The world of commercial real estate is a vast place with a load of information that you will need wade through. You may wonder what exactly qualifies a property to be a commercial property. Also, how are the rules and legalities different from private property to commercial property? This article will attempt to give you some great tips for understanding commercial real estate.
When purchasing a property that you intend to rent out, keep it close to home. You don’t want to be driving further than you would consider a reasonable commute. With a rental property, there is always the possibility of needing to drive out in the middle of the night to deal with an emergency on the property.
Use a digital camera to document the conditions. Make sure your pictures clearly show any damage or defects, including carpet stains, holes in the walls or discoloration of plumbing and counter tops.
Try to make appointments to see a few of the properties that you are interested in on the same day in a very close time range. This is a good idea because you will be able to make a good comparison of all of the properties while everything you saw is still fresh in your mind.
You can use the cash-on-cash formula to determine the amount needed for the initial investment. This approach is most commonly used by investors who are dependent upon financing activities to raise the cash needed to purchase the property; use it to compare the Year One performance of competitive properties.
To be a success in commercial real estate you need to be able to spot great deals when you see them and keep in mind that the best deal you can spot is one that you can freely walk away from. It helps to be able to recognize quickly how much repairs a place needs and to know how to quickly assess a place to distinguish that it meets your financial goals.
Be sure to request and examine financial statements and tax return information for at least the past two years of any commercial property you wish to purchase. Investigate expenses such as operating costs as well. Make sure you understand all of the information presented to you and if you do not understand it, have your real estate attorney go over the papers with you so you have a solid, working knowledge of the expense and return of the property.
Don’t accept the very first value you are offered. Almost all prices or bids have taken into account the fact that the other party will be interested in negotiation. Even if they have initially said they are not interested in negotiations you should be willing to try. Most likely that was just a strategy suggested by the opposing agent.
Research and follow up is always the key to understanding the commercial real estate world. Remember, talk to your financial advisors, as well as, a title or deed officer. Since you will be purchasing a property for commercial uses, it is always a good idea to have your legal representative be advised of each step of the process.