To be a smart and savvy investor, you plan for the years ahead rather than make short-term decisions. The coronavirus pandemic might have made real estate investing challenging, but you can still diversify your investment portfolio and reap benefits in the future.
One valuable piece of advice for real estate buyers is to invest in commercial real estate. The prospect is promising as the commercial real estate market continues to recover. And with a number of sellers wanting to liquidate at discounted prices, now is a great time to buy investment property.
To help you with your venture, here are the basics of buying commercial real estate.What is commercial real estate?
What is commercial real estate?
Commercial real estate, as its name implies, refers to properties that are used for commerce, business, or commercial purposes. There are five types to choose from:
- Multi-family rentals are dwellings designed to accommodate multiple families or households in one building or development. The six most common types of multi-family residences are:
- High-rises, which are buildings with nine or more floors and at least one elevator;
- Mid-rises, which have less floors than a high-rise building, has an elevator, and is typically in an urban area;
- Garden-style, which is a low-rise development (up to three floors each) built in a garden-like setting;
- Walk-up, which are multi-level apartment buildings without an elevator and thus considered more affordable;
- Manufactured housing community, wherein ground sites in a community are leased to owners of manufactured homes; and
- Special purpose housing, which caters to a particular population segment such as retirees, students, and low-income tenant
- Offices are buildings that can range from low-rise structures or towering skyscrapers. As such, they’re categorized as low, mid, or high rise based on their size.
- Retail spaces are involved in selling goods and services. The businesses we frequent, such as coffee shops, restaurants, groceries, pharmacies, lifestyle centers, and shopping malls are housed in this type of commercial realty.
- Industrial buildings include warehouses, factories, and logistics and distribution centers. Tenants usually sign long lease agreements, providing investors with higher rental income.
- Hospitality real estate includes hotels, resorts, and inns that serve business and leisure travelers.
Steps to owning a commercial real estate
Acquiring commercial real estate property is on the wish list of many investors. While it entails considerable sums, the endeavor can give you long-term benefits. Here’s how you can add a commercial property to your portfolio.
- Familiarize yourself with CRE language
Purchasing commercial real estate is more complex than residential real estate. For instance, if you want to buy an office building, you might be asked to sign a LOI or letter of intent before the PSA or purchase lease agreement.. It can be confusing for a first-time buyer. Start by getting acquainted with the most common commercial real estate terms.
- Determine your reason for buying
Ask yourself why you are investing. Identify your investment goals. This will help you decide what type of commercial real estate can help you achieve your targets.
- Explore your financing options
There are several ways you can finance your real estate investment. You can purchase it on your own, borrow money from your preferred lender, invest with a partner, or do a round of real estate crowdfunding, among other options.
- Find a commercial real estate specialist
To help you with your real estate investment, work with a qualified real estate agent. They will help you navigate the process, understand the nuances of commercial real estate investing, and learn more about your risk tolerance.
- Do your due diligence
Due diligence refers to thoroughly researching the property before signing a purchase contract or sale. It involves examining the property for liens, physical inspection, reviewing the title, assessing it for any environmental issues, and taking a look at all pertinent paperwork like leases and zoning requirements. All of these help you ensure that you know what you’re getting into.
- Set aside enough time for closing
Create a realistic timeline for closing the sale. It involves several other processes, all of which will finalize the purchase. Take the time to fulfill each step well and carefully to avoid any costly and stressful mishaps in the future.
Explore some of the best commercial property for sale or lease in Chester, PA, and the surrounding areas with RE/MAX Direct. Our dedicated team of real estate agents are ready to guide you to find the perfect West Chester, PA commercial real estate for sale for you. Call us today at 610.430.8100 or email us at remaxdirectwc(at)gmail(dotted)com.