A commercial property that will be used for conducting business-related activities is often a colossal decision for any buyer. It could be to open a new office, hotel, retail store, mall, warehouse, garage or just to invest in one. Whatever the purpose is, McCaw Property Management Company says, your approach towards choosing commercial real estate (CRE) needs to be completely different than picking a home. A buyer looks for good returns on investment on the former and that kind of pursuit takes time.
Here’s what you need to look for when trying to pick the perfect commercial real estate property:
1. Study The History of The Area
The location of the commercial real estate is usually one the most important contributing factors to the growth of the business. Picking the perfect location includes good accessibility for customers and staff, substantial foot traffic for your business, adequate parking space, and maybe even close proximity to public transport.
When thinking about improvements, you can check qualifiedhardware.com for all your hardware needs. This is why it’s important to dig into the history of an area before finalizing a commercial real estate property.
Just to be extra sure of the area, you must also study its history. Check if the commercial real estate listing has any property videos or drone photos that give an idea of the surrounding area.
2. Get The Floor Plans
While real estate property videos can give you an idea of the exteriors and interiors, you need a floor plan to get a view of the layout from above. A scaled diagram will indicate the relationship between rooms, spaces, and patterns at one level of a structure. It will also tell you the room sizes and wall lengths which is important as you need the perfectly-sized commercial real estate property for your business purpose.
3. Know Your Classification
Your single property can be typically classified into 4 classes depending on functions – office space, industrial use, retail, and multi-family rental.
An office space, for example, is further classified into:
Class A – Lowest risk, best aesthetics, infrastructure, and location
Class B – Older buildings with fairly less competitive pricing, usually picked by investors for restoration
Class C – Oldest buildings in less attractive areas. Possess the highest risk and need a good amount of maintenance
4. Think About the Finances
To buy commercial real estate, one needs to be sure of their finances. It’s about understanding what you can afford and how, knowing where the interest rates are, and cash flow backup in case of exigencies.
Determine the best source of funding including traditional bank loans and make sure that a high credit score is maintained all the time.
When your finances are set, it is much easier to close a deal.
5. Do Your Analysis
Well, we have established that buying commercial real estate is a big business pursuit. So, you have to be thorough with your numbers and make a decision only after receiving clean property records. Ask yourself – what is it that you are looking for from investing in commercial real estate and will that objective be met profitably? What would be the impact on your investment in case of a probable change? Which repairs need urgent attention and which ones need to be planned for the future?
Once you are done analyzing, put it through a stress test for increased taxes, vacancy, and interest rates. Know what is your break-even point.
With today’s advanced technology like drones, property videos, and single property websites; finding the right commercial real estate property shouldn’t be that tough. But you do need to sincerely evaluate your costs and profit numbers to ensure that you are making a viable business decision.
Pro tip: Sometimes it helps to know and connect with the right people. A CRE professional with expertise in commercial real estate and its economic patterns could be of great benefit in your property search.
Author Bio: Rahul Agarwal is the Co-founder & Chief Business Officer at Styldod, where he has taught a computer to do interior design! Styldod provides the most hassle-free & inexpensive virtual staging solutions for real estate agents so they can sell their listings faster, and for higher prices. Rahul was also a co-founder of Mebelkart. He’s your everyday IIT Kanpur nerd who pushes the boundaries with his innovative entrepreneurial stints and is also a sound startup investor & advisor.
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