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6 Key factors for investing in commercial real estate

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Perhaps you’ve heard there’s money to be made if you invest in commercial properties. Like a lot of investments, it can actually go either way. While some owners certainly make more off commercial than they do strictly residential, there’s a set of unique factors that can impact your decision to invest in a property in the first place. Consider these six things before you go commercial.

  1. The surrounding area

Chances are, you don’t want to invest in a property that’s sitting in an area experiencing a downturn. Ideally, your commercial property would play to the area’s strengths, and takes on some kind of role in serving trends forecasted to be of benefit to the surrounding neighborhood. This is of particular importance if you plan to develop property yourself.

  1. The tenants

When you’re taking on a building or buildings that are already occupied by businesses, the type of business they do can be a factor in your decision to buy. For instance, many food service establishments commonly find themselves in a position where their rent will have to be late. Consider the financial stability of any tenants operating on the property, and whether or not you can cover expenses if they fall behind.

  1. The work involved

You might think you’re dodging a bullet by not becoming someone’s landlord, but commercial real estate still demands regular involvement from you. Think about all of the hours the businesses on your property will be open, and consider these your working hours as well. These hours are most likely to be when structural problems, utility failures, and damage will occur.

  1. The market

Businesses find their ideal spaces through JGM Properties commercial real estate. When you’re looking for a commercial space to purchase and lease, you too have to think about what the market suggests about this property. If you’re going retail, how will online shopping impact your ability to procure and retain a quality tenant? Are the kinds of businesses your office space attracts apt to move online as well?

  1. Time and money

Ultimately, your involvement will have a huge say in whether or not the property is profitable. This takes quite a bit of patience at the start, as commercial real estate investments do not come together as quickly as other types of real estate. If your property includes apartments, those might be easy to fill, but keeping a tenant in the retail space below, and performing important renovations and additions won’t be an overnight venture.

  1. The risk

High traffic is what we want, right? Yes, but with this comes enhanced risk. Anywhere where there are more people, there’s a greater chance of accidents, like slip and falls. Commercial spaces are also more prone to vandalism. Be sure you’re ready to deal with the pitfalls of popularity.

Some experienced commercial investors avoid many risks by utilizing a property manager, or diversifying their investments to ensure one tenant doesn’t somehow leave them high and dry. No matter what plan you put into place, first think critically about the area you’re buying in, the industry you’ll be counting on to make rent, and the personal investment – including time – you’ll have to make to enjoy any success.

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