5 Ways to Save Money When Buying Commercial Real Estate
One of the reasons commercial real estate is so lucrative is because of its potential for significant gains. If you’re planning to start and grow a CRE portfolio, the good news is that you can use these 5 money-saving strategies to accomplish your goals.
There Is a Difference Between Investment and Purchase
When considering buying CRE, you will need to understand that there is indeed a difference between investing in this type of real estate and purchasing it. Commercial real estate by its nature holds value and, as such, will typically appreciate over time.
By choosing to invest in CRE, you will be earning income from commercial real estate property that’s owned by someone else. You realize a monetary gain from increasing property value and do not participate in any aspects of property ownership.
By contrast, purchasing commercial property means you own an asset that will appreciate in value over time, and it also means you earn via the rent paid by the tenants housed by your property. You also must participate in the maintenance and repair of the building, along with the other aspects of CRE property ownership.
1. Do Your Homework
First, you must know which kind of CRE property you wish to buy, and what kind of supply and demand exists for that type of CRE in your market. Then, you’ll need to find your desired type of CRE in a sound location.
2. Gather as Much Information as Possible
Now that you know what kind of property you want, you’ll want to find out as much as possible about it. A really efficient way to do this is by contacting a commercial real estate broker. They’ll usually respond to your inquiry with an offering memorandum that includes everything you need to know, including its current performance, operating expenses, and income potential.
3. Find Reasonable Down Payment and Funding Options
There are many options for securing funding for CRE, but some will cost more in the long term than others. Some government-backed loans, for example, will only require you to put 10% of the purchase price down. You can also syndicate by pooling the funds of several investors and pay cash for your property purchase.
4. Inspect and Verify
Inspection and due diligence can save you literally thousands of dollars on your CRE property purchase. It’s a good idea to obtain a boundary survey, Phase 1 environmental survey, and property inspection report, and to confirm vacancy, tax rates, and other important items.
5. Conduct Preventive Maintenance
Once the purchase has occurred, you’ll want to ensure your property has a long and healthy life. That being said, implementing a routine for the preventive maintenance of all systems will be key to making and saving money.
Where the goal is to protect your interests and add investment value, there is simply no substitute for an experienced broker. TB-RE possesses over 20 years of industry experience and specializes in owner representation, CRE management, and much more. Call (312) 473-1764 for more information.