Commercial Real Estate
Commercial real estate refers to a wide range of properties used for anything other than a personal residence. Commercial properties can include office complexes, shopping malls and retail outlets, large parcels of raw land intended for development, and residential housing such as apartment or condominium buildings and multi-family dwellings.
Purchasing commercial real estate is considerably more expensive than buying single family residences. Oftentimes, real estate investors will join forces with other investors to purchase commercial properties. Large properties such as apartment buildings and shopping malls generally require hiring a property manager to oversee maintenance and collection of rent monies.
Investing in commercial real estate is an entirely different game than purchasing residential properties. Investors must be familiar with zoning laws and abide by regulations set forth in the Americans with Disability Act.
Office and residential buildings must comply with handicap parking, wheelchair ramps, and restroom facilities. Proper liability insurance policies must be in place before leasing space to clients or residents.
Real estate investors who purchase raw land for commercial developments must obtain appropriate permits from the local zoning commission. Raw land must be approved for commercial buildings prior to commencing work. It is imperative for investors to do their homework and make certain the land is zoned for commercial buildings prior to making an offer.
Investors new to commercial real estate investing should take time to become familiar with the various types of properties and legal statutes. Commercial real estate contracts should be executed by real estate attorneys with a strong background in commercial properties.
Buying commercial real estate is complex and complicated. In addition to acquiring necessary funding, investors must understand all aspects of maintenance, property taxes and insurance, tenant rights and eviction processes.
Investors usually retain services of independent parties to assist in commercial property management. These might include maintenance and landscaping crews, property management group, leasing agents, and legal advisors.
It is important to determine the income to expense ratio prior to purchasing commercial real estate. Investors who purchase properties with a low tenant rate could end up owing more in operating expenses than they obtain in rental income.
Commercial real estate is usually rented at higher prices than residential real estate. However, properties must achieve a minimum of 50-percent tenant occupancy in order to break even. In today's recessed market commercial properties can place investor portfolios at a higher risk for foreclosure than residential properties. Financial risks should be carefully calculated prior to purchasing commercial properties.
Investing in commercial real estate can be highly profitable as long as investors take time to conduct market research. Today, many commercial properties are listed below market value. Savvy investors who do their homework can obtain commercial properties at reduced prices and wholesale them to other investors.
We invite you to browse our commercial real estate article library to learn more about this unique investment opportunity. We also provide articles on buying and selling distressed properties such as short sale and foreclosure homes, investing in residential properties, and how to purchase real estate held in probate.
Published on September 11, 2009 at 02:58 AM