Commercial real estate is an investment, whether you are purchasing a facility or property for your own business or you plan to lease the space. Therefore, the process of purchasing property needs to be treated as you would any other investment. Although you may start your research looking for properties, there are a few other things you should consider when you begin pursuing commercial property investments.

Set Your Investment Goals

If you are purchasing property for your company, you should start by identifying your business needs. First, do you need retail, manufacturing, warehousing, or office space? How much? What characteristics should your building or land have?

If you are looking for investments, you should determine the types of property you want to invest in. For example, do you want multifamily real estate or business-related properties that can accommodate companies from different industries, such as restaurants, retail stores, offices, etc.?

You also need to establish your budget. Then, determine whether you can afford or want to invest in repairs or refurbishing the property you purchase.

Gain Commercial Real Estate Knowledge

First, you need to learn how to assess the value of a commercial property. For example, you need to know the loan-to-value, capitalization rate, and debt service coverage ratios. You should also learn other industry vocabularies so you can clearly explain what you are looking for to your realtor, broker, contractor, and other team members.

You also need to learn about financing commercial property because this process is significantly different from financing residential property, especially real estate you live in. For example, you will typically require a much larger down payment, and the interest rate you pay may be higher. You also have different loan options, such as bridge loans, construction loans, small business loans or lines of credit. You should even receive better loan terms if your business occupies more than half the commercial space. In addition, you may have the option to bring on additional investors.

Do Your Due Diligence

Research the city, neighborhood, and building thoroughly. Tour multiple properties before you narrow your focus. Then, when you find a building, analyze its rental history, have the property inspected and calculate your financials carefully. Really analyze all the documents you receive from the seller to ensure they are accurate and that you will earn the income you desire from the property. You should also secure your escrow with a reputable third party who will also transfer your funds to the seller and the deed to you.

Commercial real estate is a valuable asset. As you learn more, build your team and start investing, you will begin securing your financial future.