Buying commercial properties can be a dichotomy. You can make tons of money, but you can also suffer financial ruin. To avoid losing money, be careful about the choices you make. You need to purchase the right properties and work with the right commercial lenders to be successful. This article will carefully guide you through the real estate process.
An important tip to remember with rental real estate is that you want to make sure you have a good feel for your tenants before renting out to them. This is important because you not only need to plan as best you can for how long they plan on renting, but also if they will make payments on time and treat your property well. Treat the meeting like a job interview and treat your property like a prize.
Consider whether to manage your rental property on your own, or through a rental agency. On your own may be less expensive, but if there are problems in the future with unpaid rent, damages, or lawsuits, you will be glad to have someone on your side. Not to mention the inconvenience of having to find a plumber at 2am when the pipes freeze. Let someone else deal with the headaches.
One important tip to remember when investing in commercial real estate is that you need to approach it differently in every aspect than residential real estate. This is important to know ahead of time because you will need a much higher down payment ratio, and you also need to find out which lenders will cater to your particular situation. One aspect that is safer than residential real estate is the fact that your own personal credit will not suffer if there are negative unforeseen circumstances that cause the deal to end prematurely.
Make sure that you invest some time researching local income levels and other factors, such as unemployment rates or local employers plans for expanding or contracting their businesses before you invest a large amount of funds into real estate. If you’re looking at a property that’s close to things like a university, employment centers, or a hospital, they’re likely to sell fast, and at a high value.
Condos and townhomes all each have a Homeowner’s Association with special rules imposed by them called Covenants, Conditions and Restrictions (CC&Rs). Always read the CC&Rs. They can restrict or regulate virtually anything they want from the color of your house to parking your car. In most cases, their goal is to promote conformity, but you may find out it is not for you.
When considering purchasing rental real estate, keep in mind that if you invest in rentals near a local university your tenants will most likely be students. If this is appealing to you remember to write leases which include specific rules about parties and additional roommates. Also be aware that your tenants may not be long term, and vacancies in rental units will rise during the summer.
As previously mentioned, commercial property isn’t a free money source. It takes effort, time, and a lot of money (initially) to be successful. That, though, is still not a guarantee that you will make money, and you could possibly still lose money.
Beatrice Cox is a writer and stylist with a passion for the intersection between biology, technology and design. High in Swedish Bali and Heritage, it travels around the world encouraged and informed a global perspective on the future of fashion and its relations with planetary health. She is currently working for a sustainable fashion label in Bali, Indonesia.