Six Rules To Play the Commercial Real Estate Investment Game Successfully

Buying and managing a huge commercial property is no easy task. From dealing with the various laws and regulations to keeping the cash flow constant, commercial investments must be backed with informed decisions and smart choices. Read on to find out six tips to ensure maximum benefit from the investment made.

Seek professional help

The real estate industry is highly dynamic and no two properties can be the same in terms of value and price. Amateurs to well-established real estate firms require the professional assistance of a commercial property management company from the acquisition stage to maintaining the accounts in the perfectly functioning property. These firms specialize in garnering industry knowledge and trends and ensure all services are aimed at achieving maximum efficiency at lowered costs.

Learn the art of crunching numbers

Real estate investment is clearly a numbers game. There is no place for assumptions and projections as far as commercial real estate is concerned. Investors must get down to work, spend time and work out every component of expense and income that can be derived out of the investment. A contingency plan must be in place and risk mitigation strategies must be applied.

Do not over leverage

Relying 100% on borrowed money makes the investment strategy less viable. Every commercial property must be evaluated in the light of the break-even ratio. Break-even ratio can be calculated by adding the expected operational expense and the interest from the debt which together is divided by the potential income from the property. When the break-even exceeds 80%, there is a red flag right there.

Due diligence before investment

Due diligence of a commercial real estate investment must include inspecting the property as well as the local market. Approach the property with an open mind and get accurate estimates to know how much cost would be involved in repairs. This helps to seal the perfect deal while negotiating the price. If the commercial property is a retail store, then learning the demographics of the surrounding areas is essential to determine the tenant mix.

Ask questions

What zoning laws does your property abide by? Will the property management firm help in negotiating maintenance contracts with third parties? Can the lease agreements with current tenants be renewed on change of ownership? Do not hesitate to ask questions to the buyer or your property management firm whenever required. Commercial real estate investment is a big decision and the money involved is huge too. Thus, ensure that you have all the information required to make the right decisions.

Establish strong relationships

The people factor plays a very important role in real estate. From your lenders to your tenants, the success of the commercial property is dependent on the various players associated with your network. Consider tenant requests seriously and ensure that the property is in good working condition to allow tenants to grow their business as intended. While negotiating lease renewals, take the help of a professional middleman such as a commercial property management company to ensure that a right balance is drawn between the demands from both sides.

If you are looking for a company that manages commercial real estate in NYC, the author of this article recommends Madison Properties.

Madison’s Property Management approach is such that they help you reach your revenue goals.