Typically, low interest rates and surplus commercial property have made this an ideal time to make profitable long-term investments in commercial real estate.
Falling prices and low interest rate financing are the obvious benefits.
The less obvious benefits include job creation and community revitalization and pride.
Some questions you should ask to help you in your decision-making when choosing a property are:
Are there prominent businesses attracted to the area? What are the future developments planned for the area?
By analyzing neighborhood trends, you can make an educated guess on how the neighborhood will fare in the future and if it will be a good place to spend your investment dollars.
When investing in property, the lease value should be equal to or greater than the cost of carrying the building. You need to compare the average lease rate for the area and what your cost will be for managing your investment.
Once you calculate the costs of financing, utilities, taxes and maintenance; you must compare that figure to the potential amount of money generated by rental income. If this figure is not equal to or greater than the carrying costs, you will lose money on your investment. This shows the property is a poor choice.
Check into the building's history. Specifically, check for issues such as: environmental contamination, structural deficiencies and other issues that could limit potential tenants.
These issues can be expensive to remedy and prevent you from realizing a profit on your investment.
Residential, commercial retail, office and industrial properties all have unique features and rules and regulations that have to be understood. Know and understand the type of property you choose to purchase as your investment.
Learn all that you can about the structure, location, income potential, type of property and probable profitability. By doing this, you can feel comfortable and confident in making the right choice in a depressed market!
