With the recent volatility in the real estate market, a lot of individuals who had previously been interested in this type of investment have pulled back and decided to wait until things are little more predictable. Of course, this also means that individuals who understand the market and who have a good eye for investing in property are able to make even more money since there are less people competing with them for the best deals. Although there are a number of similarities between residential properties and commercial real estate investing, there are also a number of differences that are crucial to understand if a person is going to be successful.
As with residential properties, commercial real estate investing can be summed up relatively simply. Location is the single most important thing when it comes to whether or not a property is going to represent a good return on the investment that a person is making. Obviously, this is a little bit more complicated than it sounds at first because whether or not a particular area represents a good investment will be largely determined on the type of business that is going to be located there. For example, a retail shopping center will need to have easy access to the local population and roads. Manufacturing facilities, on the other hand, may do well if they are easily accessible by local highways and railroads.
When it comes to commercial real estate investing, it is important not to overlook the tenants. Tenants who are willing to sign a long-term lease will almost always be better than those who insist on a short-term one. Tenants who insist on a short term lease often have little faith in the business that they are opening and want to make sure that they have a way out rather than committing to long-term stays. For this reason, finding a mix of tenants who are stable will dramatically increase an investor’s ability to consistently collect rent over the long term.
The vast majority of individuals who are interested in commercial real estate investing understand that this is a long-term game which requires them to build equity in the properties that they have. This is not a strategy for individuals who are looking to see a quick return on their investment as it can take several years for the value of a property to increase while also paying down the mortgage, thus increasing the equity that an individual has in it. Savvy investors know that the best way to ensure that they come out on top in commercial real estate investing is to create a strategy that allows them to detail how long they will need to hang onto a particular property in order to meet their goals.
Finally, as with residential properties, individuals who take part in commercial real estate investing will have certain capital expenditures that they must plan for. From regular maintenance to expensive improvements and replacements, it is vital that an individual have the funds necessary to take care of these types of expenditures when they come up. With proper planning and a thorough understanding of the market, an individual can make an excellent income with commercial real estate investing.
Article Source: http://EzineArticles.com/7468112