Advertise with Us

Bookmark and Share

A, B, C Of Commercial Real Estate

Commercial real estate properties are a completely different from residential properties in regards to assessing value and many investors make the mistake of overlooking the many details that come into play.

For commercial real estate, value is determined in an inverse proportion to the degree of risk inherent to the continuance and stability of the income stream from the property. And of all the commercial property types, perhaps none is more complex in evaluation than a multi-tenant property, either office or retail.

Commercial real estate – covering a broad spectrum

Commercial real estate covers a diverse group of structure types and uses, as well as vacant land. Some of these are:

Multi-Family Commercial Real Estate

This type of commercial real estate property types include duplex homes, and other construction for habitation by multiple family groups. Condominiums are frequently called multi-family because of their construction as a group, but are normally listed and sold as single family residential units. Duplex homes are also frequently listed and sold as residential units to a buyer that lives in one side and rents out the other.

Retail Space Real Estate Properties

This category includes single buildings used as stores for clothing, electronics and other consumer products, as well as malls, strip centers and the like. Restaurant spaces are a specialty subset of the retail category, with some listings shown as restaurant/retail. Valuations can be based on size and land value, retail sales per square foot or other investment return calculations.

Office Buildings and Office Complexes

A single building designed for office use, or a group of offices in a single building or cluster of buildings would fall into this category. When offices are grouped in structures with single ownership, they are listed as commercial office rental property. The owner derives income from the rental payments of the office tenants. These can be valued based on the rental income return on investment, rather than methods using square footage and land value. Medical & Dental offices are a subset.

Commercial Real Estate – a rewarding investment opportunity

Commercial real estate investing is an exciting and rewarding industry that yields results to which no other industry can quite compare. In fact, commercial real estate is one of the easiest ways to become extremely wealthy with limited knowledge, personal financial investment and time.

With commercial real estate you are able to earn millions of dollars within a matter of a few years, and use other professionals to make it happen.

How to invest in commercial real estate

The first step in becoming a commercial real estate investor is to locate actual deals. This can be done through finding potential properties on the internet, the local newspaper, brokers and agents, and for sale by owner (FSBO) signs.

The second step is to prescreen properties according to the guidelines you originally stated. It may take calling on several properties to find one that fits your specific criteria. Establish quick identifiers so you can quickly move through properties that do not fit your criteria, and uncover the ones in which you would be interested.

The third step to commercial real estate investing after you locate and prescreen a property is to submit an offer. There are many ways to purchase a property. Using seller financing, borrowing from banks, and using commercial lenders or private lenders are all viable options.

The fourth step is to follow-up with solid due diligence. This entails getting every bit of information you can on a property including actual highest and best use, after developed or future value, any issues or concerns there might be with the soil or environment, or the city or municipality.

The final step is following through with your exit strategy. Depending on what type of investment strategy you are currently using, such as buying properties in poor condition and fixing them up, or perhaps you are looking to purchase properties only to have them generate income, an exit strategy is necessary. You could quick turn a property after increasing the value, sell at retail, or even refinance. It is always a good idea to have multiple exit strategies in mind so that, if one does not work out, you have others to fall back on.

When commercial real estate investment is broken down into these steps, investing is really put into perspective. Follow these basic guidelines with every deal you find. Once you become more educated on the various types of commercial properties and how to best obtain financing, you are well on your way to becoming a true investor.

/div>