Beginner's Guide to Purchasing Commercial Real Estate
1.) Figure out what kind of real estate investments you want to make. Before you make any purchases or bid in any online auctions, you’ll want to figure out what types of investments you want to make. If you’re more interested in an active investment, multi-family residential properties like apartment buildings might be for you. However, if you’d rather have a passive investment, look into storage facilities or warehouses that require less management. Now you’re ready to make the purchase! Once you’ve purchased the property, you can call yourself a real estate investor.
While becoming an investor can be as simple as purchasing some commercial real estate, in reality, there are many important steps before you can become an investor. In order to get into real estate investments, you’ll obviously have to purchase a property. However, even something that simple can be quite complex. Here are the steps you’ll need to take before purchasing commercial real estate:
2.) Consider how you want to buy. Purchasing commercial real estate can take place in many different forms. You might be interested in a traditional negotiated sale, or you can look to online auctions for deals.
3.) Secure financing. Before you get any further, you should look into financing. Talk to banks and find out exactly how large a loan you can get. This is important because it lets you know how much property you can afford – and gives you a good idea into how much you can bid in online auctions.
4.) Make a “short list”. You should now have a good idea of what types of properties to look for and how much you can pay. Find some properties you’re interested in and start doing your homework. Due diligence is an important step when you’re purchasing commercial real estate, and involves learning as much about the property as you can from looking at documents, visiting the property and possibly having it inspected.
5.) Look at cash flow. By now, you should have an idea of the types of real estate investments you want to make. Now you can begin to do a more thorough investigation into the cash flow of the property. You can do this on your own or work with an accountant to figure out if a particular property will be profitable. You’ll need to take into account rent and other forms of income, versus debt and building renovation costs.