Commercial Properties
Anyone out there buying commercial properties- office space, businesses etc.?
The risks seem great - there are a lot of "for lease" signs up in our area. Are the rewards also great?
What advice would you give someone looking at commercial property?
Make sure you know what they are doing wrong. Then make doubly sure you can fix it and do it better. They wont sell a business that is making them loads of cash. The trick is to find there mistakes and fix them. This end of the business can and will make or break you. At least thats my view. I would also like to hear others as well, as it seems that I havent seen anyone else post that much on this subject.
Good Luck,
Kyle
It is a tenants market right now, especially in certain areas, so you can certainly find some good commercial deals. You have to know what you are doing. There should be even great upside potential once the market turns and the rents are escalated.
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Somehow my post from yesterday disappeared.
Bill,
The "upside potential" is what is making me interested in commercial property. Any resources to help me know what I am doing?
Ron
With my commercial investments I am not bothered by phone calls from tenants ( like in residential)
I started in residentail 20 years ago - now ONLY do commerical and pre construction condos.
Try CCIM for courses and publications to learn.
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Issues to consider. We are at historic low in Cap rate - and fundamentals dont look so good for the future. If cap rates go up your building value goes down unless you can raise the rent more than the cap rate - and right now it is hard to raise rent in some areas. The trend is away from cities and into suburbs - so the fact that a city property has been doing ok doesnt mean that it will in future. Suggest you look for property in the path of progress and be a little conservative - dont assume that you can maintain the current occupancy .
Dick -
You make a VERY good point about caps rates. I would be very nervous if I was buying commercial based on the low caps rates out there now. A small bump in the interest rates and these low caps rates will go away.
Traditional banks are not buying into the low caps rates. Doen here in south FLorida there is soem "stupid" 1031 money chaseing the low cap rates.
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on commercial property make sure the down payment is big enough so that it has some equity.