Are You A First Time South Florida Commercial Real Estate Buyer?

If life were perfect, then investing in home or commercial real estate would be worry-free and painless. However, like anything else, without the proper resources, good contacts and research, it may be difficult to know if a property is a good investment or poor one, which can end up being a nightmare for a buyer venturing into the commercial real estate industry for the first time.

Of course, we live in the real world and things can often go wrong when buying South Florida property despite every good intention. Commercial real estate can be broad and diverse, so it’s important to make sure you have researched and evaluated thoroughly the best properties in the areas you can afford. After all, the whole point is to generate a positive cash flow while watching the value of the property grow over time.

But how do you find these best properties? How do you know that what you want isn’t a huge mistake or cash cow?

1. Think Like A Professional:

With tighter credit issues in force, commercial property investors will need cash for a larger down payment, as it is not unheard of that banks or loan companies today require 30 percent. Keep in mind that income on commercial real estate properties is related to usable square footage, so a buyer will see a bigger cash flow than with residential properties.

2. Create A Solid Plan Of Action:

Ask these all-important questions:

  • What is your budget?
  • How much can you afford for improvements?
  • What are your goals for the deal?
  • How much rental space do you need to fill?
  • Do you have tenants already?
  • How much rent will they pay?
  • Any ongoing repair issues?

As you can tell, and probably already know, an investor must have a very clear plan along with a firm and practical budget. Prepare to spend more than you think you will, as it is rare that any improvements or repairs that are made come under budget. If you are unsure of your financial status, or have partners that have not fully committed, don’t move forward until this is resolved.

3. Have An Exit Strategy:

The most successful real estate investors may know a great deal when they see one, but they have an exit strategy where they can walk away if necessary. As an investor, you need to be aware of the repairs that are needed, potential title issues and other factors that will create issues with your budget. If you don’t have a way out when the deal starts turning sour, then you may be at financial and legal risk.

4. Find Motivated Sellers:

Like residential properties, the goal when buying commercial real estate is to find motivated sellers. The best deals come from those who are eager to sell at below market value. Here, you have a seller who will negotiate quickly and aggressively. Quite frankly, the buyer in these situations has the upper hand and can potentially save thousands of dollars, if not more. If you have a seller that isn’t all that eager to sell, or plans to hold out until they find a buyer who will pay close to their asking price, they won’t negotiate as much.

5. Research! Research! Research!

Of course, if you find a great deal, there may be a reason why. Walk around with your real estate professional and find out everything you can about the neighborhood. Is it an up-and-coming area, which at times may be a risky deal? Will renters want to live or work there? Is safety an issue? Is parking readily available? Is the property located next to thriving businesses or too many “For Sale” signs? Talk to other business owners in the area and get their opinions. Contact the local police department to see if crime is a major concern. Finally, don’t ignore other professionals and investors for their opinions. If a deal seems too good to be true, you may need to wonder why.

6. Leave No Stone Unturned When Looking For Commercial Properties:

In other words, and this may seem obvious but needs to be reiterated, check the Internet and real estate listings in the newspapers for properties. Hire a well-respected real estate agent who has numerous contacts within the commercial real estate industry. Ask friends, visit the Chamber of Commerce or other business organizations and contact any person that you know will be helpful to aid you in your search. Take their recommendations but again, always follow up with research once you locate a possible property.

Finally, it takes more than the above. At the heart of the matter, you want to make sure that you communicate and build professional relationships with business owners who can become valuable resources as you start a commercial real estate career. You want a circle of advisors that feel comfortable sharing ideas and passing along good information and advice. Establishing contacts early is a great way to ensure success so never hesitate in asking questions.