3 Key Areas That an Investor Has to Be Conscious of When Choosing a Commercial Real Estate Investment
Commercial Real Estate Projects are mostly quite similar to residential realty aside from the fact that they can be much more extensive when it comes to scale and can need large amounts of money. This article deals with 3 aspects that a person has to be cognizant of he is contemplating acquiring commercial real estate.
Zoning Issues
Property investing involves partitioningthe property and if the zoning is modified while you are rebuilding the property, you are likely to acquire a greater than expected cost to shift the use of the real estate. There was this large scale residential undertaking that was re-zoned to commercial use. Because of the re-zoning, the property developer needed to put in lots of time repairing the interior of the real property so as to modify its purpose from a residential real estate to a commercial office type of setup. So, it’s sound to practice your due diligence and use the services of an experienced real estate attorney to do a check on the real property for you to detect if there is imminent re-zoning as it will impact your real estate investment.
Crucial Utility Issues
The most terrible problem a real estate investor faces is learning about the electrical and plumbing problems of the property he has just purchased. Therefore, devoting time becoming versed in how old is the structure and when the piping and electrical system was previously repaired is crucial when viewing a potential building to develop. This is because electrical and plumbing issues mean you will likely have to hack through the ceilings and walls so you can take out old metal pipes that are corroding and defective electrical circuits. In short, you have to undertake sizable overhaul on the property and unless you’re tearing down the building and rebuilding, such fixes may not be worth undertaking.
Tenant Mix
Most real estate investors purchase property to establish cash flow and leverage their investments. Devoting some time examining the renter mix of a commercial building can help determine whether you are purchasing a moneymaking real property or not. Many lenders will lend you a amount that is in proportion to the credit of your largest renter so you will want to purchase a real estate with credit worthy tenants or find credit worthy tenants to take on the lease. Thus, if you have an option of choosing and replacing a few of the tenants when their lease is up, take some time to study the tenant mix and see if there’s anything you can do to make it better.
To sum up, we have discussed 3 things that a real estate investor must note when buying a commercial property. Spending some time to look around the building and looking at the building’s business directory may help you ascertain the tenant mix and find out if there are likely electrical and plumbing issues. But it is a good move to engage the services of a lawyer to assist you with the zoning matters.