Commercial Real Estate 101
Residential real estate investing has become extremely popular in the last few years, but investing in homes has also become more expensive as home property values rise. If you’re interested in diversifying to include commercial real estate, consider these factors of investing in this type of real estate. When starting a career in commercial investing, be sure to keep an open mind and be prepared for the different set of challenges that you’ll face.
New Real Estate Agents
To be successful in commercial real estate investing, you’ll need to work with new real estate agents. While residential real estate agents are helpful in finding the perfect home to invest in, they likely won’t be able to find the types of commercial properties that you’re looking for. The first step in finding the ideal commercial property is to use your networking skills to connect with a qualified and professional commercial agent. This type of agent will be able to help you locate the commercial properties that you need to be successful in your investment opportunities. However, keep in mind that commercial real estate investors take home a larger commission that a typical residential realtor. Commercial properties can be more difficult to find and take longer to sell than residential properties, so be prepared for your agent to take a sizable chunk of the purchase price.
If you’ve only invested in residential properties up until this point, you might be unfamiliar with estimating the value of commercial real estate. Instead of estimating the value based on similar structures, you’ll estimate the value based on how much income it should bring in each month. For example, two different office buildings look similar might actually be worth vastly different amounts. When you’re calculating the worth of a commercial building, make sure to consult with experienced commercial investors to help you make an informed decision before purchasing.
Since commercial properties usually bring in a substantial amount of income each month after you’ve made improvements to the building, seller financing can be a viable option if you’d rather avoid working with a traditional lender. Seller financing is extremely common in commercial investing, but be aware that this is usually a short-term solution. If you’d like to build a history in making payments on a particular property before seeking traditional financing from a bank, opt for seller financing. Seller financing can be a bit more complicated than standard financing, but it’s also a good option to explore when you’re purchasing an expensive property that you might have trouble securing the funding for.