How to Profit from Commercial Real Estate

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  • Author Mary Crown
  • Published December 29, 2010
  • Word count 376

Finding a property that will render a return on your investment may be easier than you think. Obviously there are pieces to the puzzle that have to fit together in order to maximize profit. So before you go out to make your purchase there are a few things you ought to do.

First of all, if you don’t understand all the nuances of a business transaction, consider retaining the services of an attorney. He or she will protect your interests by reviewing and negotiating all contracts. The lawyer will ensure you don’t fall victim to fraud or a scam.

Decide on how much money you’re going to invest; and when you find something that’s appealing, estimate how much profit the property could generate. Have an accountant assist you with creating a business plan; one that will take into account renovating expenses (if any), taxes, maintenance and other miscellaneous costs you might incur prior to selling. This is important in order to assess whether the investment is truly worthwhile.

Note that there are two types of investments in real estate. One is known as "value driven" and another called "value added." The first one is considered somewhat safer and is backed by renewable lease agreements. It can render between six and fourteen percent earnings, depending on several factors such as its location, property age, construction style and utility. Tenant continuity in this case is also very important. Thus, you’ll need to know whether the current tenants are planning to renew their contracts; or will you see a slew of moving company trucks upon concluding the negotiations.

The latter type of venture can bring bigger profits especially to investors with smaller capital. It might render 25%, depending on how much time it will take for the property to increase in value.

Once you find the right lot or piece of property, shop for a mortgage. Find a broker who has an established relationship with major banks and whose creativity will help you obtain the best banking arrangements. Note that there are hundreds of programs available for people who want to capitalize from buying commercial real estate. This is a buyer’s market so it’s the right time to take advantage of attractive prices.

Moishe's Moving Systems is a moving company, which started its business more than 25 years ago and became the largest and most trusted moving company in the New York tri-state area.

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