Commercial real estate has its set of distinctions from residential real estate.
Online, May 5, 2014 (Newswire.com) - Most people are accustomed to the common need for buying houses for settling now and making a profitable investment. The natural interest in houses is the primary reason as to why residential real estate has been the focus of investments among investors. They are familiar with the different types of residential real estate properties such as single-family homes, town houses, condos, apartments, and multi-family homes. According to Todd Tretsky, of CRE-Finance LLC, this makes commercial real estate run out of focus but never out of profit.
Why Invest in Commercial Real Estate?
Commercial real estate investments have good value, bring additional cash flow to the owner, have an abundant market, and gives greater room to play in. Consult your local commercial real estate agent to clarify any possible doubts and you would be advised to invest into commercial real estate properties such as offices and shops.
Making a Profitable Deal in Commercial Real Estate
Investments into commercial real estate properties are experiencing an upward trend. For understanding commercial real estate and exploiting its potential to the maximum, here are things to take into consideration.
Profitability
Commercial real estate has its set of distinctions from residential real estate. If you are planning to make a deal in commercial real estate, think like a professional and keep these things in mind. To generate a good income from your commercial real estate investments remember that the income is directly proportional to the usage square footage. In commercial real estate, the income scales and the property leases are also longer putting you at a considerable advantage.
Homework and Planning
Before making a deal, map out a plan of action identifying your top priorities for the property, take finances into consideration and know exactly what you are up for and how much can you afford. Once you have your mind set, hunt for good deal. How do you identify one? Simple! A good deal is one from which you know you can walk away from. Assess the risks, repairs and costs associated with the property and go for it only if it meets your financial goals.
Property Assessment
Key metrics to consider for a commercial real estate property are net operating income (NOI), cash on cash and cap rate. Keep these in mind when assessing the property. A property with a positive NOI is worth purchasing i.e. the first year's net gross income should be greater than the net gross expenses. The cap rate involves the capitalization of earnings to determine the value of future income cash flows from the property. Whereas cash on cash is used to determine the amount required to acquire the property (i.e. the initial investment) and is used to ensure the fact that the investor does not pay the entire amount for the investment. It also accounts for the mortgage payments that need to be made from the NOI.
Making the Right Choice
Commercial real estate is also driven by customers. Besides the above mentioned steps and considerations, make sure to buy the property in a profitable location, talk to neighbors to determine the profitability and do some research on the area before closing the deal and making the right choice.
It is also wise to contact the mortgage professionals at CRE-Finance if you have any questions regarding commercial real estate or are seeking financing. Please reach out to Todd Tretsky at 212-257-7305 or Rich Tretsky at 212-257-7307. You can also visit us at www.cre-finance.com
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