8 Fundamentals of Commercial Property Investing for Beginners , by Steve Peterson.

By Steve Peterson

8 Fundamentals of Commercial Property Investing For Beginners

The real estate market is growing in all dimensions. Much like residential property investment, so is commercial investment value appreciation. Oakland has become an industrial market with numerous investors wishing to start up commercial investments. Any investor in Oakland looking forward to starting this type of real estate has the advantage of receiving steady cash flows, experiencing lower vacancy risks, always having readily available tenants, and increased income potentials. Although a highly lucrative type of investment, commercial real estate comes with risks, especially for first-time investors who are beginning to diversify their portfolios. However, with the appropriate strategies, it becomes easier to earn more returns on the investment.

WHAT ARE THE BEST FUNDAMENTALS? Firstly, understand the various transactions

–the investor should determine if the potential commercial property meets their financial goals and criteria. For example, a commercial property may have low monthly cash flow; this should not make an investor go for the property with higher cash flow but more risks. Also, the value-added properties differ, and investors should first consider the costs of renovations, improvements, and deferred maintenance needed. Similarly, investors should consider the likelihood of appreciation for that particular property. The possibility of that commercial property to appreciate in future, the better.

Multi-family investment strategy – typically, this commercial property has cash flows with high occupancy rates and low expenses since most expenses are covered in the rental rates earned and units are leased at or above the market rates. However, investors should determine how much operational costs they will need on maintenance and renovation to know if they will rent the property with low or higher rental rates.

Triple – Net lease investment strategy – This commercial investment involves an agreement where the tenant agrees to pay for all maintenance costs, real estate taxes, and the building insurance. Also, tenants pay for all the utilities except rent. Hence, these tenants save time and resources for investors. This investment tends to have lower risks, and it’s easy to manage.

Understanding commercial property financing

– for any first-time investor, understanding the interest rates, loan length, and amortization is the key entry to comprehending commercial property investment. Interest rates are dependent on current prime rates and how banks borrow the cash needed for loans. Longer amortization means lower deductible debt payment and higher interest rate, while the shorter the amortization, the higher the debt payment and lower interest rates. Loan duration corresponds with the length of the lease.

Comprehend the Role of Property Management

for commercial buildings – any prospective commercial investor should understand that every commercial manager has different obligations depending on their property type in Oakland. Also, they should be aware that the payment rate of property managers is influenced by how much they put into their work.

Determine if Investor Assistance is necessary - in Oakland, investor assistance is usually provided by the industry expert or property team. They are supposed to seek other real estate market opportunities available. The asset manager is often used when purchasing a multi-tenant property. Asset managers are primarily helpful when an investor wants to buy a multi-tenant property. Any beginner in Oakland should opt to have an asset manager since they are experienced and offer guidance throughout commercial investing.

Have proforma knowledge – proforma elaborates the financial analysis of commercial property investment. For example, it reviews the vacancy rates, debt services, gross revenue, and operating expenses. All this gives the investor a better understanding of the commercial market situations. Finally, understand the triple net lease- this type of lease is unique, and it has different criteria that every anticipating commercial investor should know before investing in commercial property. These criteria include; the absolute triple net, double net, grade of tenants, and lease terms.

Commercial property investing, like residential property investment, has its benefits and risks. Any person willing to start commercial investment should be well informed of the market and be experienced enough to understand how this investment works. The use of proper strategies, especially for beginners, is a core factor to avoid uncertainties. Are you planning to begin commercial property investment in Oakland? You don’t have to start the journey all alone! Reach out to Eric Lawrence Frazier MBA DRE 01143484 and get the best investor assistance you need, or contact Steve Peterson, an agent familiar with the commercial market in Oakland, to give you the best advice on how to start your dream investment.

ABOUT STEVE PETERSON

Steve Peterson CCIM is the Broker/Owner of Infinity Investments, a commercial real estate brokerage and investment firm based in Oakland, California. His focus and expertise are in apartment buildings, but he has experience in office and retail property, working as both a broker and principal. Steve has been in the commercial real estate business for 15 years as an investor and a broker/agent. To read more about Steve, go to; https://www. thepowerisnow.com/steve-peterson/

ABOUT THE POWER IS NOW MEDIA, INC

The Power Is Now Media is an online multimedia company founded in 2009 by Eric L. Frazier, MBA, headquartered in Riverside, California. We advocate for homeownership, wealth building, and financial literacy for low to moderate-income and minority communities. The Power Is Now Media corporate office is located at 3739 6th Street Riverside, CA 92501. Ph: 800-401-8994 Website: www.thepowerisnow.com.

Eric Lawrence Frazier, MBA. President and Founder, The Power Is Now Media

References

https://bfpminc.com/commercial-property-investment-for-beginners/ https://www-realwealthnetwork-com.cdn.ampproject.org/v/s/www. realwealthnetwork.com/learn/commercial-property-investing-for beginners/amp/