Learning how to buy commercial properties has become the next logical step for many investors that have grown comfortable dealing in single-family homes. If for nothing else, commercial real estate represents the next challenge or exit strategy that can elevate your investing career to an entirely new level. While buying commercial real estate can certainly coincide with amazing benefits, it’s not without a few downfalls: risk, difficulty, and the sheer volume of capital required to deal in commercial real estate can all impede an investor’s progress.
It is worth saying, however, that buying commercial real estate is not impossible. Not unlike buying single-family homes, there’s a process; one that, if followed correctly, can result in amazing benefits. That said, you must know what you are doing if you hope to realize success in the commercial industry. Jumping in without a plan is the surest way to sabotage your own efforts and ruin everything you worked so hard to achieve.
If you want to successfully make the transition to commercial real estate familiarize yourself with the commercial real estate buying process. Here are a few buying commercial property tips to help:
- Learn The Language: There can be a learning curve when making the transition from residential to commercial real estate, so you may need to go back to basics before you get started. Familiarize yourself with terms and concepts commonly used in commercial real estate, like capitalization rate and building classification. Reviewing the language will help make sure you are comfortable when talking to potential business partners, tenants, and especially lenders.
- Find A Market: Just like with any real estate investment, location is everything. It is not uncommon for commercial real estate investors to venture outside of their market area, or to invest in multiple markets. Analyze each market you may want to invest to find the right area to invest. Don’t be afraid to choose high performing markets simply because they are outside of your local area or state.
- Work With Your Mentor: A mentor is crucial for any real estate investor, but they can be especially helpful when it comes to more complex investing strategies like commercial properties. Attend real estate networking events in your area or ask your existing connections to meet someone with experience in commercial investing. As you build a relationship over time, their advice and insights could help as you build a portfolio.
- Visit Properties: As you start identifying potential properties, make sure to visit each of them. This will give you a better idea of what to expect if you choose to move forward with the deal. Even if you do not plan on managing the property yourself, it is still a good idea to picture what the building will be like. Visiting properties can even help you narrow down your options if you have more than one investment you are trying to choose between.
- Protect Your Assets: Before you move forward with your first commercial deal, make sure the rest of your assets are properly protected. Look into the way your business is currently organized and how a commercial property will fit into that. Research different types of liability insurance and business structures before taking on more complex properties.
Buying commercial real estate can certainly be well worth your time if you do it correctly. Savvy commercial real estate investors have already proven that it belongs in a well-rounded portfolio, but I digress. For as beneficial as it can be to own commercial real estate, it can be equally devastating for those that go in without a plan. If for nothing else, commercial real estate investing comes with risks for those that act irrationally. Poor investment practices could result in devastating problems, and they are only magnified by the size of commercial investments. Therefore, it pays to have a sound plan in place. With proven systems on your side, you are more likely to avoid the pitfalls of commercial investing and realize success.
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