Welcome to the 8th and final installment of our Beginner’s Guide to Commercial Real Estate (CRE). Now that we’ve reviewed the 4 Major Asset Classes and most if not all of the Key Asset classes, how do you know which Asset Class you should invest in?
- First of all, as a Beginner investor, you should utilize the support and advice of an experienced Commercial Real Estate agent.
- Secondly, consider and tour many different properties. Figure out what works and what doesn’t regarding each of them. Consider the most important things for each one, including:
- Condition, and
- Allowed Uses
- Location, Location, Location – the importance of location can’t be overemphasized. Properties located near universities, hospitals, or downtown areas will generally have a higher value and sell more quickly.
- Above all, you’re searching for a “fit” with your property. It should be a fit in terms of price, location, uses, and investment required.
- And remember, the Key calculation for any investment property: It should be in the black after subtracting what’s called PITI (Principal, Interest, Tax, and Insurance) from the annual revenue earned from rent.
Other questions to consider for each property you’re interested in are:
- What is the property currently used for?
- What are its allowable uses? Meaning what can/can’t it be used for?
- What kind of rent/income does the property currently generate per year?
- What kinds of taxes are there on the property?
- If there is an existing building, what items will need to be replaced or repaired soon?
- Why is the owner selling?
- How is the area around the property doing? Are there any major upcoming changes?
We hope you found our 8 Part Beginner’s Guide to Commercial Real Estate (CRE) informative and helpful. While we have endeavored to provide an informative overview of Commercial Real Estate, it is by no means all inclusive. So please feel free to contact us to address any CRE concerns or questions you may have.
TIP: Remember; whether you are a Beginner or an Experienced CRE Investor, always perform your due diligence. It will ultimately save you time, headaches and money.