Before closing a deal on buying commercial real estate, you should always carry out extensive research to make sure your investment is a sound one. There are many factors that can influence the success of your real estate purchase and the more you can find out beforehand, the more confident you can be of getting a solid return on investment.
Here are our 5 top tips on how to research the best properties for commercial real estate investment. These tips for investing in commercial real estate are just as useful for startups as they are for experienced investors.
How to Research Commercial Real Estate
1 Research the area
This may seem obvious, but you need to get in your car and drive around the area you are thinking of investing in. Many investors just look at maps or check out Google maps to get an idea of the area. However, nothing can beat your “hands-on” experience. This allows you to get a first-hand glimpse of how the area currently looks, what the transport links are like, and if there are good facilities nearby that draw in people.
2 Speak with others
Speak with store managers, restaurant owners, and other business people who operate in the local area. If you show an interest in their business, they will usually be more than willing to share their knowledge and experience of the local area. You can also get a feel for local development plans and if businesses generally are successful in the area.
3 Compare sales
Comparing sales of properties that have recently sold is one way to evaluate commercial properties and help decide if the investment is a sound one. Your real estate broker should be able to provide you with a list of comparable properties in the area.
4 Find out all costs
In order to determine if your investment is a sound one, it’s necessary to find out all costs that are needed to run the property. There are factors like the average monthly cost of utilities, insurance, loss of income from empty space, as well as, property taxes to consider. Usually, it is easy to get a breakdown of monthly running costs for commercial real estate.
5 What is the property potential?
Do some research on the potential to change the property use or expand it in the future. This requires you finding out about zoning regulations for the area. This is helpful to know if you decide to change the property’s use in the future. Also, find out if the property can be extended and what kind of planning permission you need for that.
