Appraisers are expert authorities on property values, which gives them unique insight into commercial real estate investing.
Commercial real estate investing can lead to sizable returns through long-lasting tenant agreements. The success of your investment hinges on being able to assess the value of a property accurately, something Ferstl Valuation Services has been doing since 1967.
Before you pick up your phone to schedule a virtual tour of a promising piece of commercial real estate, consider the following five tips from Arkansas’ largest full-service appraisal firm.
1. Identify the Right Locations
As with residential real estate, identifying an up-and-coming neighborhood for commercial real estate investing is crucial. Take the time to learn as much as you can about the area surrounding a commercial property. Do not hesitate to speak with other local real estate owners to gain a better understanding of the area before investing your hard-earned money. Comb through recent issues of the local newspaper or even the business section of a state-level publication, such as the Arkansas Democrat-Gazette, to discover any recent developments that could make or break an investment opportunity.
2. Recognize Motivated Sellers
Finding commercial real estate owners who are motivated to sell takes some practice, but it pays off in the long run. Motivated sellers are much more likely to strike a deal in your favor, potentially even selling below the current market value. Be wary if a seller seems too motivated. You can avoid a desperate seller who is aware of structural issues or other property flaws by doing thorough research and requesting professional inspections.
3. Crunch the Numbers
Always work up a detailed commercial real estate investment analysis of any property before making an offer. You will want to know not only how much you can afford to pay, but also how much you can expect to make in profits off the deal. A commercial real estate investment analysis should include details such as how many tenants are needed and how much rent they will pay. If you have never conducted a commercial real estate investment analysis, you will want to hire a professional appraiser to assist you.
4. Prepare for Down Payments
You can expect to make a down payment of at least a 30% on a piece of commercial real estate. You need to be financially prepared for your investment by having the down payment you need readily available or, at the very least, having a loan approval ready and waiting. Having cash in hand upon making an offer is always a plus in the competitive world of commercial real estate investing.
5. Minimize Your Risks
A rule-of-thumb to consider when investing in commercial real estate is that the best deals tend to have easy exit strategies. That is, you can walk away easily if needed. Appraisals and inspections can also reveal the risk associated with an investment, making you aware of any necessary repairs and potentially weeding out properties that could prove to be more trouble than they are worth in the future.
If you are interested in a commercial real estate investment analysis in Arkansas, contact Ferstl Valuation Services at 501-313-0641 to schedule an appointment.