How Long Will I Keep the Property?
Following the guide for commercial real estate, the first question any proper investor will determine how long they will hold on to the commercial real estate. An investor could fix up a property and sell it in a few months or a year. This process is called property flipping. Or an investor can be in it for the long haul and hold onto a property for 30 years. How long a property is to be held effects the mortgage, interest rate, any type of build out or construction and a plan for selling the real estate.
Will I be a Passive or Active Investor?
How much time and sweat you are willing to put into a property will determine what type of commercial real estate is best to purchase. For example, purchasing an apartment building will result in direct hands on involvement unless you plan on hiring a management company to oversee all property issues. An easier investment is a single tenant building or properties that are leases “triple net” that leave the tenant with most of the maintenance responsibilities.
Do I have the Equity?
The final question that needs to be answered is whether there is sufficient equity for this piece of property as well as future investments. The equity available will depend on the amount of the loan and the maximum loan to value ration allowed by the lender. The interest rate is also an important factor as they are the loan fees that will have to be paid. You also want to keep in mind the concept “not putting your eggs all in one basket” as plan on diversifying investments by purchasing more than one property. This guide for commercial real estate will ensure you make an informed decision when purchasing a commercial real estate property.