5 Things to Consider Before Investing in Commercial Real Estate

Investing in the commercial real estate is a lot different from doing business in the residential sector. The sales cycle is usually longer and the rules are different. Nevertheless, it represents an interesting investment opportunity for any investor who wants to expand their business and gain access to a bigger pool of potential clients. Here are 5 things to consider before taking your first move:

1. It Takes Time:

You don’t have to forget everything you’ve learned about the residential real estate, but you have to understand that there is a whole new experience awaits you. Learn to be patient as everything will typically take longer. Finding new tenants and renovating your property takes time but the leases are longer. If you are waiting for a permit for a new building, it might take months or even years. It is very important to discuss your investment with the local authorities before buying a commercial building. This way you can learn about all the needed approvals and asses the time needed to have all your papers ready. You will have to accept that you will spend time trying to learn about the new vocabulary like the capitalization rate and vacancy rate.

2. Study the Market:

You have to understand the market you are trying to invest in and take your time to study it well. You should visit various properties and see how they are different with respect to their prices, location, and allowed uses. You should also keep on an eye on the legal implications, competition and vacant properties in any given area. Certain properties that are located near hospitals or universities will sell faster and will have a higher return on investment. By building the right investment portfolio, you will be able to diversify your investment.

3. Assessing Risks:

Assessing risk in commercial real estate investment is a whole different story. The success of 2 similar residential buildings in the same area is easy to predict but commercial buildings are different. There is a range of risks that will be inherent to your commercial building based on a number of factors including the allowed uses, for example.

4. Think About your Financing Options:

You can get your finances supported by banks, credit unions, and mortgage brokers. Each type of financing has its pros and cons. You should discuss the interest rate up front to make sure that you are picking the right choice.

5. Ask for Expert Advice:

Buying and investing in the commercial real estate is not an easy process and you will probably need to hire an expert to help you. The experts you hire should have experience related to the type of property you are trying to invest in. Make sure that you contact a reliable commercial real estate investment company that will assign you tax, law, and accounting experts to help you make the right decision.

As tempting as it may be, investment in the commercial real estate sector is not for amateurs. You need to make sure that you’ve hired the right people to provide you with the best advice.

What are the Differences Between Residential and Commercial Real Estate?

If you think that residential and commercial real estate are the same then you need to think again. Residential real estate brokers and commercial real estate agents work in property, but this probably the only thing they have in common. If you have been investing in residential real estate, then you might be thinking that you are qualified enough to experiment with the commercial market. Here are a few differences that set the 2 worlds apart:

1. The Market Has Different Segments:

The market for residential real estate is made up of people who are looking for a new living space, regardless of its type, location, and size. But the commercial real estate market is divided into 4 different groups. These are industrial, office, retail and hospitality. Each group has different needs and concerns. This is why you are probably going to find highly specialized investors who work particularly with one of these segments.

2. Residential Real Estate is Easier to Finance:

People usually think about entering the market for commercial real estate because it yields a higher income. The lease agreements are usually longer and you are going to make a lot of money by leasing your property. However, investing in residential real estate is less complicated. It involves less paperwork and is definitely easier to finance. This is why you need to make sure that you are working with a reliable real estate broker before getting involved in any deal.

3. You Can Get Rid of Non-Paying Tenants Fast in Commercial Real Estate:

Residential tenants are protected by a system of rules and laws. Some tenants misuse and abuse the system and might spend a long time without paying any rent. All this time, the landlord is enduring cost and is unable to get them evicted. But it is different if you are investing in commercial real estate. If your tenants are not paying the rent, they will move out and you will be able to rent your unit fast.

4. It is All About Teamwork:

In commercial real estate, the bigger the network you have, the more successful you will be. You will be able to know a lot about the hottest deals just because you know the right people. You need to work with a trustworthy team of brokers, agents, lawyers, and lenders in order to succeed. Finding the right deal takes time but it is totally worth it.

5. Properties are valued Differently:

In residential real estate, properties are usually valued based on the comparison with other similar properties. But it is a different story in commercial real estate. Properties are based according to the income that can be achieved from an investment point of view. This income is affected by a number of industrial and financial standards.

If you have been investing in the residential real estate, you need to take these differences into consideration before shifting to the commercial market. Make sure that you are hiring reliable advisors who will help you find your way.

Acquiring Tampa Commercial Real Estate

Tampa has become one of the sunshine state’s most valuable cities. It sheer commercial importance simply cannot be denied. This is something that all entrepreneurs should take note of. If you are among the smart ones, then you should probably use it to your advantage and consider investing in key Tampa locations.

Of course, the last thing we want to do is to give you the false impression that real estate acquisition is an overly simple affair. The truth of the matter is that it is a complex process that will require your full attention. That being said, our main goal is to make things easier for our readers.

Know the Lingo

As any entrepreneur would tell you, every industry has its own language. The real estate industry is certainly no different as it has its own vocabulary. It makes full use acronyms most people not working in the commercial real estate will surely find strange and unfamiliar. That being said, you should make it a priority to familiarize yourself with these terms. At least, if you want to make things easier for yourself.

Listed below are a couple of commonly used real estate terms worth your time.

  • Capitalization Rate – Commonly known as Cap Rate, it pertains to the property income divided by its total value. This will surely come in handy if you are looking at the prospective returns on your investment.
  • Loan-To-Value – LTV refers to the ratio between the money you are asking from the bank or lender and the total value of the property you are looking to purchase. This is vital if you are looking into the different financing options available to you. It will also give you a concrete idea with regards to the value you need to have upfront.
  • Cash on Cash – This compares the property’s annual income and the amount of money you have actually put into it. This will help you make a projected trajectory and timeframe with regards to when a specific property will actually become profitable.

Do Your Homework

It should go without saying that not all properties are the same. Some will inevitably fit your needs much better than others. That is why you should make it your priority to really look into the fine print. If possible, you should go to the sites and assess the properties yourself. Keep in mind that there are a number of different factors that you need to take into consideration before actually making a purchase or a lease.

  • Price – Like with any other business venture, your budget should always be figured into your plans. Look at the capital you have on hand and the possible sources of funding available to you.
  • Location – The location of a particular business can determine whether it will succeed or not. That is why, when it comes to real estate, you are not only paying for square footage, you are also paying for its location.

Real estate deals are rather complex affairs. Beautiful as Tampa may be, its real estate market is certainly not exempted from this rule. With that in mind, we have come up with a few simple tips that you should always remember.

Tips for Acquiring Tampa Commercial Real Estate

Tampa is considered to be one of the top spots in the whole sunshine state. It plays host to a wide range of sights, all of which never fails to draw in the crowd. It is hardly surprising, then, that the beautiful shores of Tampa have become one of the commercial hotspots in Florida, with many of the industry giants and medium-sized entrepreneurs flocking to the city to invest.

If you are an entrepreneur yourself, then you should do yourself a favor and start looking at the different properties available. We cannot overstate the fact that investing in Tampa commercial real estate is the best thing you can do right now. Of course, some people may find the prospect of purchasing commercial property a bit overwhelming. Have no fear, this article presents readers with a comprehensive guide to help you sort through the mess.

Perform a comprehensive assessment of your capacity

Before anything else, entrepreneurs need to understand that asset acquisition is a complex process that will inevitably require your full attention. After all, you will be allotting a significant portion of your capital into a particular piece of real estate. The last thing you want is to get in over your head. That being said, the most important step is to perform a comprehensive assessment of your own capacity to actually pursue such a deal in the first place.

A quick look into your finances should do the trick. As a general rule, you should always remember that your business will always entail expenses. With that in mind, do you have enough capital to purchase your own property? This should help you find out which properties are available to you. It would also help if you kept an open mind with regards to other options such as long-term leases if the capacity assessment produces less-than-stellar results.

Assess Your Needs

Now that you have assessed your own capacity, it is time that you start asking what kind of property are you looking for? This may seem simple enough but there are actually a number of different factors that you need to take into consideration.

  • Projected Usage – Going into the deal, you should have a clear idea of the planned purpose for the real estate property you are looking at. For instance, are you planning to use it as the location of your own business? Perhaps you are planning to rent it out or maybe use it as a means to build equity?
  • Location – Again, the success of any business venture is affected by their real estate strategy. Spatial concerns are no laughing matter. As the old adage goes: location, location, location! For instance, the last thing you want is to place your consumer-directed business in a place with barely any foot traffic.

Do Your Homework!

No one wants to end up holding the short end of the stick. That being said, you should ensure that you have done your homework. It would be smart if you did an independent scan of the Tampa commercial real estate market.

Tips for Choosing the Best Commercial Real Estate Broker

If you are planning to invest in the commercial real estate market then there are a few important decisions that you have to take. But picking the right broker is the first and most important one. A real professional real estate expert is going to provide you with the advice you need. This will help you overcome the obstacles and allow you to make the right decisions. Here are some tips that can help you choose the right broker:

1. Make a List of your Needs:

Before picking the right broker, you need to make a list of your needs. This guideline is going to help you assess the qualifications of all the potential candidates. The right one should be able to ask you the right questions. He or she should be able to help you determine your current and future needs. They should also be able to provide you with a reliable list of references. Picking the right broker can help you make millions of dollars.

2. How Long Have They Been in Commercial Real Estate?

Working with a real estate broker who has been working for years in the residential market is not the right thing to do. You need to make sure that they have enough experience in the commercial market, too. They would be able to understand the nature of profit and loss statements, taxes, third-party contracts, and all the other documents that are involved in every transaction.

3. Property Filtering is Important:

The right broker should be able to do the right research. There are a lot of properties available and the most-qualified broker is going to filter them to offer you the ones that represent a good investment opportunity. He or she should be able to pick the properties that match your needs; otherwise, you will be wasting your time touring properties that don’t suit you.

4. Good Networking:

A good real estate broker is going to have a big network. They should keep a keen eye on the market waiting for the right opportunity to pop up. They should also know a lot of landlords and have a clear understanding of the rates and expenses. They are going to protect you from getting involved with people who are known for having a bad reputation in the market.

5. A Good Broker is Well- Updated:

Just because your broker has been in the market for years, doesn’t qualify them to handle your next transaction. They need to be able to adjust to the new market rules, buying, and selling methods. They should be open to changing their old ways to stay up to date.

You should spend some time interviewing potential candidates to make sure that you are working with the right person. A professional expert is going to do their best to help you close deals that match your financial and investment needs. This is a long-term relationship that you will both commit to. As you both grow, you can expect to realize your investment goals.