Commercial Real Estate Investing

Entrepreneurs who are interested in commercial real estate investing may find that a little business savvy and a lot of research and preparation can yield some very profitable results. Investors should tap into the wide variety of resources and advice that are available on the subject. If successful, anyone who chooses this area of commerce can make a good deal of money. Of course, as with any investing activity, there can be large risks. Researching the market is very important, as is an understanding the nature of the real estate business. If an individual feels prepared to do so, the first step in commercial real estate investing would be to find an appropriate property. Before making an offer on any property, a wise investor will have prepared a list of needed criteria. These criteria could include the type and size of the property, the lot size, what the building will be used for, and other concerns. If the property in question meets that criterion, further research can begin. The investor will want to ask a few pertinent questions before making an offer. Is the price that is being asked for the property a fair market value? What kind of improvements can be made to increase the value of the property? Will this location be likely to earn a good return on the investment? If the answers to these questions are satisfactory, the investor may be ready to move forward.

After an offer has been made and accepted, financing that is geared toward commercial real estate investing can be attained. The sources for this financing could include banks loans, private lenders, or commercial lenders. For this type of investing, borrowing funds is generally a good idea. This will allow the investor to keep cash on hand in case it is needed. In addition, the hope is that the use of the property will generate enough profits in the future to pay off the loan and bring in additional money for the owner. The future value of the property will hinge on a variety of issues as well as the intended use of the building that is being purchased. If the building is to be used as a business, is the surrounding zoning appropriate to this purpose? If it is to be converted into residential space or rented out as apartment units, is the neighborhood one that potential renters will find attractive? Will the costs of these conversions be reasonable? After answering all of these questions, anyone who wishes to succeed at commercial real estate investing will want to consider how long they want to keep the property. Is this an investment that is to be held over the long term, or will the investor wish to sell the improved property at a profit?

Another trend in commercial real estate investing involves increasing retirement savings through real estate. Using retirement funds for investments of this nature can be risky. But if successful, such risks can make the dream of early retirement a reality. Of course, the overall market should be a determining factor here. If the market is down, the prospects of making money could be limited. Risking important retirement capital in such an environment may be a bad idea. But, if the market is robust, a wise investor may be able to increase savings in a way that is not possible with other investment activity. Purchasing land for development, commercial buildings, or buildings that can be converted into apartments or condominiums can yield considerable profit if done wisely. This approach will usually be more successful if the individual has a good deal of money to spend. As with any investing, choosing the safest route when placing important funds at risk is a good idea. Participating in sound commercial real estate investing will involve a lot of research into the local area. Have previous investors had success with purchasing and reselling properties here? If a property is improved, will the new selling price be high enough to make the effort worthwhile? Of course, a diversified real estate portfolio may offer an extra edge of security, as opposed to risking all funds on one property.

There are many common mistakes that can be the downfall of a hopeful real estate entrepreneur. A lack of knowledge of the local market can be a major mistake in the area of commercial real estate investing. A failure to put effort into due diligence, as well as poor up front planning, can be detrimental to success as well. Staying too long with a loosing project can be another sign of eventual failure. Buying up too many properties without any sound plan can prove to be a costly mistake. In these areas of investment, the entrepreneur should not be motivated by greed, but by sound business practices. The Bible mentions the importance of remaining content no matter what the circumstances. "Not that I speak in respect of want: for I have learned, in whatsoever state I am, therewith to be content." (Philippians 4:11)

Anyone who is interested in commercial real estate investing may benefit from the wide variety of software products that are available. These programs can help investors with such issues as cash flow projections or investigating various tax benefits. Mapping out monthly projections of costs and liabilities can be made easier with this software. Calculating the rate of return is another useful feature. Whether or not an investor chooses to use these programs, the potential for financial growth in real estate can be very good for the educated entrepreneur.