Any newcomer to the commercial real estate market can benefit from a compilation of hints and tips on the most effective ways to purchase or sell commercial property. Below is just such a collection that can assist the eager novice into eventually becoming a pro when it comes to buying or selling commercial real estate.
Pest control is an important issue to look at when you rent or lease. If you are renting in an area that is known to have a lot of rodents, pests, or bugs, then ask your agent what the policies on pest control are.
When you have to decide between two commercial properties, think on a bigger scale. Getting the proper financing is going to the same hassle for a retail building with ten outlets as it would be for a retail property with twenty or even thirty units. Think of it like purchasing in bulk; as you buy more, each individual unit costs less.
Learn to understand the commercial real estate metric called Net Operating Income (NOI). For the investment to be profitable, it has to produce more income than operating expenses.
Make sure that you’re not asking for an unrealistic price for your property. There are a number of variables that can affect the realistic value of your property.
When renting out your own commercial properties, keep in mind that is always best to have them occupied. If no one is paying you rent, you’ll be the one footing the bills. You need to ask yourself why properties are not getting rented and fix any issues you discover.
If you are considering leasing a property to someone else, then cover all your bases to reduce the risk of a default. That will cut down on the likelihood that the tenant defaults on a lease. You want to avoid any circumstances that could lead to this occurrence.
Have a professional do an inspection of your commercial property prior to you listing it as available on the market. Fix all problems that they find as soon as possible.
Go on a tour of all potential properties. Definitely consider having a professional contractor go with you when looking at potential properties. Decide on an initial offer and start negotiations. Take your time and really explore your offers before you decide to buy or pass.
When drawing up a letter of intent, try to solicit agreement on big issues first and leave smaller issues for later rounds of negotiations. This lets you get the bigger issues out of the way first and makes small issues simpler to complete.
Plan on doing some improvements to your new commercial space before you can inhabit it. The changes don’t have to be extensive. You may just want to repaint or rearrange furniture. Sometimes a new business will need to alter the floor space by moving interior walls. Be sure to negotiate who is responsible for these changes ahead of time so that you do not have to pay for the full cost.
Commercial real estate agents specialize in working with different types of clients. Some agents represent tenants only, while brokers work alongside tenants and landlords alike. A broker who works only with tenants should have more experience and should represent a better choice for you.
If you are thinking about hiring any real estate professional, read over all their disclosures. One thing you should specifically watch out for is dual agency. Your real estate agency will represent each side of the transaction. In effect, while you are paying the agency, they also work for the opposite side; if you are a prospective tenant, for example, the dual agency represents the landlord, as well. The fact that the agent is representing both parties must be disclosed to everyone involved and those parties must sign off on it.
In the beginning phases of your career as an investor, limit yourself to working with a single type of investment. Pick one type of property, at first, and pay close attention to it. Generally speaking, you’ll maximize your profit if you first become an expert in a single property type rather than a dabbler in many.
Before you invest in real estate, be certain that you understand the implications regarding your taxes. Investors can get interest deductions and depreciation benefits too. Yet sometimes investors receive what is called “phantom income”, and this is income which is taxed but isn’t received as cash. You should be mindful of phantom income prior to investing.
Before you purchase a property, talk to a tax advisor. A tax adviser can tell you what your tax liabilities are on the purchase and future income from it. By taking your adviser’s advice, you may be able to find a location where the taxes are less.
Ask a broker firm how they make their money before you start working with them. An honest broker, of course, will be open to discussing how their money was made. Don’t hire a broker if he can’t adequately explain how helping you with the transaction will benefit his firm. If you don’t understand how the company benefits from transactions, ask questions to clarify the issue.
These tips should get you started on your way to being a successful real estate buyer. Apply the above advice to all of your buying and selling efforts to see more satisfying results.