Investing in commercial real estate is an attractive venture. When done right, it can provide you with consistent returns and passive income. But while this type of investment is popular because of its profitability and growth potential, becoming a real estate investor requires time, money, effort, and, most of all, knowledge.
Apart from being excellent assistants for your homebuying or selling journey in West Chester, PA, our team at RE/MAX Direct are also experts in commercial real estate. To help you get started in investing in commercial real estate, here are some of our commercial real estate advice for buyers.
Get to know your options
Commercial realty comes in different types, forms, and all that. Before you take the plunge, identify which property type will work best as your investment.
What are you interested in? There’s retail, office spaces, hotels, golf courses, restaurants, wellness centers, and the list goes on. Typically, commercial real estate properties are divided into five general categories:
- Industrial – These include manufacturing sites, warehouses, factories, logistics, and distribution centers.
- Office – Low, mid, or high-rise buildings with floors that generally serve as office spaces, ranging from single-tenant offices to skyscrapers.
- Multifamily – Dwellings that accommodate multiple families or households, such as apartments, condominium units, housing communities, and special purpose housing.
- Retail – Spaces designed to accommodate businesses that sell goods and services, such as malls, retail centers, banks, and restaurants.
- Special purpose – Properties designed for a specific use, including self-storage facilities, schools, airports, sports arenas, amusement parks, and hotels.
Don’t just consider the profits you might make. Pick a commercial property type that is aligned with your long-term investment goals.
Familiarize yourself with the local market
How well do you know the local real estate market? Each area has a unique supply and demand. While certain property types may perform well based on the current economy and trends, the situation may be different at a local level. Sometimes, it could be that there’s an oversupply (or vice versa) of a certain commercial property in your chosen location.
These nuances emphasize the importance of working with a local real estate agent who specializes in commercial real estate. You will be able to conduct your own market research (backed by data) to identify opportunities and risks based on the local real estate market climate. Furthermore, your agent can also come up with a feasibility study so you can make the right choices.
Know the difference between commercial and residential property investing
Investing in commercial real estate is a different ballgame. It’s more for the long term, unlike the usual residential leases. Furthermore, the income from your commercial property is typically related to usable square footage. These are just some of their differences that will help you understand why commercial properties typically generate higher income.
Another difference lies in the tenant type, which varies more widely CRE than in residential real estate. In the market are various potential industries or occupiers who are significant in determining demand. For instance, manufacturers, distributors, and related services vie for industrial spaces. And of course, office buildings are in demand among businesses and companies that retain employees.
Avoid these commercial real estate investing mistakes
Knowing what not to do is just as important as knowing what to do. It is better to be proactive and mitigate risk exposure rather than being reactive. Here are some common investing mistakes you should look out for.
- Working alone – Don’t try to save money by doing everything on your own; it pays to have a competent team of professionals to guide you throughout the investing process.
- Forgetting due diligence – Buying a property is a significant investment and therefore requires making the right decisions backed by due diligence. Don’t skip what may seem like extra steps, such as property inspections.
- Financial and legal ignorance – Commercial real estate investing involves financial and legal matters that could lead to devastating losses if you are not prepared and well-versed.
Kickstart your commercial real estate journey with RE/MAX Direct
If you are looking to invest in a commercial property in West Chester or the surrounding areas in Pennsylvania, RE/MAX Direct is your partner in jumpstarting your commercial real estate journey.
We will help you find the right property and provide the best real estate tips for buyers like you. And we don’t stop there. When you decide to sell your property, we will be there to guide you on the steps in selling a commercial property.