Commercial real estate investing can be an enjoyable and profitable business venture, but it’s important to have a good understanding of how to make the right kinds of investments. Here are some important tips you should keep in mind as you begin your career in commercial real estate investing.
Are Multifamily Dwellings Right for You?
Many novice real estate investors like to work with multi-family dwellings since they’re similar to residential properties. Typically a multi-family dwelling will need high occupancy rates to be successful, and each unit must be leased at rental rates in line with the current market or even above. A good multi-family unit should have lower expenses which can be covered easily by all the income rentals which are derived from it.
Understand How Financing Works
It’s generally necessary for commercial real estate investing for the entrepreneur to make a larger personal financial investment than is required with other kinds of transactions. Interest rates associated with commercial properties always depend on the prevailing prime rate, and you can expect to pay a rate somewhat above prime. When you’re dealing with the amortization rate of financing, you can expect to pay a higher interest rate on a longer amortization period, although it will also have a lower debt payment. By contrast, a shorter amortization period will carry a higher debt payment, but it will generally have a lower interest rate.
Understand the Role of Property Management
Property management is different for a commercial building than it would be for a residential dwelling. When you’re the manager of a commercial property, you’ll have more responsibilities, especially if you don’t have a designated property manager handling your real estate for you. As you might expect, the less you do as an owner of a commercial property, the more that your property manager will have to do. This will naturally impact how much you’ll have to pay your property manager because the responsibilities will be greater.
Interested in commercial real estate investing?
Most commercial real estate investors require funding to make that next big transaction on a commercial property. If you’re in need of funding for your next major deal, we may be able to help at Integrity Financial Capital. Contact us today, so we can explore some financial options with you.