Factors To Consider When Investing In Commercial Properties
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Investing in commercial properties is always
rewarding. Commercial properties promise overall returns of 15-16%. However,
you need to consider a few factors to reap maximum benefits from commercial
properties. Research is of paramount importance when venturing into real estate
investment. Thorough research leads to well-informed decisions that will prove
beneficial for investors in the long run. Commercial real estate investments
provide additional income, security, and longevity, unlike other forms of
investment.
5
essential factors to consider
Let’s look at a few important factors to
consider when choosing a commercial property for investment purposes:
- Decide the property type
There are a vast number of choices for
commercial real estate investment. Commercial real estate comprises industrial
complexes, retail shops, big apartment buildings, office buildings, mixed-use
spaces and many more. Decide the kind of property you want to deal with as
returns will vary for each property. Assess the risks involved in each property
type and make an informed decision.
- Assess the location
The location of the property has a direct
impact on the returns. The property needs to be easily accessible. An office
building will need certain kinds of amenities to be successful while a retail
plaza will need good vehicular and foot traffic in the location. Consider
locational advantages before investing in a property to generate maximum
income.
- Pick the right builder group
Choose a builder that has a proven track
record of successful projects. This ensures top quality and craftsmanship and
saves you from wrong investment decisions. Investing in an inferior-quality
property will hamper your profit-generating potential in the long run.
- Consider demographics
A location with a steadily declining
population or a majority of older population is probably not the right choice
for property investment. The demographics of a location will determine whether
your investment will be successful or not. A location with young, working
population is more favourable to attract better financial gains.
- Calculate projected ROI
Before you invest, it is advisable to have a
fair understanding of the projected returns. This will help understand how profitable
your investment will be. Projected ROI can be calculated by taking factors such
as occupancy, rental rates, projected appreciation and any value add
opportunities into consideration.
- Know property characteristics
Some properties are ready for use while some
need additional investment to get the place up and running. Know the size,
amenities, layout and overall condition of the property to ensure the property
is in line with your expectations.
- Consider market trends
You will gain higher returns if you have a
strong grip on the fundamentals of investing. Favourable market conditions will
tip the scales in your favour and help you attract more income. Market
conditions are unpredictable and it is not possible to predict trends and
calculate next moves with 100% accuracy. However, having a sound knowledge of
market trends will reduce your risk profile to a great extent.
Investing in commercial properties
opens the doors to lucrative opportunities. By bearing these factors in mind,
you can successfully navigate the commercial property market with ease.
Article authored by: Team Proptranxact
Date: 28th October, 2023