8 Commercial Real Estate Tips for Acquisitions
Buying commercial real estate is a much different experience than buying something residential. If can be hard to wrap your head around your first few deals. Use these tips to make the process a little easier.
You will have to do some research. There are many different kinds of commercial properties ranging from industrial sites to apartment buildings. Because of the various properties you can get, your first purchases may require a lot of research. Meaning your first deal may not happen as quickly as you want it to.
You will have to make concessions. Once you have done your research and know what you want in a property, you will have to make a decision. The chances of you finding a commercial real estate property that meets all of your criteria is no very good.
Partners can give you a lot of benefits. Not only do you gain access to more money, but your network immediately grows. You can now turn to them for help during the process, and get some of your tougher questions answered with ease.
You will need to network. Even if you do not want to have a partner, you will need to network with people in the commercial property business. Realtors, lenders, owners and other buyers may be able to help you find out about unpublicized deals.
Be proactive with your finances. Before you start looking at properties, you should know how much you can spend and where the money is coming from. Most commercial loans require a larger down payment and have different interest rates that you need to get familiar with.
Think about unit price. While it may seem more manageable to buy a 5-unit apartment, something with 10 units could actually be the cheaper option. When you have to jump through commercial real estate loan hoops, you may as well make it worth it by going as big as you can. Typically, more units are not harder to manage.
Get familiar with new formulas. When you start looking at commercial property, you may come to realize that you need to know different terms, such as net operating income or capital rates. Not only do you need to know the terms, but you also have to know what is considered good and how you can figure out the rates.
Spend money to make sure it is a good deal. When you buy commercial real estate, you need to do due diligence. This means paying for an inspection and appraisal, which cost more than their residential counterparts. Even though you may lose the money, you need to be ready to spend it.