In today’s business climate, accurate and relevant information is crucial for success in commercial real estate investing. In other words, if you don’t know the local market, you could be in real trouble. Despite this fact, commercial real estate is a sector favorite among investors, with its relatively strong returns with only minimal to moderate risk.
We are often asked by friends and family to evaluate a potential deal in commercial real estate — and, of course, we are happy to do so. Since we’ve been these types of questions more and more, we thought we would pass along that knowledge to you. Read on to find out 4 tips for evaluating or vetting a potential commercial real estate deal.
Understand the different types of commercial real estate
Before you even think of purchasing a commercial property, it is important that you first understand all of the different commercial assets that are available to you. A blanket term, “commercial real estate” can actually refer to any of the following:
- Retail buildings
- Office buildings
- Warehouse spaces
- Industrial buildings
- Multi-family buildings (such as apartments)
- “Mixed use” buildings
- Commercial land (undeveloped)
- Self-storage facilities
Next, you’ll want to weigh the pros and cons of each type of building or property, as well as your own level of personal interest, to help decide which type of investment or investments will be right for you.
Know the local market
One of the best tips we can give you to help vet potential real estate deals is to know the local market. Having this extensive knowledge is a great way to help determine whether or not to buy a commercial property. Spend some time driving around the area and tour other available properties, if possible. It’s no secret that there is nothing better than in person, first-hand experience talking with tenants and other owners as you’re searching for the right vacancy.
Learn to spot a good deal when you see it
If you ask anyone in the industry, they’ll tell you the same thing — the top commercial real estate agents know two things when they see them: a good deal and a good investment property. Spotting a good deal comes with experience — knowing the market, knowing the key players in potential deals, and knowing when (and how, if necessary) to walk away from the deal.
When touring a potential property, keep an eye out for any damages that need repairs or outdated features that need upgrading, in order to help you determine if the property is still a great investment.
Of course, at the end of the day, finding the right commercial real estate deal is about more than just knowing the market and knowing how to price any potential repairs. At the heart of any real estate transaction, including commercial real estate, is a relationship and communication. Building relationships and rapport with building and property owners can go a long way toward helping them feel comfortable about opening up to talk to you about those really good commercial real estate deals — and want to do business with you.