Real Estate Resources and Advice For Growing Families

3 Things To Consider When Purchasing Commercial Real Estate

Buying commercial real estate is an entirely different process than buying residential properties. Not only are the costs involved usually significantly higher, but there are a number of factors that go into owning commercial properties that you will need to assess before committing to a purchase. If you are thinking about making the move into the world of commercial real estate investment, consider the following three things while you compare and contrast various properties.

First-Year Expenses and Income

The first year of operation is massively important for any commercial real estate property. In fact, it can sometimes determine the course of a property's value for years to come. You'll want to do thorough research into likely first-year expenses before anything else. If the property requires extensive renovations, for example, be sure to include these in your projected operating expenses — and, in turn, the calculation of your net operating income. Additionally, you will want to estimate the capitalization rate in your first year so that you can more accurately consider the net present value in years to come.

Zoning Restrictions

It's always a good idea to consider options that are a bit unique but don't make your purchase of commercial property more complicated than it has to be. Unfortunately, if you don't take zoning restrictions into consideration, that's exactly what might happen. For example, if you're looking to buy an older home in a historic neighborhood to renovate and turn into a cafe, you'll want to ensure that the property is zoned for commercial use, not just residential. In some cities, creative repurposing of commercial property can be difficult, so communicate with your local zoning board early on.

Forming a Team

The process of purchasing commercial real estate properties is an endeavor few can manage on their own. That's why you should have a solid team in place before you close in on a deal. At the very least, you should have an experienced and knowledgeable team consisting of an attorney, contractor, and property manager. It's also likely you'll want to network to form relationships with several trustworthy lenders. Finally, you may want to involve a broker who can help you identify properties that fill your list of requirements, but also offer the most potential. Without a team of qualified personnel around you, commercial properties for sale in your area may be sold to other buyers more quickly than you can evaluate them.

To learn more, contact a real estate service regarding commercial properties for sale.