Whether you’re a small-time investor or a large investor, or a would-be business owner, commercial real estate can boost your profile in major ways. It can also tear you down and leave you broke. Read these tips about commercial real estate to ensure that you’re properly informed about the market.
Be patient when handling a deal with commercial property. The initial legwork is more involved than buying a home. There are more inspections, more work to be done and more paperwork to do. Build this time into your investment plans so that you won’t be caught off guard.
Short sale auctions may seem to be quite alluring, but prepare yourself to lose out on the house by being over bid at the last minute. There are many people who have lost out on a home at the very last minute for slightly more money than what they had bid.
Most apartment complexes make you, the tenant, pay for the water you use every month. However, some places go as far as to taking the amount of water your whole building used in a given month and splitting it up among the number of units using it. If you use less water than everyone else, you can end up paying for someone else’s water usage. Make sure that you know of these water usage regulations before signing a lease. With leasing in mind, it is also important to bear in mind that the latest FASB standard on lease accounting, ASC 842, went into effect for most public companies in 2019. You can see more information about the ASC 842 effective date here. Among other requirements, ASC 842 declared that most leases need to be capitalized and recorded on the balance sheet.
Make sure you can refer to other investors with more experience than you. If this is your first investment, there are a lot of regulations and expenses you do not know about. Befriend an experienced investor or hire one for their expertise, and have them assist you with the transaction.
You should take measurements yourself to make sure that the landlord is honest about the square footage. If you find that they aren’t, then you can use all of the information that you have to try and negotiate a new deal.
Obtain and study information about the number and types of businesses surrounding each commercial property that you are considering, based upon the underlying type of business that will likely occupy the property. A deli or restaurant space might not be your best option if there are dozens of established eateries within a five-mile radius.
One of the advantages of using a broker for your real estate purchase is because they will get paid only on the completion of a transaction. This means that they will have your interests in mind, because the better value you get, the more they will be paid.
When first starting out make sure you focus on just one type of property. You don’t want to overwhelm yourself with too much at first. Get to know that type of property and how to own it. Once you feel comfortable with it, you can start looking into other types of properties.
When you write your letters of intent, start by dealing with the larger issues, then move on to the smaller ones later. This way, negotiations will be smoother, and agreements on the small issues are more likely to be reached.
Commercial real estate leases are not the “take it or leave it” type. Don’t ever sign the so-called standard lease agreement of the broker. It is beneficial to the landlord, and it usually includes lots of provisions and disadvantageous to the tenant. The lease agreement should be a partnership agreement ” turn their standard lease into a mutually beneficial relationship.
Always make sure that you’re as informed as possible when dealing in commercial real estate. This unforgiving market will break you if you’re not prepared to deal in it. Reading the tips above is a good way to get started, but the onus is on you to put these tips into practice and use them wisely.