Real estate is a cornerstone of wealth and financial success. Most investors start off with multi-family properties and expand into larger commercial real estate investments. If you’re ready to take the leap and expand your real estate portfolio, here are a few tips on buying your first commercial property.
1 – Get Educated on the Market and Industry
Commercial real estate is quite expansive. You’ll want to find a specific niche to start. Larger apartment buildings may be the easiest transition if you are an experienced multi-family investor. Other possibilities are office, retail, and industrial spaces. Whichever you choose, take the time to learn about the market, the industry, and the customer base. There are certainly many pros and cons to consider!
2 – Evaluate the Financials
Financials are the most important consideration when buying your first commercial property. Important factors include:
- Debt Service Ratio
- Capitalization Rate
- Cash-on-Cash Return
- Vacancy Rate
- Usable versus Rentable Space
- Tax Benefits and Liabilities
- Regular Maintenance Expenses
- Capital Improvements
- Short- versus Long-term Forecasts
You should understand all of the above terms and be comfortable with preparing and reviewing financial forecasts. Only through a deep understanding of the financial aspects of your purchase can you make sound investment decisions.
3 – Rely on Local Experts
Be sure to rely on the services and advice of seasoned professionals for your purchase. This is true for any property but is essential when buying your first commercial property. Among the professionals needed are:
- Real Estate Broker/Agent
- Real Estate Attorney
- Property Inspector, Engineers, etc.
- Financial Advisor and/or Accountant
- Environmental Specialists
- Lender/Loan Specialist
Legal Assistance with Buying Your First Commercial Property
Martino Law Group provides legal assistance with commercial real estate purchases. From contract negotiations to loan closings and lease preparation, we can assist with all legal aspects of purchasing and managing commercial properties. Contact us for additional information on how we can help you with buying your first commercial property, and every property thereafter.