Commercial real estate is an attractive investment venture for many people. It is capable of providing consistent returns, passive income, and has strong growth potential. According to the National Association of Realtors January report, commercial property values are generally down due to the pandemic opening up new investment opportunities. But before you jump into the market, be sure to catch up on trends happening in the industry.
As one of the top Phoenix commercial real estate agencies, we’ve compiled a list of tips to help you secure a successful investment. Read further to learn more about effective commercial real estate investment in today’s market.
Consider Different Sectors of Commercial Real Estate
Commercial properties have several asset types you may consider investing in. including:
- Industrial
- Office
- Multi-family
- Retail
- Medical office
- Hotel
It’s important to note the supply and demand, yield, and profitability of each industry will vary greatly. Location is key in commercial real estate and it will play a heavy role in the success of your investment. Moreover, it’s important to cater to a sector that performs consistently well and offers the greatest opportunities in today’s economy. For instance, in the National Association of Realtors January report, industrial, multi-family, and land assets are performing extremely well. Before you begin investing in commercial properties, do some research and see which subcategories may be worth investing in.
Commercial Real Estate is Subject to Ups and Downs
Just like with the general economy, commercial properties are prone to change. Asset valuations rise and fall, sellers’ and buyers’ markets alternate in demand, and some sectors will do better than others. Understanding how cycles have progressed in the past and how they may fare in the future is critical.
Establish Financing Options
With interest rates low, investors have a choice of several financing options to secure enough capital to purchase commercial property. Banks, private lenders, and the U.S. Small Business Administration offer various financing options, including:
- SBA 7A loans
- SBA 504 loans
- Conventional bank loans
- Hard money loans
- Online marketplace loans
- Joint venture loans
While we all continue to deal with the COVID-19 pandemic, commercial real estate investors are experiencing a variety of effects to lending EY mentions how borrowers are being subjected to providing additional equity or finding more debt sources. Additionally, property valuations may show declines depending on the market, resulting in higher loan-to-value ratios (LTVs).
Hire a Real Estate Professional to Help
It’s always wise to hire a commercial broker to help you through the process. The knowledge real estate brokers provide is invaluable and can lead you in the right direction towards a successful investment. They’ll help figure out what to look for, how much you can afford, and how much profit to expect. Additionally, they have several resources to conduct comprehensive market analysis to ensure you make wise investment decisions.
Plaza Companies Specializes in Commercial Properties
With almost 40 years of experience, Plaza Companies has helped develop, lease, acquire and manage hundreds of commercial properties. We provide investors with access to first-class properties to create valuable additions to their portfolios. Our extensive experience in brokerage services can help ensure you make the best investment possible. Contact us today and learn how Plaza Companies can help maximize your investments in commercial real estate.