THINGS YOU NEED TO KNOW BEFORE INVESTING IN COMMERCIAL REAL ESTATE

If you are considering investing in real estate properties then Commercial Real Estate (CRE) is a great option as it is an excellent way to grow your passive income, has good growth potential, lower risk factor and gives steady returns. Commercial properties include office buildings, retail, warehouses and apartments.

Investing in commercial and residential properties necessitates a completely different approach and it is wise to do ample research prior to investing.

Tips for Good Investment

1. LOCATION

Commercial properties that are in the heart of the city have a greater chance of attracting tenants. Properties near other residential complexes can be easily accessed by everyone and are hence more very popular. If the residential areas nearby have a vacancy of less than 5 percent this could be an indication that your tenants do not leave the place easily, thereby increasing your capitation appreciation. The ease of access to public transport, surrounding cities and roads are also factors that need to be considered.

2. QUALITY

Tenants are more drawn towards a building of superior quality, and it is thus far more advantageous to you, even if it means shelling out more money. Greater quality means that people are willing to pay a higher premium. A building with a greater ceiling height, stunning view and platinum rated certification results in greater tenant retention and more capital for you.

3. DOCUMENTS

A property that has sound legal documentation looks better in the eyes of the prospective tenant. Scrutinize the property documents to find any hidden charges and verify that the ownership transfer, mortgage and sale agreements are in order. Checking the documents beforehand saves you from dealing with repair, insurance and statutory charges.

4. DEMAND AND SUPPLY

The fundamental concept here is that if the demand for commercial properties is more than the supply, your rent goes up. If the supply greatly exceeds the demand, however, tenants can renegotiate the rent with you and if it is not agreeable, find another place from the multiple options available. Thus, finding commercial property in a location where the demand is high, is a more profitable option for you.

5. INTERIORS

Any commercial property has to fulfil the basic requirements of the tenant like electricity, plumbing, flooring, ceiling, wiring and water. Even if you might have to bear the cost of ensuring these amenities are provided, it is well worth the price as tenants would more readily take such a place and stay for a longer time. If you already have a specific vision of how the space should look, for example, an office space, you could also go ahead and
create a reception, conference rooms and furniture as needed and market it to a specific type of tenant.

6. TENANT CREDENTIALS

While taking in tenants it is important to find out if they have previously been paying the rent on time, stayed the entire duration of the contract and if they are trustworthy. If the tenants are struggling to pay the advance or the security deposit, that could be a warning sign. It is better to take on tenants who have many credible recommendations and are part of a multinational organization.

CONCLUSION
Investing in commercial properties is quite different from residential complexes and requires due diligence. While there are many factors to consider, it is quite rewarding in the long run.