The commercial real estate industry has created many millionaires and is seen by many as an alluring industry. However, success in this field requires knowledge, strategy, and the right mindset. As a professional in the industry, it is important to know how to navigate the market and make wise investments. In this article, we will provide tips and advice for achieving success in commercial real estate.
Measure Before You Rent: Consider Your Vehicle Size
When renting an apartment with a garage, it is important to measure the size of the garage before signing the lease. This is especially important if you have an oversized SUV or pickup truck. You don't want to end up with only one additional parking space and no room for your vehicle. Make arrangements with the management beforehand to avoid any inconvenience.
Secure Financing Before You Start Looking
Before you start looking for the perfect property, it is crucial to determine your financing methods. It would be a shame to find the ideal property and then realize you are in a bind when it comes time to pay. Qualify with a lender beforehand so you have your finances in order when the right property comes along.
Calculate Net Operating Income (NOI)
One of the most important metrics for judging the attractiveness of a commercial property is the NOI, or Net Operating Income. To calculate NOI, subtract the first-year operating expenses from the property's first-year gross operating income. A positive NOI indicates that the property will bring in more cash than it will require to operate and maintain it, making it a good investment.
Consider the Impact of Neighborhood
The surrounding neighborhood can greatly impact the value of a property. If the area has recently experienced a boom, you can expect higher prices. On the other hand, if there have been a lot of foreclosures, prices may be lower. Consider the demographics of the neighborhood and how they align with your business and target market.
Understand the Transaction Process
Remember that purchasing commercial real estate takes longer than residential contracts. The property may need time to settle, renovations may be necessary, and it will need to be sold for a profit. Don't enter into a transaction if you are short on time and expect a quick return on your investment.
Read Square Footage Information Carefully
When looking at square footage information, be sure to understand what it includes. The listed square footage often includes the thickness of the sidewalls, which may not be usable space. The usable square footage is the actual area you will be able to use, and the rentable square footage is the space available for rent.
Negotiate a Longer Lease Term
When discussing the lease with a landlord, consider signing a longer term. Landlords prefer long-term tenants and may be more willing to negotiate terms and conditions. Additionally, having a stable office location can be more attractive to customers than a company that relocates frequently.
Get Legal Advice Before Signing a Lease
Always have an attorney review and negotiate the commercial lease with you. Make sure you fully understand the terms and conditions, restrictions, and any legal jargon. Don't sign the lease until you are confident you understand your obligations.
Commercial real estate presents a lucrative opportunity for those who are knowledgeable and make wise investments. By applying the advice in this article, you can set