Whether you’re new to real estate investing or looking to expand your existing portfolio, you’re likely questioning how you can find the best investment property. The goal of any investor is to make as much money off your investments as quickly as possible, which means the last thing you want to do is add a dud of a property to your portfolio. Instead, you need to be meticulous in your search to ensure the property aligns with your goals. When looking for the best investment property, you need to have a thorough understanding of:
- Your budget
- The market
- Your desired involvement
- The desired property use
Although there may not be the “perfect” property, with these factors in mind, you’ll be able to find an investment property that will help you achieve your goals. But where exactly do you get started on your search for an investment property? Follow along as Price Commercial Properties shares a few tips for finding the best investment property.
Evaluate Your Finances
This shouldn’t come as a huge shock, but one of the most important steps in your investment property search is understanding where your finances stand. Will you be purchasing an investment property in all cash? Are you going to need to take out a loan? What is the maximum budget you’re willing to shell out? Understanding these details before you start your search can save you from falling in love with an investment property that isn’t a financially sound decision.
Along with having enough money to make the initial purchase, you’ll also want to factor in the inevitable things that may go wrong while owning the investment property:
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Ongoing maintenance
No matter the age of the property you’re looking to purchase, you should expect there to be regular maintenance costs over the years. There are going to be unexpected repairs that pop up. You should plan for potential issues related to the plumbing, HVAC, and roof, as well as other areas. While you may be able to cut costs by fixing some of these issues yourself, sometimes you will need to call in a professional that may cost you a bit more.
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Vacancies
Your goal as a real estate investor is to purchase a property that you can then rent out to tenants. However, you need to consider the fact that you may not be able to have your property occupied all of the time. Depending on the length of your leases, you may find yourself with a gap between tenants where you will need to comfortably float any costs since you will not have income being generated from the property at that time.
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Natural disasters
Depending on the market where you’re purchasing an investment property, you may want to consider the types of weather or natural disasters you’re likely to experience. If the area is susceptible to hurricanes, floods, or other disasters, you must have the right type of insurance in place to protect both yourself and the property from damage.
When evaluating your finances, consider the money you’ll need to have upfront for the initial purchase, as well as any potential expenses if something were to go wrong.
Types of Investment Properties to Consider
Depending on your real estate goals, you may be leaning towards one of two types of properties: commercial or residential. There are pros and cons to both options and the decision ultimately comes down to which aligns more strongly with your goals. To ensure you’re making the right decision, we’ve outlined a few of the differences between commercial and residential investment properties.
Commercial Property Options
Investing in commercial real estate means you won’t be working with the average individual, instead you’ll be working with businesses looking for office or manufacturing space. A few types of commercial properties you may consider are:
- Office space – This is the most common type of commercial real estate. Purchasing office space allows you to rent it out to companies to use as their office. Depending on the property, you may be able to utilize the office space for multiple tenants — increasing your monthly income potential.
- Warehouse space – Along with office space, you may want to consider investing in warehouse space that companies will rent out for manufacturing, storage, shipping, and more.
- Retail space – Investing in retail space comes in a few different forms. You may purchase a retail space that accounts for one retail tenant, but you may also look into purchasing a larger commercial property such as a mall or complex of space where you can rent to multiple retail tenants.
- Mixed-use – In some instances, you may find a commercial property that also has residential properties above it. In this case, you would be able to focus on a commercial investment while dabbling a bit in residential real estate.
Along with standard commercial real estate investing, you may want to consider investing in a residential-type property as well. While the below properties are considered commercial, they have unique features. Having your multiple tenants living in the space is different than a 9-5 office building:
- Multi-family – This type of residential property allows you to lease out separate, yet attached spaces, to multiple tenants. The most common type of multi-family property is a duplex.
- Apartment building – If you’re looking for a residential investment that can be rented out to multiple tenants at once an apartment building may be the right choice.
Questions to Ask Yourself Before Purchasing an Investment Property
Be sure to ask yourself the following questions if you’re ready to pull the trigger on an investment property:
- Who will maintain the property? Will you handle any maintenance or repairs, or will you hire a property management company to handle any issues that should arise?
- Is your physical distance from the property an important factor? Do you want to purchase a property where you live? Is there another market out-of-state that you want to get involved in?
- What methods will you use to rent out the investment property? Will you aim for long-term leases or are you considering short-term options like Airbnb?
- Will all the spaces in the property be rented out to tenants? Do you plan on utilizing some of the space (i.e., office) for yourself and your real estate business?
By thinking about these questions during your real estate search, you’ll help narrow down which properties check all the boxes.
Working with a Commercial Property Realtor to Find the Perfect Property
Acquiring commercial real estate is a top choice for many investors for three reasons
- Cash Flow Potential
Investment properties provide investors with both short-term returns (rent payments) and long-term returns (selling the property).
- Diversification
When your portfolio is diversified with more than stock market shares, you are helping minimize risk. Longer holding periods (5+ years) and maintaining assets in different areas with different risk profiles, help your portfolio avoid the daily ups and downs of a portfolio full of stocks.
- Appreciation
Your properties are real assets that can increase in value over time depending on their location, amenities, and potential increased rental income. For most investors, their big payday comes when the property is sold or refinanced for more than the cost to build and/or upgrade.
Ready to make the best property investment for your portfolio? Contact us today!
Finding the perfect property to invest in is difficult, but with a Price Commercial Properties realtor on your side, you’ll be on your way to investing in the best. We are one of the fastest-growing commercial real estate firms in the Piedmont Triad. Why? We simply and effectively do the hard work for you. If you are ready to find your perfect property in commercial real estate, we’d love to help! Whether it’s your first property or you already have a strong, diverse portfolio, we support investors of all sizes. We know this opportunity is an important part of your plan to secure your financial future. That’s why we will provide you with the local market research you need to make the best decision.
