Maybe you’ve been thinking that being a landlord is in the cards for your future, or maybe a local commercial real estate opportunity has fallen into your lap, but you’re wary about moving forward. How do you know if commercial property is the right invest for you?
We’ll break down some of the basics below to help you figure out if purchasing commercial property is the right thing for you and your real estate interests.
What is Commercial Property?
There a few different types of commercial property that we’ll break down below. Each comes with its own benefits and challenges, so it’s important to weight out the pros and cons depending on what type of responsibility you want to hold, and what you’re looking to get our of a commercial property investment.
To begin, any property that generates a profit for the owner of said property is commercial real estate. If the property can be seen as an asset for an investment portfolio, or is a part of extra monthly income, it is almost certainly a commercial property.
Chances are if this is your first time investing in commercial real estate, you are looking at an office space, multi-family building (ie apartments, townhomes, and condos), or a retail space.
Multi-family or residential buildings can vary in responsibility to the property, and depending on the role you take as the property owner, you’ll want to keep in mind that managing the property will fall into your hands. You could potentially partner with a management company or hire individuals to care for the property and its residents, but it’s on you to perform any maintenance and keep the building up to code according to city and state laws for habitation. Additionally, the size of the space will dictate how many tenants you can have, and all living spaces must be up to code to be livable.
Office buildings and retail spaces are a little more hands-off, comparatively speaking.
Retail spaces can be either single buildings with one renter, or larger spaces with multiple renters who claim space, like strip malls.
Office buildings will usually also have either one renter, or will be a part of an office park or group of smaller businesses that are looking to rent a space. Just like with multi-family buildings, you will have to pay attention to code to see how many people will be allowed to occupy certain spaces.
I Want to Invest – Now What?
So you’ve found a property you’d like to invest your hard-earned money into – what happens next? There are a couple of initial steps you’ll need to take.
Firstly, you’ll want to visit all of the properties you’re thinking of purchasing. Not everything is as it appears online, and seeing something in person will show you any repairs that need made, and can give you a better insight into what other expenses you may incur before the property can start making you money. Look at how much the property currently makes on a yearly basis, why the current owner is selling, and what the rest of the neighborhood is like.
Secondly, you’ll want to check your budget and figure out what you can comfortably afford. This doesn’t mean what you can afford if you put another mortgage on the house you and your family lives in, but what is possible using loans. Check out banks, mortgage companies and credit unions that may offer you a loan, and compare their financing options and interest rates before choosing.
Thank you for reading our real estate and homeowner’s blog. We are Weichert Realtors – The Place of Houses, and we’re happy to have helped you learn more about investing in commercial property.