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8 Factors to Find the Right Commercial Property

By: Elite Legacy Education, July 5, 2017

Investing in commercial properties can be very exciting, but there are some important considerations to keep in mind. First off, you must consider your investment objectives when it comes to finding the right commercial property. Will you be wholesaling, rehabbing, leasing or using some other investment strategy? This decision must come before you can evaluate the potential of any investment deal. In the case that you decide to rent, you should consider your ideal tenant. This way, you can better understand from their perspective what it is that they would find valuable. Ultimately, it will increase your odds of finding tenants by selecting a building that caters to their unique needs.

 

  1. Property type: As you know, commercial real estate is any building that is used for the purpose of generating profits. This encompasses a broad range of building types. Depending on your investment goals and the preliminary questions we identified, you can define your ideal property type accordingly.

 

  1. Location: Consider the location both from your perspective and your potential tenant’s perspective. You should consider the accessibility of the property to determine whether you can service it or if you need to hire someone. Another consideration is whether the property will be in a central location. If so, you will likely be able to charge higher prices on lease agreements. This will make it easier to rent too since the property will be closer to other amenities.

 

  1. Capitalization rate: The cap rate measures the rate of return you can expect from the property during its first year of operations. Of course, you want the cap rate to be as high as possible. You can also consider some other metrics to help evaluate the investment opportunity. More on that in a future article.

 

  1. Required maintenance and investments: Consider whether you will need to put significant capital into restoring certain parts of the property until it is ready to lease. You should also consider when different components have been replaced. For example, you may want to find out if updates are needed to heating and cooling equipment, light fixtures, the exterior of the building or any other major pieces of the property. It’s better for your sake if things have been replaced more recently as it means it’s less likely you will have to do so anytime soon. Also keep an eye out for anything that’s outdated as that will likely require investment on your end when it comes time to upgrade.

 

  1. Proper documentation from the buyer: Always ensure that the buyer provides proper documentation prior to signing anything. You may want to enlist the help of a lawyer or real estate professional to help you verify this information. Taking this precaution will help you avoid any unwanted surprises later on.

 

  1. Surrounding market conditions: You can’t evaluate the potential of any investment property without considering the surrounding market conditions. After all, your entire exit strategy will depend on this. Be sure that the market conditions support the investment property at hand, as well as any strategies you had planned to employ.

 

  1. Potential rental income: Whether you are renting or selling the property, you can use this to your advantage during the valuation of the property. Clearly, the higher the rental income the better. If you’re renting, this means you will be able to generate higher rental proceeds. If you decide to sell the building, you can also leverage this since the next owner will be able to charge these higher amounts.

 

  1. Property taxes: Common to all real estate investments, be sure to inquire about the associated property taxes. It would be a shame to purchase a property and then be blindsided by the amount of taxes owed on it.

 

Keeping each of these factors in mind will help you to evaluate and identify the most promising commercial properties to put your money into. Today's market is filled with many opportunities for the savvy investor. Our Elite Legacy Education trainers will introduce you to proven strategies that can help you launch your career as a successful real estate investor.

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