Shops, commercial buildings, industries, retail, wholesale, warehouses, hotels and educational institutions come under the commercial property. You can either buy the property directly or indirectly by investing in property companies, developers, house builders or even in funds. However, as a beginner, it might be a daunting task id you don’t have enough funds or have a bad credit. DC Fawcett suggests the best ways for the starters to invest in commercial real estate.
Best Way of investing in commercial real estate investment for beginners
There are so many factors to consider before you think about starting to invest in commercial real estate. One of the main factors is budget and location. Prices for commercial building or complex vary according to the location and area. One of the ways is to ask a professional real estate agent about investing in commercial property. If you are looking to invest in commercial real estate as a beginner, following are the ways.Real estate rating.
Learn what the insiders know
To be a professional in this trade, you need to think as a professional and take tips from the people who are experienced. You need to know that commercial property is different from the residential property. Even to avail the loan, you make at least 30% down-payment to the commercial property lenders.
Map out an action plan
The top real estate professionals are able to make out whether the deal is good enough. They make use of exit strategy, i.e. they know what deals they should accept and what not.
Get familiar with key commercial real estate metrics – It consists of:
NOI (Net Operating Income)
– The commercial property’s NOI is calculated by evaluating the property’s first year’s gross operating income and deducting the operating expenses for the first year
Cap rates – Real estate cap or capitalization is used to calculate the net present value of income generating assets.
Cash-on-cash – Most of the commercial real estate investors rely on financing to purchase properties abide to cash-on-cash strategy in order to compare first-year performance on commercial properties. This approach takes that the investor does not pay 100% cash for the property on one go and won’t keep all the NOI if they have other commitments like paying the mortgage loans. To uncover cash-on-cash, you need to calculate the amount required and stick to your budget
Look for motivated sellers
Like any other business, the customers’ drives real estate too. You need to find the sellers, who are ready and eager to sell below the market value. Nothing happens or matters in real estate till you find a motivated seller.
Study the neighborhood
To evaluate the commercial property, you need to study the neighborhood, where it is located in by going to their houses, talking to other neighborhood houses, and looking for the vacancies.
Apart from finding and evaluating commercial properties, getting a great price and communication, you need to build a good relationship and rapport with the homeowners.