New York has an aggressive and competitive real estate market. Properties ranging from apartment buildings to industrial facilities sell for a premium when compared with similar properties in other states.
Given the high level of demand for commercial real estate in New York, investing in commercial real estate either for your business or as part of a broader investment strategy can prove to be profitable. Purchasing a property instead of leasing it means you have more control over the use of the facility. Also buying means that your business develops equity in the property, as well as the potential to sell the real estate held by the company later for a profit over the purchase price.
Investing in commercial real estate to rent to other people can also be profitable, provided that you are careful about what properties you buy and how you structure your contracts. The more you know about commercial real estate, the more informed the decisions you make will be.
You have to look at more than just the purchase price
When determining whether a particular property is a good investment or not, there is no question that the asking price for the property represents a substantial investment. However, there will be many other costs that you also need to consider when deciding if a property is right for you.
A property listed for a low price, for example, may require substantial secondary investment, potentially even the destruction of existing buildings or improvements on the property. Other times, the property may be priced reasonably to reflect other issues, such as a lack of parking, zoning that doesn’t fit with the building type, problems with local crime or even higher tax rates because of the neighborhood.
Carefully looking at all of those potential costs will make it easier for you to evaluate whether investing in a property makes sense for your business. You want a property with the right zoning and amenities to make it valuable while you use it and profitable when you later sell it.
If you want to lease your property, explore all of your costs
Renting your commercial property to someone else can be a great way to develop equity without needing to absorb the costs of the mortgage, taxes or insurance on the property. You can even expect your tenants to pay building improvement and maintenance costs through common area maintenance (CAM) fees.
Before you set a price or sign a lease for the rent on a building or individual unit, take the time to look at the total tax liability, the cost of insurance, the expensive maintenance and security costs. Ideally, you can pass most or all of those expenses on to your tenants.
By exploring your options and planning carefully, you can take control of the process of purchasing commercial real estate, although you may still benefit from professional help during the sale.