Commercial Real Estate
Information on commercial real estate investing and leasing
The world of commercial real estate differs enormously from its residential counterpart, though it too holds many opportunities for investors. Real estate is still considered one of the best and safest investments you can make, though you'll have to navigate quite a few differences and variations if you're only accustomed to buying residential properties.
Commercial real estate leasing is something that just about every business faces at some point or other, too, so if you don't have the cash flow to actually buy the property where you plan to house your company, there are a few things you should know to get yourself the most advantageous lease terms possible.
The Basics of Commercial Real Estate Investing
As an investment, commercial real estate holds great profit potential. Broadly speaking, you can participate either in speculative commercial real estate investing, or put your money into established properties that you believe will increase in value. A commercial real estate broker may be able to help you with this.
Speculative commercial real estate investing involves acquiring undeveloped or underdeveloped lands in the hope that they will eventually be zoned for commercial property. At that point, you can sell them to developers or hold onto them as they increase in value. Purchasing established commercial properties is similar in principle to what you'd do in residential real estate: you generate positive cash flow from tenants, which you can use to improve the property and increase its value until you're ready to sell it.
There are a few things to be aware of before you dive in, though. Securing commercial real estate loans and commercial real estate financing can be more difficult, as these properties are generally valued much higher than residential ones. You will also usually need to come up with a greater portion of the purchase price in the form of a down payment; it is common to put up 25 percent for a down payment (as opposed to the 10 to 15 percent required for residential properties). Also, there are many municipal coding and zoning concerns you need to be familiar with, and it's vital that you look into these when doing your investment research.
Negotiating Commercial Real Estate Leases
While leasing frees you from the worry of securing commercial real estate financing, you have to be just as careful when renting. It's important that you have a well-developed ability to understand and analyze the clauses in the lease to avoid getting trapped with disadvantageous terms. Hiring an attorney to help guide you through the commercial real estate leasing process is highly recommended.