The Basics of Buying Commercial Real Estate

Commercial real estate can be a lucrative investment opportunity for those who know how to navigate the market. While it may be a bit more complicated than buying residential real estate, the potential for higher returns is often worth the effort. 

Let’s cover the basics of buying commercial real estate and provide some tips to help you make informed decisions. 

1. Determine your investment goals

Before you start searching for properties, it’s important to determine your investment goals. Are you looking for a long-term investment that generates steady cash flow or a property that has the potential for significant appreciation? Are you looking for a property that requires minimal management or are you willing to take on more responsibility in exchange for higher returns? 

Once you’ve determined your investment goals, you can start to narrow down your search based on factors like location, property type, and price range. 

2. Understand the different types of commercial real estate

There are several different types of commercial real estate, each with its own set of pros and cons. Some of the most common types of commercial real estate include:

  • Office buildings: These are typically multi-story buildings used for professional or administrative work.
  • Retail spaces: These can include everything from strip malls to standalone stores.
  • Industrial properties: These can include warehouses, factories, and other industrial buildings.
  • Multifamily properties: These include apartment buildings and other residential properties with multiple units.

Each type of property requires different levels of management and expertise, so it’s important to choose one that aligns with your investment goals and skillset.

3. Conduct market research

Once you’ve narrowed down your search to a specific type of property, it’s important to conduct market research to determine the supply and demand in the area. This can help you determine the potential for rental income and property appreciation.

Some factors to consider when conducting market research include:

  • Vacancy rates: A high vacancy rate could indicate a lack of demand in the area.
  • Average rental rates: This can give you an idea of how much income you can expect to generate from the property.
  • Population growth: Areas with high population growth may have a higher demand for commercial real estate.

4. Get pre-approved for financing

Commercial real estate typically requires a larger upfront investment than residential real estate. Getting pre-approved for financing helps you determine how much you can afford to spend on a property and give you a better idea of your financing options.

5. Hire a commercial real estate agent

Working with a commercial real estate agent may help you navigate the complex process of buying commercial real estate. An experienced agent helps you find properties that align with your investment goals and negotiate favorable terms.

6. Conduct due diligence

Before making an offer on a property, it’s important to conduct due diligence to ensure that you’re making an informed decision. This includes:

  • Reviewing financial records: This helps you determine the property’s cash flow and potential for appreciation.
  • Conducting a property inspection: Identify any issues with the property that could affect its value.
  • Reviewing lease agreements: Get an idea of the current rental income and the potential for future rental income.

7. Make an offer

Once you’ve completed your due diligence, you can make an offer on the property. Your commercial real estate agent can help you negotiate favorable terms and ensure that your offer aligns with your investment goals.

8. Close the deal

If your offer is accepted, you’ll need to work with a commercial real estate attorney to finalize the purchase agreement and complete the transaction. This typically includes paying a down payment and closing costs.

Buying commercial real estate may seem complex, but with the right knowledge and expertise, it can be a lucrative investment opportunity.

Plaza Companies is the Premier Choice of Commercial Real Estate

Plaza Companies is a full-service real estate firm specializing in the leasing, management, construction, and development of some of the most innovative commercial real estate projects in Arizona. Our firm specializes in staying connected and conscientious of all emerging trends in commercial real estate. Contact us today to learn more about leasing the right space or anything else we offer!

Ready to Get Started?

Whether you are looking to us for management, leasing or development services, we can help you find the perfect space. With over 40 years of experience, you can trust Plaza Companies to assist you with your real estate needs.

Related Articles