Commercial real estate properties are popularly in providing a return on investment in two ways such as rent and capital appreciation. Both of these factors highly vary due to the location.
It seems difficult to invest in commercial property but it is not that much tedious task to accomplish. If you are moving forward according to the principles of long term investing, then it is possible to earn as much as high returns on investment as compared to that of the most debt instrument. Keep the following things in mind while going for commercial real estate investment. For more, you can approach Roy Spagnolo for ideal financial advice.
Location is the key
Location is the first and foremost thing that you have to consider. Two ways are there if you want to get huge returns on investment such as rent and capital appreciation. Both rely on the location. Search for locations where vacancy is not more than 5% and there are low chances that tenants will vacate, advises Paramount Management. This will result in higher rents and appreciation through the capital. It gives options to tenants for moving as well as to negotiate rents again.
A location for commercial real estate has two buildings but one has boasted the better quality as compared to the other one. It also increases the chances of grabbing more rent as the quality attracts more number of tenants. Moreover, it also provides high rents to investors with better tenant retention and high capital on the other side. It is more likely to receive a premium on top-notch quality. Keeps an eye over the certifications such as gold or platinum ratings to the buildings with nicer lobbies, elevators, ceiling heights, and better view. The buildings with high-quality interiors and facilities sold faster than others.
Demand versus supply
This is the first and foremost thing every commercial real estate investor has to assess before proceeding to buy a commercial property. Every city has various types of micro markets. Each market has its supply and demand. Demand is regularly published by brokers. The demand and supply will have an impact on both new and old buildings. Lower rents are available in the new buildings as the tenants have several options in the market to choose the best one. However, the old buildings adjust the rents and escalation clauses as well.
The value of commercial property automatically increases if the tenant is of high quality like good. Always search for international tenants and try to ignore the smaller as well as strangers. These tenants are good at paying rents and also, pay higher deposits and increase the value of property in no time.
The security amount for commercial real estate properties varies between 10 and 12 months. Be careful if the tenants proffer a deal of six months or less as it means that they want to stay there for a short period.
These are some of the points that you need to consider and also, take financial advice from Roy Spagnolo who has prowess in it.