.
How You Make Money With Commercial Property
The first way you make money with commercial property is with the rental income. You usually make more money than you would make with residential property since the building is so much bigger and there is more to rent. You can make a lot of money with commercial real estate, especially if you buy in a popular business district where it is easy to charge a lot of money in rent. It is important to work with an established business tenant that has a good history of making payments on time.
Make sure you work with a stable business that isn’t going to go out of business in a few months and stick you with the rent. You have to work with a business that is trustworthy and that is going to be a stable tenant. When you work with a commercial tenant, the lease is usually going to be a lot longer and is often in the 5 to 10 year range.
Not only do you make money with rental income, you also make money with the equity you are going to build with the building. If you choose a good location, your building is going to become more valuable year after year and you can make a profit if you ever decide to sell it. You need to make sure that you research the area you want to purchase property in so you can make as much money as possible.
How To Choose The Right Commercial Building
Choosing a commercial building is similar to buying a home, only the stakes are much higher. You need to do as much research as possible so you choose to buy a building that is in an area that is popular and has high equity rates. Spend a lot of time thinking about the right neighborhood for your new building and be sure that you know what the other buildings are getting in rent and what kind of equity they are building.
Commercial real estate investing costs a lot of money and you can either make a lot of money or you could end up losing big, so you need to make sure that you know what type of neighborhood you plan to invest in. The more research with Commercial search you do the better and you can never really do enough research on your property purchase. You have to make sure that you are going to be getting a reasonable return on your investment or else it is not going to be worth it.
You don’t want to buy a huge building in a declining business district because the rents that you charge are likely to decline as well and that is going to mean that you lose money. You have to make sure that you are going to be investing in a neighborhood that is popular and on the way up. Finding an up and coming business district is a good idea because you can make the most money this way.
In an up and coming neighborhood the commercial buildings are going to be earning a lot of equity and the rents are going to steadily climb as well. You can also buy the building cheaper since the business district is still on the rise. It can be a bit of gamble because you don’t know for sure if the neighborhood is going to keep rising or if it is going to decline again. Commercial real estate investing does require a bit of luck, but mostly it requires a lot of planning.
The right investment is going to provide you with a stable source of income and you also get to build equity. Commercial buildings are in limited supply so there is always going to be lots of opportunities to make money as these buildings are always going to be valuable. As the economy grows you get to make more money and realize greater profits.
If you are interested in investing in commercial property make sure you have a good plan. Show the bank how you are going to make money and be prepared to provide your business plan. Commercial properties can be wonderful investments.