The best thing about real estate investing is the large number of investment opportunities it presents. Investors could purchase a finished home or a gutted commercial property and still turn a profit. But to make the most out of your purchase, you’ll need to do your research.
How to Invest in the Perfect Commercial Property for Renovation
Buying a commercial property can be a great investment, as they often yield better returns. To find the perfect investment property for your needs, consider utilizing the following tips.
1. Research the Market with a Real Estate Expert
Unless you’re an investment/commercial real estate agent or a senior investor, you’ll need some help getting started. Investment real estate agents are a top choice because they’re familiar with the industry and likely invest themselves. Plus, they may have access to unlisted properties.
Before investing in a real estate property, pay attention to the market. Check what commercial buildings are in high demand. Consider the scope of future development in the area. Keep in mind that commercial properties in cities are more likely to see a return on investment.
2. Search for Properties That Meet Your Investment Goals
Whether you’re looking for commercial real estate for sale in Staten Island, NY, or Miami, FL, you need to consider what you hope to get out of your investment. Some investors may want to renovate and rent out an office for several years, while others want to sell for a quick profit.
Commercial property investors aren’t limited to offices. You could renovate hotels, shopping centers, strip malls, industrial buildings, or raw land. As a rule, you’ll want to save the easy projects when you’re flipping and keep the more complicated builds for long-term investing.
3. Check What Renovations Your Property May Need
Most commercial properties need a bit of TLC before you can start renting them out. First, check if that building has lead paint and asbestos or requires a roof replacement. These jobs require expertise and could become expensive, so hire a building inspector to examine the place.
It isn’t enough to make the place look nice; you also need to certify that your property is safe. For example, property owners can get their building verified by experienced MEP engineers after they check for sprinkler safety, HVAC temperature control, and energy/electricity efficiency.
4. Secure Financing (Not a Pre-Approved “Mortgage”)
Investors can’t be pre-approved to purchase a commercial property, similar to how you can with a mortgage on personal property. Instead, you have to secure financing. When a property is “subject to financing,” it gives the buyer a grace period to gather the necessary funds.
You usually have 7 days to secure funding. Otherwise, the buyer has to walk away from the initial offer. It’s important to do your research and look at brokers, banks, and credit unions to see what they can offer before you start looking for properties. Or, you could try getting a lease.
5. Protect Your Investments with Insurance and Safeguards
Once you’ve secured your own commercial property, you should make sure it’s protected. The first thing you should do is purchase commercial property insurance. If you’re going to rent the place out, you may need physical security measures, like smart locks and security cameras.
If you plan to become a landlord full-time, consider becoming a limited liability company (LLC). As an LLC, you minimize financial risks and lower the chance of real estate asset seizure. If you plan to own several properties and want to prevent total asset seizure, make multiple LLCs.