If you’re a homeowner, you already know what it takes to get through the housing market. There’s a lot of ups and downs, as well as missed opportunities and rejected offers, but at the end of the day, it’s quite straightforward. You estimate the value of the house compared to the asking price, it’s easy to approach a seller, and you know the red flags to look out for.
The commercial real estate market, on the other hand, takes some practice to get used to. You’re looking to invest in a building that cannot be lived in, meaning the value found in both the property and the land requires ten times the focus and attention.
Sound like a good investment to you? Let’s think about it first.
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What Does the Local Market Say?
How many potential business tenants are out there in your area right now? Doing market research will show you what the current commercial outlook is, and whether or not you’re likely to both find a tenant AND get paid the rent price you’re really after.
Take a look at current trends on a national scale too. What are business owners willing to pay in areas similar to yours, in terms of cost of living and the demand for working spaces? That data can help to inform your decision too.
The Maintenance and Repair Needs Will Be Higher
Commercial properties are rarely valuable when they’re in a bad condition. You’re either going to need to ‘flip’ the property and sell it on, or you’re going to need to put time and effort into the repairs to ensure long term profit off of business tenants.
This maintenance and repair work will be a score higher than that required on residential property.
Business premises need to take employee wellbeing into account, which means a minimum level of space, light, and ability to maintain a consistent temperature is essential. Accounting for usable space, natural light and productive wiring, as well as insulation, is expensive.
Similarly, commercial properties need a stronger level of security. This often means the use of Road Blockers in outside road access areas, plus the use of industrial shutters on entrance points. Installation services are worth the cost, but you need to factor these elements into your budget from the beginning.
You’ll Likely Require a Very Healthy Budget
This is the catch-all requirement of the commercial real estate market. If you want to invest in a building that can be used as office space or a retail store, you’re going to need a lot of starting cash.
If it was a struggle to afford your own home, and the mortgage payments are still hefty in your lifestyle 10 to 15 years on, your plan may need some reevaluation. You may need to secure funding from elsewhere, or look into investment funds that allow you to share ownership first.
If you want to invest in commercial real estate, plan your course of action very carefully.
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