Among the several business ideas that ensure a smooth cash flow, commercial real estate is an exceptional one. Investing in commercial real estate sector has become a common trend nowadays. Sometimes the prices in real estate can go very low and at time you can yield a good return on your investment. However, to enter the race of smart business, this certainly is the best time to invest.
A property with good returns is the first aspect to look for in the real state business. Next comes the strategy to strike a good deal. The following tips will help you survive in the commercial real estate business.
Create a plan based on your budget: The value of commercial investment properties is different from the residential properties. Moreover, there is a bigger cash flow with these properties. First you should make a budget plan, based on the amount of money that you can easily spend to buy a property. Find out if the property is on lease, and if it is, find out the rent being paid. Continue reading “Tips to Survive in the Commercial Real Estate Business”
Investing in commercial real estate is undoubtedly a great idea but before making the final decision, it is very important to know everything about the real estate market, so that you do not make any mistake while investing. Here, we shall discuss about the types of commercial investment properties, the benefits of investing in a commercial property and factors that must be considered before making the final decision.
What are the different types commercial real estate?
When we talk about commercial property, any property that is not residential is categorized under commercial real estate. Properties like office buildings, malls, retail markets, resorts and industrial factories, to name a just a few are some of the commercial estate real estate properties. In simple terms, when you invest money in a property that will be used for commercial purposes, it means you have invested in the commercial real estate. A commercial property is an investment property with returns – this means you can be assured of monetary gains or profits.
Why to invest in the commercial real estate?
Once you invest in a commercial property, you can relax as this is an ultimate key to generate money. Let us have a look, how:
- You can purchase a property and build equity. Keep a watch on the real estate market trends and when you think exiting is a great decision, sell off your property and enjoy the profits. Choosing a commercial property for investment sale is certainly a great choice.
- Secondly, if you want a monthly income, you can rent the property and enjoy the benefits. Your tenants will pay the monthly rental and you can enjoy the profits.
- Thirdly, if you yourself are a businessman, you will not have to pay any monthly rental for an office space. You can successfully run your business from the office space you own and at the same time, you can also build your equity.
- Lastly, if the space you own is more than your personal requirement, you can rent the extra space. By doing so, you can utilize the extra space and also, enjoy the monthly cash flow.
Factors to consider before making the final decision
- Check the location of the property.
- Check the infrastructure of the property and assure that the property is in a good state.
- Estimate the monthly amount that you can expect from the property.
- Calculate the amount that you will have to invest and figure out whether you will be gaining profits or not.
- Consider the future prospects of the property.
When we talk about investments, one of the best choices an individual can make is of investing in commercial real estate. Many people cannot decide whether investing in a residential property is beneficial or they should opt for commercial investment properties. In this blog we shall discuss everything about commercial property and the benefits of investing in a commercial property.
What is a Commercial Property?
To start off with, let us first get an understanding of what a commercial property is. In very simple terms, every other property that does not come under residential property is known as commercial property. These properties include offices, buildings, shopping complexes, hotels and industries, to name but a few. The residential property is for an individual’s personal use while a commercial property is used by more than one person. Whether we talk about commercial property for investment or sale purpose, the choice is always beneficial. However, an investor should always be very careful while investing in the property.
Why Is a Commercial Property a Secure Investment?
Once you decide to invest in a commercial property, you can be assured that you have made a secure investment for yourself.
- One of the biggest advantages of investing in a commercial property is that it is an investment property with returns.
- The money that you spent in buying the property, can be recovered in the form of the monthly rental given by the tenant.
- If the CPI (Consumer Price Index) increases, the commercial lease also increases with it. This means that if there is any increase in your expenses, that amount will be directly added to the monthly rental that is paid by your tenant.
- A huge amount of the operating cost is paid by the tenant through the structure of NNN or NN lease.
- If any changes are made to the property, the tenant bears the expenses.
How to Play Smart While Investing
To make the right choice, it is very important to consider a few factors before making the final decision.
- Always check the infrastructure completely. Do not go only by the outer appearance.
- Estimate the monthly rental that can easily be generated and compare it with the amount you would be spending. Make sure that you are not at a loss by the end of the deal.
- Set up a budget and choose a property within the predetermined budget.
- Make sure that the property is located at an accessible location.
- Study about the area and consider the future prospects of your current investment.
Investing in a property is one of the best decisions, but often people get confused whether they should invest in a commercial property or in a residential property. It is always a good choice to invest in a property that gives high returns and there can be nothing better than investing in a commercial property. While making an investment in a property, make sure that you are careful and follow one step at a time. Here are some factors that will help you understand why it is beneficial to make an investment in a commercial property.
A commercial property is an investment property with returns: If you own a commercial property, you can generate a good monthly rental and increase the return on your investment. Moreover, while renting your property, you can involve your tenant in a long term lease. This will ensure that you keep receiving the rent for a long period of time. In cases of residential property, the tenant might sign a short term lease and you may have to look out for a new tenant in every 6-12 months.
Tenants of commercial properties are responsible: For some property holders, renting a residential property becomes a nightmare thinking about what kind of tenants will be living in their property. But when you rent a commercial property, you can be assured that your property will be safe as it will be used only for some hours everyday. Tenants of your residential property can throw a party every night, but this will not be the case if you rent a commercial property.
Commercial property investment market is less competitive than the market of residential property: When we compare the market of residential property with the market of commercial investment property, the later is undoubtedly less competitive. There is less demand of commercial property, but once you find a potential tenant, you can be assured of high returns.
Commercial property is used for limited hours: If you rent a residential property, you must be prepared to attend your tenant at any time of the day, even at midnight, in case of an emergency. But, the case will not be the same if you rent a commercial property as the commercial property is used only for a limited period of time on a daily basis.
When we consider the above mentioned factors, it becomes certain that investing in a commercial property is undoubtedly a better option.
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When we think of investments, there can be nothing better than investing in a property, and if you are thinking of an investment property with returns, you should always opt for a commercial property. Gurgaon, the millennium city, has developed tremendously in the recent years and there is an availability of various office spaces in Gurgaon. If you too are thinking of investing in a commercial property, you can consider choosing Gurgaon as your location.
Many of us know that is a wise decision to invest in a commercial property, but only a few of us are aware of the mistakes that we make while making a commercial property investment. Let us have a look at a few mistakes that one should avoid while investing in a commercial property.
- Going Wrong in Analyzing the Market Trend: This is one of the biggest mistakes that a property buyer can make. Analyzing the market trend is of utmost importance, specially in cases of commercial property investment. Keep an eye on the ongoing trend and assess whether the time is right or not to invest in the commercial property. The small mistake of not analyzing the market trend can prove to be heavy on the pockets.
- Not Checking the Property Details: Whether you are buying the commercial property or are considering the option of taking the commercial property for rent, do not go by the outer appearance of the building. It is always important to check the property from inside. Before paying the money, look for any damages or problems that need to be rectified. Apart from the infrastructure, also keep a check on the taxes that you are paying. Make sure that the taxes are of the current rate.
- Not Analyzing the Budget Properly: Before making an investment in a property, you should assess whether it is suiting your pocket or not. This budget includes the taxes, title work and approximate cost that will incur in repairs, to name but a few. If this cost sums up to more than your income, it is unreasonable to invest in such a property. Also, if you are willing to rent out your commercial property, take an idea of the general time taken in renting out the property in that location.
- Putting Excessive Money in the Property: It has been generally observed that people borrow money from banks when they plan to invest in a property. Make sure you not put in too much money in buying the property. Always remember that you will have to return the money and that too with interest. The initial years might not be extremely beneficial, but you will have to pay your bank on time. This might be a little heavy on the pockets, thus it is advised that too much money should not be put in a property.
By keeping the above mentioned points in mind, you can avoid making mistakes while investing in a commercial property.