Commercial Real Estate: Things to Know Before You Invest
The world of commercial real estate investing has a reputation for being a fast-paced, high-stakes field. It’s viewed as a lucrative opportunity where millionaires are made overnight, living a high-rolling luxury lifestyle. While there is an element of truth in that reputation, the realty is stranger than fiction. As a new investor it will take a lot of work to reach those high levels of success in this investment sector. Everything is not glitz and glamor. You’ll need a solid foundation that begins with understanding the realities of investing in buildings and land used for business purposes. Below are a few things you must consider before venturing down this road.
Learn About the Different Property Types
There are a broad range of commercial properties. The most common types include retail shops, shopping malls, office space, warehouses, industrial plants and land. Familiarize yourself with the different property categories. Meet with proprietors and other investors. Read industry publications and join related association for networking and investment opportunities. Starting out, it’s best that you specialize in buying and selling a specific type of commercial building.
Understand This Is Not a Get Rich Quick Business
Commercial real estate investment has a reputation for being where the big money is, but that is not always the case. In fact, there are instances where investors reap greater financial rewards with residential property. Yet there is money in the commercial sector. The major financial windfall occurs with multi-million dollar properties such as shopping malls. However, those types of deals are few and far between. As a new investor, you’re not likely to encounter a deal like that during your career.
Prepare for Lengthy Transactions
For many investors, the idea of obtaining a quick ROI is one of the appeals of this investment vehicle.
Well, when it comes to investing in retail and/or industrial real estate you must take into account that closing deals is a lengthy process. Unlike residential properties, these deals are more complex. As such, the transactions are not completed quickly. For instance, the typical residential transaction is completed in two months or less. However, commercial property will usually take six months or longer to close.
Like any other form of investing, commercial real estate has its pros and cons. Before leaping into this field, learn as many of the ins and outs as possible. By doing so, you’ll know what to expect and how to proceed in a way that minimizes your risk and maximizes your rewards.
