What To Know Before Investing In Commercial Real Estate
Every piece of available land in Charleston is getting bought up as quickly as it becomes available. Commercial buildings are also standing empty waiting to be bought up in a mad rush. While you might see this as a great opportunity there is still quite a bit you need to consider and know before buying commercial real estate!
Like we talked about in our most recent blogs, Charleston has been blowing up! The demand to move to the Lowcountry continues to grow and builders, landowners, architects, and everyone in the industry is trying as best they can to keep up with the demand. Downtown Charleston has seen an incredible overhaul in many new projects in a mix of new buildings and historical buildings being bought and restored. However, the reality on the other side of things is that due to the economic impact of the pandemic, many businesses, restaurants, and other establishments had to close and are still standing empty. With the country reopening and life returning to a similar motion to what it was before the pandemic, these properties will not stand empty for long. With the stimulus money and other loan money that is available to businesses of all sizes, the demand for new builds both commercially and residentially will catch up to the empty buildings. A new wave of interested entrepreneurs, restaurateurs, entertainers, and many others will begin to take interest in the opportunity. You might even be one such individual who is interested in this! If you're new to the idea or are just getting your feet wet, e there is quite a bit you will need to know and be aware of before you jump into the deep end of property ownership. With this in mind, we wanted to share a few tips, thoughts, ideas, and suggestions to know and take to heart before investing in commercial real estate.
It's no joke that commercial real estate - or CRE - is a very appealing investment because of the opportunity to provide you with consistent returns, income, and growth.
Don't forget that while CRE can be very lucrative, it's not all created equal. It doesn't always mean that just because you own it that you will make money off of it.
To get ahead of the game and to prepare yourself, one of the smartest things to know and understand are the common risks, mistakes, and pitfalls that come with owning CRE. This way you can prepare yourself if these issues ever appear or you can avoid them altogether.
There are many different types of CRE, and none is similar to the other. Their ability to become successful by being consistent money-making pieces of property depends on the demand and need of the type of CRE that you own.
Keep in mind how the digital world is affecting brick and mortar CRE properties. Online shopping is starting to take over in-store buying, and retail space is suffering because of it. If you own a retail space like this, it might be very volatile because of its digital competition.
Instead of investing in just a single tenant or single office space CRE, many are finding more success and safety in owning CRE that has multiple tenants.
One of the best steps you can take is to always do your research! Before you even consider investing in CRE property, research the performance of each asset class in the current economy that you might buy it in and the potential economy that's on the horizon. Is it worth it?
Does the CRE that you are interested in fit in the supply and demand of your area?
Make sure to take your time and take part in your due diligence before you get too excited and just jump in and start buying up property. This will help you understand the market and the property you are considering so much more than you do right now. During your due diligence period, you will review financials, tax returns, documents, profit and loss statements from the previous owners or business property inspections, conduct a multitude of surveys and studies, and more. Understanding and knowing your potential property can help save you from making any crazy or drastic mistakes. It will also make sure that nothing goes unaddressed!
Before purchasing, make sure you know and understand everything that goes along with the permit process, their costs, and what you might owe the city or the municipality of the property.
If it is a vacant property you are looking at, always make sure to check and know that the zoning of this area is exactly what you want to use the property for!
If you are looking to expand this potential CRE, investigate and know how much more the market can support what you want to build.
The process of CRE will take substantially longer than residential investing. A lot of this is due to due diligence. You will need to maintain calm and patience.
Consider the trends of the coming area. Is the CRE you're looking at a part of an area that others are planning on investing in? Has it already been targeted as an area that when given the time and money, will see a very profitable and economic boom? These are areas that you want to invest in!
Go right to the source of permit approvals, they can take months or years to receive the permits you need to have a successful CRE building and property. Before building, sit down with the local authorities to know and understand how long it takes to get approvals from the city council, overall planning, zoning, and more.
If you're looking for a passive investment, commercial real estate isn't for you. Some of the most successful investors and owners take a very active role in their properties.
Your finances will need to be in order before you begin your search and you need to know all of your financing options before you begin too.
If you don't have to go through the process of buying CRE by yourself, you don't have to! If you can work, with a commercial real estate professional to help you through the whole process. This is especially helpful to those who are brand new to the whole process.
Location will always be key, no matter if you are buying residential or commercial real estate. While CRE might not need to be on the beach to be successful being close to freeways or a budding area can be a big player in why you should or shouldn't buy your CRE.
Make sure to look at multiple options, don't just buy or invest in the first property you view or look at. As you continue to look at multiple properties you'll begin to notice and add other important elements that you will need on top of what you already knew you needed from your CRE beforehand.
When buying or considering buying commercial real estate property these 20 ideas and tips aren't the only ones to know, but it is a good place to start! We hope this has helped you and hope it has answered some of the questions you've had. If you have any more questions and concerns about commercial real estate don't hesitate to reach out to us, we'd love to chat with you and help you get started! Until next time, stay safe and stay inspired!