It is an exciting financial venture to invest in a commercial property, be it an already existing business or a building. This prospect could go wrong if you don't have sound information on what it takes to invest in a commercial property. Here are some valuable tips to follow and keep in mind when you are deciding on your investment strategy.
Commercial Property Valuation
You most likely have had experience with having a residential property inspected for it's value. When a commercial property is valued, however, it is based on how much revenue is generated on site. This could be a rental property or a factory and its value will be based on this fact. Your investment in a commercial property is less likely to fluctuate than a residential property will in the market based on this fact.
Larger Down Payment
Unlike with a residential down payment where you may be able to put about 10%-15% of the property's price down on the cost of the purchase, a commercial property down payment will be higher. Typically most properties will expect at least a 20% down payment on a commercial property in order to purchase. You may also find your broker and mortgage fees will be higher.
Higher Cost to Maintain
It will cost you more to maintain a commercial building than a residential one as well. These buildings are larger and will require upkeep of machinery as well as the structure itself. You may also wish to hire a property manager for a rental building and or a service company to care for cleaning and maintenance services.
What Type of Property Do You Want
Since commercial properties come in many variations, you need to decide on what type of property you want to invest in. You could opt for an apartment building, strip mall, office building or even developmental land. The type of property you invest in affects your costs, return on investment and overall obligations.
Consult a Commercial Real Estate Lawyer
You should do your own research on the different types of commercial properties you can invest in to help you determine what's best for you. However, it is advised to consult with a commercial real estate lawyer, like the ones at A R E Law, before making any decisions. You will receive informed and educated advice and when the time comes to purchase, you have help filling out paperwork and help understanding the laws surrounding the property's purchase.