1. Weigh the various types of property based on your interest and goals. Many people simply turn to residential apartment buildings by default, but there are plenty of other commercial real estate options to consider, from office buildings to mobile home parks.
2. Don’t bank on a great location. Today’s trendy, up-and-coming neighborhood could easily lose steam and become a ghost town in just a few years, and gentrification has been known to stall. While location is important, don’t pay an arm and a leg for it – try to keep some perspective.
3. Consider the physical state of the property. When you buy it, every health issue and instance of damage will be yours to address, so tread carefully. Beware of properties that come with liabilities like asbestos or lead paint, and look closely at whether the space is showing signs of wear and tear. You’ll want to bring a property inspector in so that you can get an accurate assessment of the condition of the property. Don’t skip this step, or you might wind up kicking yourself years down the road when you find you have a money pit on your hands.
4. Look into the legalities of any limitations on the interior or exterior changes to the property. If you’re buying commercial real estate in a historic part of town, you may be barred from making changes to certain elements. Make sure you look into any relevant building codes or zoning laws to find out whether you’ll have the freedom to alter your property as you see fit.
5. Find out whether there are opportunities for growth. If you want to expand, could you potentially buy the space next door?
6. Go big or go home. The more units you buy, the cheaper they’ll be per unit, so you might as well invest in at least 10 units at once. In the end, it’ll be just as hard as managing five units. Why not double your yields by buying more?
7. Make sure you have a team of experts available to advise you. You’ll want to hire a lawyer, an accountant, a mortgage broker, and a commercial realtor. A qualified attorney will be able to help you draw up contracts, such as residential leases. A realtor can help you sniff out valuable new properties in your area. A broker can help you tackle finances so that you have the means to buy new property. And an accountant can offer you in-depth financial advice regarding your commercial real estate purchase.
8. Secure financing for your purchase as soon as you can. You’ll want to have your down payment available before you begin applying for any mortgages.
9. Take your time. Buying commercial real estate can be a time-consuming enterprise full of frustrating roadblocks. Don’t get too impatient, and use the downtime to consider whether you’re choosing the right property for the right price.