Tips for investing in commercial real estate

For people in New York, commercial real estate can be a good investment strategy. However, for those who are new to the industry or have only dealt with residential real estate, it is important to understand that the commercial side is a whole different ball game. The following should help those who are considering investing in commercial property.

According to Forbes, investing in commercial real estate can be a good way to grow business interests, but that being patient is an important traitbecause of the longer sales cycle. It also takes longer to remodel, find tenants and for due diligence. However, on the plus side leases are usually longer as well. It is important to realize that risk varies based on the property type, so you cannot directly compare two properties that are close in location.

The approval process can be a nightmare, especially for those who are doing a complete new build. Before investing, make sure you know what approvals you will need and how long the expected process is. Unlike some residential properties, investing in commercial property takes a big hands-on role. This is to make sure the property is operating at its best potential for financial gain.

According to the American Bar Association, financing often differs from residential real estate. Many sources of commercial financing include insurance companies, banks or other institutional lender. Along with the debtor's assets and the property itself, other assets that collateralize the loan include equipment, fixtures, accounts receivable, supplies and inventory. The person taking out the loan must also typically have a variety of documents to secure the loan. 

 

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