Commercial real estate is any non-residential property used for business or retail purposes. Profit from commercial property will be generated, either from capital gain or rental income. This property includes office buildings, medical centers, hotels, malls, retail stores, farm land, multifamily housing buildings, warehouses, apartment buildings, and many more.
It is generally agreed that, investment in real estate, especially residential properties, is among one of the best type of investments in Pakistan. However, the benefit and opportunities available by making investments in commercial properties, could be far more significant than residential properties. In commercial real estate investment, you have an opportunity for tenant diversification, economies of Scale (a lot easier to put a large amount of money to work), market specific opportunities and multiple Investment Strategies. So, commercial real estate has a significantly different risk profile than residential real estate investing. Here are several considerations you will look at, in order to crack a good deal.
Get Clear Idea about Market Trends:
It can be appealing to purchase commercial property, but you must take your time. As a beginner level investor in the market, you must know what the market trends; like how much properties are renting for, how they hold their value for resale, and such other factors. It’s a huge decision to invest in commercial real estate, so take your time.
Invest in rental properties:
Rental properties are a good source of passive income. They aren’t totally passive though, as you’ll have to provide some maintenance, but in general, they are a stable investment. You may utilize this property in many ways; like occupying an investment property and renting out rooms in the property or living in one of the units while renting out the rest. Investment in rental property can become a regular source of income for you.
Avoid large investment in beginning:
In the beginning, you must start from small investment and go to large investment, as you get more experienced. Start out with just one property or a multi-unit property that has only a few units. With the passage of time, you can buy more real estate and get more involved, but don’t burn out early.
Learn about Commercial Real Estate:
There are some downsides to invest in commercial real estate, such as empty spaces if a tenant vacates or tenants who are late or don’t pay their rent. Even if the space is vacant, you still have to pay the mortgage. Moreover, investing in commercial real estate is more expensive than residential real estate. Commercial properties also often have long leases, so you won’t be able to raise the rent for 5 to 10 years. While this means you might have a stable tenant, it also means you can’t adjust to meet market prices on a regular basis like you can with residential property. So, before investing in this sector, you must learn about pros and cons.
Consider Your Market:
Don’t simply depend on real estate agents or different investors to know the market that you plan to buy in. Do your own research and know the values of the properties in that area. Knowing your market ensures that you make sound decisions that will be fruitful.
Invest in old buildings:
Purchase a building for a low price, fix it up, and then sell it can be a way of great profit. In this case, more risk is involved, as you have to accurately predict renovation costs and sell quickly, to minimize the amount of time you are paying. There’s always the chance that the building doesn’t sell, or takes a long time to sell, so keep that in mind. If you have good skills to renovate a building, such buildings might be the right move into real estate investing for you.
Think about locality:
Locality is among one of the most significant factors for profitability in real estate investment. The commercial property should be in a well-established micro-market, wherein, there is reasonable office demand, as well as transport and social infrastructure.
For the beginners, investing in real estate is not overwhelming. Before to go for investment, do your research, start from small and consider your short-term and long-term goals. Talk to experts and learn more. Good Luck!