Commercial Real Estate: First Steps

Investing in commercial properties can be a solid way to increase wealth over time. However, if you have only purchased residential properties, you might find yourself on uneven footing when it comes to seeking commercial real estate. Take these steps for commercial investment success.

Obtain Financing Early

The point of your investment is likely that you'll you make money, so you may be reluctant to get a loan. However, proper commercial property financing can ensure your commercial property makes money without becoming a drain on your personal finances. Being able to secure loans for commercial buildings will enable you to purchases larger or more established properties, which in turn can increase the money you'll make. In addition, your commercial loans can also help you with maintenance, repair and upkeep costs.

Rather than waiting until you select specific real estate, make it a point to get commercial property financing early on. This gives you time to submit the paperwork and financial information that lenders require; you also have more time to address any concerns or submit supplemental documentation. Having the loan before visiting commercial properties can give you the confidence to wait until the right property comes to you; you will already know how much spending you can do.

Explore Zoning

With financing in hand, you'll be seeing many commercial properties. However, bear in mind zoning for each of these properties could be different; that could make one or more ultimately more desirable to you. Some commercial zones only permit one-story buildings, while other commercial zones allow for skyscrapers. Whatever your current goals are now, know that they may change as the market changes. Therefore, ask about the exact guidelines of a zone before committing to a particular commercial property. In fact, you may want to visit the town or city zoning officer yourself to discuss the area and any upcoming changes. Even small details like fencing and parking lots could be dictated by zoning, so it's vital that you don't skip this step.

Talk to Tenants

If you'll be getting an apartment building, office building or retail space, tenants may be there today. If possible, ask the current owner if you can speak with them. As the possible new owner, you may be interested in whether the tenants are paying their rent and plan to renew their lease, but there are other things you need to know. For example, you can ask about traffic flow, location and what they may want from a new owner.

When these steps are followed, commercial property investments can be a great experience. Enlist realtors, lenders, attorneys and other professionals to ensure your first investment is a good one.