Determine whether you should invest your money in a Commercial Property project by asking seven crucial questions. Getting the answers you need to your commercial property questions could give you the confidence to decide whether the property will provide you a handsome return once you own it.
Do Your Homework Before Buying a Commercial Property
People like to invest in commercial real estate for a number of reasons. For one, you can make lots of money with high yields from capital gains or rental income for years to come. Additionally, property management can be hassle-free with long-term tenants. No wonder commercial property attracts so many investors.
However, before jumping into buying and selling apartments or condos, office buildings, hotels, malls, retail stores, warehouses, industrial property and other types of real estate, make sure to minimize your risk.
Brian Stephens, Paramount Property Analysts principal, said investors should ask some key commercial property questions first.
“Make sure you know the commercial property you want to buy inside and out,” Stephens advised. “Whether you need to ask seven question or 100 questions, it’s important for you to understand any investment you make. If you need some guidance, feel free to call one of our professional experts, who are more than happy to consult you.”
Seven Crucial Commercial Property Questions
Let’s review the commercial property questions you should ask before signing on the dotted line.
Will there be sustained demand?
Sure, demand is good but sustained demand is even better. Scrutinize the commercial property closely. How long do tenants stay on average? Do you have much competition? Assessing demand typically can be a straightforward exercise.
For example, you have your eye on an office building downtown in a bustling and growing city with a low supply. You can count on demand being high for many years. Eventually, the market may get over saturated with new developments. However, for now you can count on high, sustained demand. This makes your investment highly desired for the long-term, resulting in increasing capital growth potential. It should also ensure an easy exit when you become ready to sell.
How good is the location?
We all know the cliché, “location, location, location.” Any real estate investment follows this rule of thumb.
Major manufacturers may want easy access to highways, railroad lines or ports. An apartment complex should be in a safe neighborhood surrounded by lots of things to do.
Research your commercial property thoroughly to make sure it includes high occupancy and, thus, high profitability. If you plan a development, you must conduct due diligence to make sure you pick an attractive parcel, free of any factors that would decrease its value.
Does the guaranteed income period make sense?
We at Paramount Property Analysts can assist you with this by comparing similar properties located in the same general location and discovering their rental demands. This tells you how secure high yields on the property may be.
How do you hire a reliable developer?
When it comes to the developer, do your homework to ensure the company has experience in its trade and performs high-quality work. Find out its track record by examining past developments it completed in the same commercial sector as your project.
What if you need the money you invested?
A flexible exit strategy remains one of the most crucial elements to any commercial real estate investment. This can be achieved with a property producing high yields over a long period of time. This means commercial property investors can sell an attractive, proven development to potential buyers at any time for a top price.
Another common stipulation in investment contracts is guaranteed buy-backs. While they can offer a coveted flexible exit strategy to investors, they should be scrutinized. Make sure any guaranteed buy-back has occurred before on a tried and tested business model.
Does the commercial property fit your investment goals?
Often investors overlook two key elements to their investment strategy: 1) How well will the commercial property suit their needs? and 2) What place will it take in their portfolio?
While an investor may find a great investment, it may be wrong for them. Ask those two questions before buying. Remember, while diversity in commercial property should exist in a portfolio, that great opportunity must fit in with other properties investors already own.
What are the risk factors?
The best friends of commercial property investors are sure things. Mitigate risk by following all the advice, so far. Additionally, sales contracts for commercial property must be both robust and asset-backed. Always picture the worst-case scenario and make sure to have security in place to protect against it.
Paramount Property Analysts Can Answer Any Commercial Property Questions!
If you plan to buy a commercial property, this investment should ideally be secure, provide guaranteed growth in income, and complement other real estate you already own. Reach out today to our experienced and highly qualified professionals in one of our six locations in Texas for any commercial property questions you may have. Know that our team will provide a true and accurate value of any property, plus we offer other real estate services, such a Trusts, Estate Planning and Property Tax Consulting.