August 8, 2017
Purchasing an office building or other commercial real estate property is a lucrative investment. It’s an asset that appreciates in value, and having ongoing and steady tenants means a continuous cash flow.
Investing in a building with tenants means you’ll become a landlord, which comes with a wealth of benefits and challenges. Making a commercial real estate purchase is the first big step, but before you buy, make sure you’re ready to be a landlord. Here are some signs that you are.
You have the money (or can get the financing) to invest.
Sounds obvious, but do you have the money to invest in commercial property? Paying cash may be ideal in some situations, but there are also many financing options out there. One option is the CDC/504 Loan Program through the U.S. Small Business Administration.
504 loans specifically finance major assets, such as real estate. While there are several eligibility requirements, these loans are fixed rate, come with flexible terms, and are less expensive than other types of financing. A 504 loan is a great option for first-time commercial real estate investors.
You can find solid tenants.
When you own commercial real estate, tenants are your lifeblood. Having solid, long-term tenants will keep cash flowing, helping you pay back loans and adding to your bottom line. Finding such tenants can be challenging.
Advertising the property online is one of the best ways to attract tenants. You create a profile for your space (link to: https://www.realmassive.com/signup), include lots of appealing amenities, and take enticing photos to stir interest. You can share the listing on social media to attract even more interest.
You’re not dependent on the cash from rent.
While commercial real estate brings a nice return on investment, don’t rely on the rental income as your sole source of income (or even a large part of it). Chances are there will be times that you have vacant spaces—and, no matter how successful your tenants are, they might not always pay their rent on time. Not to mention that companies can go out of business.
You understand the responsibilities.
Being a landlord comes with many responsibilities. You will be responsible for maintaining the property, making any repairs and keeping it in a state that will attract tenants. You also have to insure the building and keep all certifications, like fire safety, up to date. Landlords are also responsible for creating lease agreements and sticking to the lease’s conditions.
If you’re ready for the responsibility that comes with being a commercial landlord, these tips will help you get started.