Making Commercial Real Estate Acquisitions Easier
Commercial property is the Holy Grail for real estate investors. Depending on their size and purpose, these acquisitions can give your portfolio a huge boost. Sometimes the deals are easy; other times, not so much. There some tips, however, that you can employ to make your commercial real estate acquisitions a piece of cake. Well, maybe not that easy, but much smoother than normal.
An Office Building Is Different from a Home
Educate yourself on the differences between commercial and residential real estate. The two are not the same, so you’ll be looking at different values when seeking your next investment. With commercial property, you want to purchase as much usable square footage as possible. The more you can put your building to work for you, the more money you will make off the investment.
Learn the Language
You can’t go into commercial real estate investing without understanding some key terms. They are cap rate, cash on cash, and net operating income. Your building’s cap rate is the value of its estimated income production. Cash on cash takes the first year of your initial investment’s performance and compares it to other investment properties. Net operating income is your property’s gross profit against its expenses. All of these help you measure the anticipated and actual value of a commercial space so you know when to buy and when to unload.
Use These to Recognize a Good Deal
That jargon above will help you recognize a good deal when you see one. If a property has a history of a high net operating income, and it will continue to have a high cap rate, you might consider purchasing this building, because it should turn over a reliable profit. Of course nothing is certain, but when you look at the historic numbers, you can tell easier whether this will be good investment.
Be a Good Neighbor
If you have your eyes set on some downtown space, be a good neighbor and get to know the people and the businesses they run around the area. These people are a mirror of the economic picture of that neighborhood, and it’s easy to tell whether the businesses or multi-family residential units are succeeding or failing.
Employing this multi-pronged approach will help make your commercial real estate acquisitions easier. When you know what to look for and how to measure whether it’s a good deal, your next purchase should be smooth sailing all the way, or at least a lot smoother than some.