Smart Questions to Ask Before Investing in Commercial Real EstateShare
The income from commercial real estate can have the potential to offer investors higher returns than those available in the residential housing market. But in order to receive these returns, investors must first make certain the properties they purchase have or can be developed to have valuable qualities. If you are preparing to invest in commercial real estate, the following information can help you compare available properties and select those that offer more potential benefits for your needs.
1. Location considerations
Location is an important factor when purchasing most types of real estate and even more so when purchasing commercial property. Some of the critical location factors buyers will want to consider include:
- whether there is sufficient parking and access for potential tenants, customers, clients and vendors of the most likely property usage
- whether pedestrian and vehicle traffic will be supportive for the property's most likely occupants
- whether the property's location compliments or supports other properties in your investment portfolio
Commercial properties that include obvious location obstacles may be much more difficult to rent and maintain at a profitable level.
2. Demand considerations
Another important factor for commercial real estate investors to consider is the amount of demand they can expect for a particular property type. Markets that are oversaturated with a particular property type often result in longer vacancies between tenants and less overall potential for profit.
When considering a particular commercial property, investors will want to explore the area and gather helpful information. For example, when considering the purchase of retail property, prospective buyers should seek to determine the number of both vacant and occupied retail properties in the area.
Higher vacancy rates in an area can make it more difficult to attract tenants and maintain good profit margins on any commercial investment property. In addition to the number of existing available properties that are similar to the one under consideration, prospective commercial real estate investors should also determine average rental amounts in the area and how that figure will compare with their plans.
3. Developer considerations
If a developer is involved, prospective purchasers of commercial real estate must also consider the developer's qualifications and track record before moving ahead with the purchase. It is important for purchasers to look for developers who bring experience and a proven track record of success and avoid any who are unwilling to provide verifiable information of their past performance.
Simplifying the process of successful commercial real estate investing is easiest when prospective buyers work closely with a qualified real estate professional who offers experience and success with listing and selling commercial properties.