7 Ways to Maximize Your Commercial Real Estate Investment
When it comes to investing in commercial real estate, there are most definitely right and wrong approaches you can take. That’s why it’s important for entrepreneurs to understand exactly what they’re getting into, and how to maximize the value they get from every commercial real estate deal. From finding the right commercial real estate financing to choosing the property with the best chance of gaining value, here are seven things to consider when you’re planning your next deal
First off, location is almost everything. It’s the key to property value, but understanding location means understanding not just what is near the property now, but how the traffic in that area and the prospect for future economic growth and revitalization will make its prospects change over the next few years. That brings us to the second point of consideration—the property condition. Realistically speaking, you’re going to get your best value when you buy a property in good enough condition to avoid major renovations and structural repair that also needs some improvements to be ready for use.
When you’re looking for a deal, it’s important to note all the improvements that will be necessary before you’re ready to put it to use, whether it’s an income property or facilities for your business. This will help you balance the savings you’re realizing off the price against the short-term costs of getting the property configured for use, and it will help you understand how much commercial real estate financing you will need. You also need to research the returns by checking out the market capacity for rents in your area of town, so you can determine either how much income the property can generate or how much purchasing would save you over renting the same business space. There’s a law of diminishing returns when it comes to improvement, and you’ll know when you’ve just about maximized your investment if you know what the market can bear.
That leaves us three more things to consider to maximize a deal, three ways you can affect that outcome. Your experience in the market, which can be mitigated by entering into your first few deals with experienced partners. That’s easy. Your financial wherewithal is also important, so you’ll want to be sure you can demonstrate the ability to handle the costs associated with this investment, even if it doesn’t pay off right away.
Last but not least, finding the optimal lending partner will help you contain costs by providing you with a wide range of commercial real estate financing choices. That way, you can always find the financing that fits your investment.