Purchasing the first commercial real estate property is an exciting time in every investor's career. If the property is selected because it can offer good potential at an affordable price, it will likely become a stable foundation for continued success. If, however, the property is purchased without doing proper due diligence to determine any risks that could affect the profitability of owning the property, it could spell financial disaster for the fledgling investor. If you are new to the world of commercial real estate and preparing to make your first offer, the following tips can help you cut your risk and avoid some very costly mistakes.
What Does the Future Hold for the Location of the Property?
Location, location, location is one of the most often stated phrases bandied about when shopping for real estate of any type, but commercial real estate investors have to not only consider the location of the property, but issues that may affect that location in the future, as well. Potential changes in infrastructure, zoning and demographics that are planned or expected in the future can have a major impact on whether a property will be profitable investment or a financial drain for the owner.
To avoid this problem, new investors should spend time looking for any future issues that could influence the profitability of any property they are considering. This information can usually be found by:
- researching public property records for clues about any issues that have affected the property in the past, such as ownership, permit and taxation records
- researching community plans for both short and long-term development, including proposed changes in vehicle, rail or ship traffic and changes in zoning that could create hardships for potential tenants of the property under consideration
- researching proposed or upcoming changes in local or national laws that could negatively affect the rental potential and value of the property being considered
What Does the Future Hold for the Property's Most Likely Tenant?
For a commercial property purchase to be profitable, it must be able to generate reliable income. If the most likely use for the property is very limited, such as heavy manufacturing, it might be very costly to modify it for another type of tenant.
To assess this type of risk before making your offer, spend some time researching the potential for the current usage of the building. In most cases, the best commercial investment potential will be found in properties with features that have wide appeal for tenants or those that can be easily modified to fit different usages.
When shopping for commercial real estate, new investors can streamline the research process by forming an alliance with a trusted real estate professional who they can rely on to provide accurate information about each property under consideration. For more information, visit http://sgcityrealestate.com/ or a similar website.