Here is what you should consider before investing in commercial properties.
Many different investment opportunities can provide you with great benefits. However, any time you enter a new investment market sector, it’s essential to do your research. What are some of the things that you should consider before investing in a commercial property?
Understand Alternative Categories
When people think about commercial property investment, they think about retail, industrial, office, and multifamily properties. However, there are investment opportunities outside of those four core categories that might be an excellent idea for you. These properties include self-storage facilities, data centers, and senior living facilities. Getting into these segments of the commercial real estate industry segments might be more complex, but it can be much more rewarding.
There Will Be Ups and Downs
Like residential real estate and other industries, the commercial property industry will have ups and downs. The value of your assets may rise and fall over time, and the market will consistently shift between being a seller’s and buyer’s market. When you enter the commercial property investment sector, you should be prepared for the market’s cyclical nature and not merely look for short-term gains.
Location Matters
You’ve heard the saying location, location, and location aren’t just crucial for residential real estate. Your commercial property investment should be in a place that is ready to support your business. Look for areas with an existing strong market or that are currently growing.
Pay Attention to the Capitalization Structure
A commercial property investment also involves debt and risk. Interest rates are variable, and you will be required to pay the cost of your mortgage whether or not you are generating any income from the property. Additionally, you must be prepared to cover the mortgage if the property becomes vacant. You should have your capitalization structure finalized before finishing the deal to ensure you understand the amount of risk you are taking.
Don’t Forget Tenant Experience
When you are balancing the many different parts of investing in commercial real estate, there is one thing that you should never forget – the tenant experience. If your tenants are happy, it will be easier to attract additional tenants and experience high retention rates. However, if you don’t invest in the tenant experience, you can expect to spend a great deal of time with your property sitting empty, trying to attract new ones.
Trust the Professionals at Clagett Enterprises for Your Realty Needs
If you’re looking for an experienced property management company, the perfect realtor for your property, or a professional to assist you during your home purchase, you can rely on Clagett Enterprises. Clagett Enterprises is a full-service real estate company with almost 30 years of experience in the Frederick and Western Maryland area. For assistance with commercial sales, leasing, management, and development, and consulting, contact us online or give us a call at 301-665-6009. To meet our team and see some of our beautiful homes, follow us on Facebook, Twitter, and Pinterest.