At first glance, the world of commercial real estate may seem intimidating to beginners. However, if you’re looking to break into this potentially lucrative field, the following tips can help you get started.
Tip 1: Know the Basic Property Types
Before becoming involved in commercial real estate, there are some basic property types you should be aware of:
- Cash flow properties are typically ready to begin generating income as soon as you purchase them.
- Value add properties typically need renovations before they can generate income.
The upside of cash flow properties is that they require little to no work before they begin making you money. That money can be used to purchase other properties. Meanwhile, a value adds property will take longer to begin making money, but the payoff can be immense if you hold on to it long enough to renovate the property and take advantage of the appreciation in the area.
Tip 2: Consider Appreciation
Appreciation is one of the most important factors in commercial real estate. It can help you both turn a profit and decide how long you plan to keep a piece of property in your portfolio. To get a handle on a property’s appreciation potential, look into factors like population increases or decreases in the area, whether rental prices are going up or down, and how much demand there is for land or space.
Tip 3: Carefully Research Before Purchasing
It is essential that you research a property extensively before purchasing it. If you’re not sure where to start, consider finding a mentor in the field who can give you insight into their research process.
Legal counsel can also help you figure out whether buying a property is a good idea. For example, Forbes.com contributor Matthew Holden recommends that you have legal counsel provide advice about the due diligence needed on a given property.
Elevation Financial’s other blog posts cover additional investment and financial topics, so be sure to give them a look!
