In today’s tumultuous economic climate, it can be tough to decide what’s a smart financial move when it comes to investing. Here, Nick Debeyiotis is sharing what you need to consider before deciding whether it makes sense for you to invest in commercial real estate.
Location, Location, Location (Especially if the Building is Vacant)
There are many things you change about the commercial real estate property you’re considering purchasing, but you won’t be able to change the location of your building. You must consider why the building is vacant and whether the location was a factor in previous businesses being unsuccessful. If the building is packed with thriving businesses, the location may be a factor that makes it make sense to offer a higher purchase price to the seller.
Ease of Acquiring Tenants
It’s impossible to make money on commercial real estate if your tenants can’t pay their bills. Talk to the seller about the tenants currently occupying the space (if any) and discuss whether there’s a high demand. If the seller has a waitlist of people who are willing to move into the space, you’ll be able to rest assured that you’ll be able to make ends meet even if one of your tenants is unable to pay their lease agreement and needs to move out early.
Think About Utilities
Consider whether you’ll pay the utilities for your property or have your tenants each pay their share. If you’re paying utilities, you’ll want to think about what types of businesses make the most sense to have in your space. For example, a building that houses a bustling arcade will likely use far more electricity than a building that houses an accounting business.
Consider Your Risk Tolerance
Buying a commercial property is risky, especially if you’re purchasing a property that’s currently vacant. Consider your tolerance for risk before buying, recommends Nikolaos Debeyiotis. If your other investments are steady and profitable, you may be more comfortable taking on the risk of a commercial property than if your other investments are struggling.
Think About Repairs
You’ll want to work closely with your building inspector before you decide whether to invest in a commercial property. If your property is in great shape, it may make more sense to invest than if the property you’re considering is in disrepair. Talk with your inspector about how much you can expect to shell out for repairs. If the building is currently occupied, you’ll also want to chat with the current tenants about any issues they’ve noticed with the building to give you an idea of what unexpected expenses may pop up after you purchase the property, says Nikolaos Debeyiotis.