There are different types of property namely the residential property and the commercial property. Let us talk more about the commercial real estate investment properties. As a real estate investor or as an investor in general, finding out the potential value of a property is a necessity. Weighing the price if it is a good investment is also very important. A lot of people tend to focus on the value of a property now and forget to look out for the potential value when these two should be done together.
Here are certain points wherein they differ:
- Cash Flow
- Property Value
- Lease Documents
- Investor Knowledge
Let us discuss both the cash flow, tenants, and property value:
Commercial property usually deals with long-term leasing to make sure that a specific tenant can guarantee you a long-term cash-flow. Long-term cash flow is something you want to secure by factoring in the possible appraisal of the property. Deciding on a certain price that is beneficial for both you and your tenant is something which must be done accordingly because even if you own the property, there can still be a possibility that the value of that property will depreciate and that is something you want to watch out for before buying. Finding good tenants is also a must because there are some businesses which can depreciate your commercial building in terms of property value. Pick your clients wisely to save both you and your property from possible depreciation. As a real estate investor, you have to make sure that the contract to leasing your property is beneficial for both you and your tenant.
The maintenance and repairs of your property are usually assigned to the tenants but this depends on your contract. Having a solid and thorough agreement can save you from a whole lot of trouble. Having a thorough contract includes agreements on who is responsible should a fire break loose or should other unforeseeable events happen. This is necessary because if you do not come to terms, you may even have to spend more than you earn on repairs and maintenance. These contracts should also include certain possible circumstances that could disrupt the property value. Commercial real estate investment properties will only work if the owner and the tenant are working in perfect harmony. Establishing a healthy owner to tenant relationship is something you would want to do to make sure your property is in good hands.