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How to Prepare for That First Investment Property Purchase

Posted on August 10, 2012 by Jeff Hobbs

– How to Prepare for That First Investment Property Purchase –

How to Prepare for That First Investment Property Purchase

Buying commercial real estate is not for the faint of heart.

Following are some essential tips that will help investors through their first commercial property purchase:

Prepare Financially: Commercial investments require larger down payments than residential properties. It is not unusual for commercial lenders (many different types of commercial lenders) to require 10 to 30% down in order to purchase a business or commercial property (owner occupant commercial real estate). Commercial investment properties (owner’s business does not occupy the real estate) often require 25 to 50% down payment. Investors must also have capital in reserve to make upgrades to the property or sustain the initial business.

Select a Qualified Commercial Real Estate Agent: Commercial property sales can be very complex for an unfamiliar buyer. A real estate agent can educate you on the process of buying, explain about any pitfalls and identify properties that meet your criteria.

Decide What Type of Property to Invest In: Each property type has unique issues that need to be addressed. Gas stations, multi-family residential complexes, hotels, commercial residential mix, industrial, general office, land, medical office, and retail buildings all have benefits and drawbacks.

Be Confident and Aggressive: First-time commercial buyers need to go into the transaction informed and knowledgeable (seek brokers and developers that educate instead of dictate). Buyers will be required to make quick decisions and work to deadlines with their broker. By being confident in your decision and aggressive with your offer and negotiation (find a broker with financial education to help you learn how to quantify decisions) you’ll get the best deal possible (seek “win-win deals” through “math” and uniting the goals of each party in the transaction).

First-time commercial investors (investment properties, owner occupied purchases, and leases are all “investments”) have a major hurdles to overcome when entering into the world of commercial real estate investments. By finding a qualified commercial real estate brokerage team, and being confident in the decision (learn the math!), investors will find an investment that can provide profits for years to come. After you find a deal with your broker, consult with your cpa, attorney, and any other trusted advisers before making a final decision.