Although investing in residential real estate is certainly a great way to create wealth, it can be unpredictable with tenants coming and going so often. Investors in New York and around the nation often look toward commercial real estate to help diversify and improve their portfolios. If you are new to the world of commercial real estate, it can be complicated to understand what areas to focus on, so the following includes a few of the most important things to know before investing in commercial real estate.
Understand your market trends
Perhaps the most important thing to have at your disposal before investing in commercial real estate is a deep knowledge of the market you’re seeking to invest in. The mistake most investors make is only looking at the companies within the region and not the economics of the area. The following is a list of other areas to look into before investing:
- Local unemployment numbers
- Current and future tax rates
- Trending occupations
Conducting a proper risk assessment
The fact is that no two commercial properties are the same. No matter how much or how little you have in your portfolio, it is always important to conduct a proper risk assessment of the property. The tenants, property owner and property condition are just a few of the things you must research before investing.
Outstanding litigation and liens
Although this is a part of the risk assessment you should conduct, it is important to separate this information into its own category as it may leave you in serious legal trouble. One of the first things you must do before investing is research and find out about any outstanding litigation and liens against the property owner or tenant.
Much of the research done on commercial property should be done alongside a trusted attorney. An attorney may be able to catch legal issues that the average person would not know about.