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By Joel Teo
Commercial Real Estate Projects are largely similar to
residential real estate except that they can be many times
larger in terms of scale and may require large amounts of
financing. This article covers three areas that one should be
aware off when contemplating purchasing commercial real
estate.
Zoning Problems
Real estate investment has a lot to do with zoning of the land
and if the zoning changes while you are rebuilding the
property, you might have to incur a larger than expected cost
to convert the use of the property. There was this large scale
residential project that was re-zoned to commercial use. As a
result of the re-zoning, the developer had to spend a lot of
time renovating the inside of the property so as to convert
its
use from a residential property to a commercial office type of
setup. Thus, it’s best to do your due diligence and hire a
proper real estate attorney to do a check on the property for
you to find out if there is impending re-zoning as it can
affect your real estate investment.
Fundamental Utility Problems
The worst problem a real estate investor can face is learning
about the piping and electrical problems of the property he
jut
bought. Thus, spending some time learning about the age of the
building and when the electrical and plumbing system was last
repaired is critical when looking at a potential building to
acquire. The reason is that electrical and plumbing problems
mean that you might have to hack through the walls and
ceilings
so as to replace old metal pipes that are corroding and faulty
electrical circuits. This means in effect that you have to do
massive renovation on the property and unless you are tearing
the building down from scratch and rebuilding it, such repairs
may not be worth your while at all.
Choice of tenants
Most real estate investors purchase real estate to establish
cash flow and leverage their investments. Spending some time
looking at the tenant mix of a commercial building can
determine whether you are buying a profitable property or not.
Some bankers will lend you money in proportion to the credit
of
your largest tenant so you would want to find a property with
credit worthy tenants or source for credit worthy tenants to
take over the lease. So if you have a choice of choosing and
replacing some tenants when their lease is up take some
trouble
to analyze the tenant mix and see if there is anything you can
do to improve it.
In conclusion, we have highlighted three areas that a real
estate investor should take note off when purchasing a
commercial property. Spending some time to scout around the
building and looking at the business directory of the building
can help you figure out the tenant mix and learning if there
are potential piping and electrical problems. But remember to
hire an attorney to help you with the zoning issues.
About The Author: Joel Teo is the owner of several websites
and
takes a keen interest in real estate investment. For more real
estate investment resources go to:
www.realestateinvestment101.info/Investment_Resources.h
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