Commercial Real Estate 101: 3 Essential Tips For Investors

Posted on: 11 May 2017

Investing in commercial real estate is a good option for those looking to increase their income. A good investment could supplement your income – or even become your career. Television shows like to make investing in commercial real estate look easy. However, it can be very difficult if you don't know what you're doing. Luckily, with a good real estate agent and these three tips, you can make investing much easier:

1. Consider All Property Types

Many commercial real estate investors gravitate towards apartment buildings. It makes sense. After all, apartments are similar to residential or family homes. However, you shouldn't restrict yourself. While apartment buildings can make a good investment, they aren't the only type of property you can invest in.

There are also office buildings, residential parks, and even land. So take some time to consider each type of property before you invest. You might just score a better – and more profitable – deal in something you wouldn't expect.

2. Understand The Different Value

Residential properties are valued off of the selling price of similar homes in the area. However, commercial property isn't. Instead, commercial properties are valued based off the cash flow of the building. For example, a daycare and dentist office off the same size will both have different values. This is important to know when shopping, so that you can spot the good deals. So make sure you understand and keep this in mind when shopping for a new property.

3. Know The Area

Finally, make sure you know the area you're buying in. Because while something might seem like it good deal, it could easily turn into a money pit. For example, a building might be priced well because that area is struggling financially. So be sure you familiarize yourself with the area, so that you can spot any troubling signs.

You should also pay attention to any changes in the overall city. For example, if there is a new and upcoming area of town you might want to look for a building there. While it might be a bit more expensive, it could be thriving in a few years.

While investing in commercial real estate might seem intimidating, it doesn't have to be. A little knowledge and patience can make all the difference. So take your time, get some help from a commercial real estate agent, and find a property that you truly love.