Unluckily, the commercial real estate value falls down in the previous years. It fells around 10.6% in the 4th quarter of the year 2008 only and this experienced a large price drop last 1984.
However, to real estate investor’s savvy, during the period of lower costs, this reveals real investment opportunities. So, in spite of the major fall in plan acquisitions in the peak of the year 2005, one half of the investors are planning to raise their holdings when it comes to commercial real estate.
How to Find a Good Deal in Commercial Real Estate
To find a good commercial real estate deal, inquire some real estate experts regarding the advantages when you invest in this kind of property. In this case, you will most likely trigger a story why this property is better compared to residential real estate. Most owners of the commercial property love the added cash flow, the scale of economies, and the rich market.
The following are the seven easy steps to have a good deal when it comes to commercial real estate;
1. Learn from the insiders
To become a participant in this kind of business, be a professional. The income here is based on its square footage that is why you can see a huge cash flow here. The leases in commercial property are longer compared to single family homes. Then if you are in a tighter credit situation, be sure you have enough cash on hand. Lenders in commercial property want to see that you have a ready cash of 30% for the down payment before giving you a loan.
2. Work out a Plan of Action
The top priority when it comes to the deal on commercial real estate is to set up parameters. You need to digest questions like how much you can afford, how much deal expectations, who are those players, and how many occupants pay the rent.
3. Find out a Good Deal
You have to look for the damage that needed repairs and know the various risks. You need also to get the calculator in order to know if you meet your financial objectives.
4. Be Familiar With the Metrics on Commercial Real Estate
The common metrics to use when assessing real estate are the following:
Net Operating Income (NOI)
NOI is computed by means of evaluating the gross operating income of the property during its first year and then the operating expenses must be subtracted.
Capitalization Rate or Cap Rate
The cap rate is being used to compute the income produced from the properties. It is used to approximate the present value of the cash flow and this process is called capitalization of earnings.
The investors of the commercial real estate depend on the financing to buy properties and usually follow the cash-on-cash formula in order to compare the performance of the first year.
5. Look for Motivated Sellers
Like in many businesses, customers drive the real estate. Your target here is to find those eager and ready to sell below the market value. And find the motivated sellers.
6. Study the Neighborhood
One way to evaluate commercial property is to study the neighborhood by visiting open houses, getting in touch with the other owners, and look for vacancies.
7. Evaluate Properties using “Three-Pronged”
When hunting for big deals, be adaptable. Browse the internet, employ bird dogs, and read newspapers to find the finest properties. The bird dogs of the real estate can aid you find the best investment that leads the return for the referral fee.
By evaluating and finding commercial properties isn’t just about discovering good neighborhoods, receiving a good price, or perhaps sending out alarms to bring the sellers. It’s about human communication and building relationships.