The first step is to know exactly what you want to purchase, why, and where. It’s harder than it sounds…
Commercial property owners seem to be pretty demonstrative when it comes to their chosen profession—especially when compared to their residential counterparts who seem to get all the attention. They’ll tell you about the insane cash flow, the abundance of quality property managers, and the lack of competition—but rarely do you hear about the journey they took to get to this point. Buying commercial real estate is a complex undertaking that can be challenging for even the experts to time right to maximize their investment value. The road can be disappointing, costly, and downright stressful when you’re at the whims of the market and ever-fluctuating demands. Here are a few steps to follow when dipping your toe into commercial real estate.
Know thyself and thy potential property
Greek aphorisms aside, it’s incredibly important to have a clear understanding of your goals, commitment level, and any hurdles in place before jumping into the world of commercial real estate. Now we know these are questions that may seem ridiculous when asked individually—but when you take stock of what your priorities are and document them in a single sitting, many times you discover something about your priorities that can impact future decisions. Take this list and write out responses for each question. You may be surprised what you find.
- What kind of commercial property are you looking for?
- What kind of location do you need?
- What will be the purpose of the building? For your own business, rent it out, build equity, and/or something else entirely?
- How much time can you commit to the property?
- How much work are you willing to put into the property?
- How’s your cash situation? Do you have the ability to make a down payment?
- What experience, skills, and/or knowledge do you bring to the table?
- Are you be willing to partner with someone else on the property?
- Who will be managing the property?
Check back for the next installment of this series when we’ll cover the application and underwriting process.