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Questions to ask yourself before investing in commercial property

On Behalf of | Sep 9, 2020 | Real estate

Pursuing commercial property is a significant decision. Setting aside what ideas you have for the property in the future and the associated costs, the initial investment is often substantial. Because of this, you want to make sure no question or concern goes unanswered. 

But what questions should you ask the seller – and yourself?

Start with the following.

1. How good is the location?

This answer is vitally important. If numerous businesses have cycled through this property, that may be a tell-tale sign to move on. Also, remember that just because a city has a booming real estate market, that doesn’t necessarily mean it’s a haven for commercial properties. Is the city developing around the property that sparked your interest? Is the location suited to attract high occupancy and high profits?

2. Do the income guarantees make sense? 

Also, are they in-line with similar properties in the area? One aspect of this is to research the developer and their track record.2. 

3. What is your exit strategy?

Your exit strategy should be flexible. If events occur that subdues the property’s sustained attractiveness, or the specific conditions surrounding the investment make you weary, trust your instincts. A bad investment on the scale of a commercial property can be damning to one’s financial portfolio. To provide yourself flexibility, make sure the investment conditions include a “long guaranteed income period with attractive yields.”

4. Identify your goals and objectives

Does this commercial property fit your present and future goals? What opportunities does the property offer? What threats are in the way of success? Do the strengths of the investment outweigh the weaknesses?

You never know what will come up when pursuing a large investment, but doing your due diligence can ease your worries or open your eyes, offering a way out.