Real estate investments are the most profitable business around the world. Investors looking for good deals know how to benefit the most from their investment ventures. If you ask a real estate agent whether to invest in commercial or residential property, they will give you a long list of reasons why you should be looking for commercial properties for sale.
Commercial plots can yield bigger and better profits than most residential homes. However, the trick is to find the right deal and invest at the right time. How to do so? Here are some tips for finding the right commercial property for yourself.
Look For A Motivated Seller
A professional commercial property investor knows the value of a good deal and how to find it. If you land on a property whose owner is eager to sell the property for some reason, believe it or not, with all the flaws in that particular land, you might end up getting a great profitable deal.
Eager and motivated sellers need to get rid of the property for a reason. They will be willing to sell the property at a value lower than the market price. They are even willing to negotiate the price if need be. You can never go wrong with buying at a lower price, doing a little renovation, selling at a higher price, or putting it on rent for a constant cash flow.
Calculate The Net Yield For The First Year
If you want to make an estimated guess about whether the commercial property you are considering buying will be profitable or not, get yourself a calculator and start breaking it. Calculate the net yield you will get by the end of the first year.
Firstly, you will need to calculate the gross yield. It is the total estimated rent you expect to get from the property and divide it by the total cost of the property. You might also want to know the net yield, that is, the total rent minus the expenses you faced in the first year divided by the total cost of the property. Experts believe that both the calculations should have a positive value if you want the place to be profitable.
Learn Key Terminologies For Commercial Investments
Consider getting a crash course on the terminologies used for commercial property investments. Some of these terminologies can be so confusing that even a professional investor might get baffled.
You should know terms like,
- Cap rate
- Gross yield
- Net yield
- Appreciation potential, etc.
You can either consult real estate agents or download material from the internet to understand these terminologies.
Know Your Finances Before Investment
You should have a fair idea of your financial condition before investing in commercial property. You certainly might not want to put all your eggs in one basket, as it can never be a good option because of the risks involved.
There is no surety that your investment will be profitable because of various natural reasons that can create unfavorable conditions. However, with a stable financial situation, you can take the risk if you find a great deal.