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By Joel Teo
Retail real estate investment property is probably one of the
easiest type of property to understand when considering
commercial real estate investment. Anyone you ask would tell
you that the shop space with the best human traffic would
fetch
the highest rental. This article will expand on that basic
idea
and explain why this statement is true and how you can apply
it
to your property search criteria to find a good retail real
estate investment.
Before we go into the three reasons why human traffic flow is
important, we want to frame this concept in a larger picture.
Most people when they go to view a shop space for real estate
investment purposes, usually think about what they observe but
fail to appreciate the impact of zoning and development on
human traffic. Spend some time talking to the real estate
agent
and learn all you can about the community, crime, zoning laws,
highway movements and everything you can learn about the area
that your retail store is going to be. You would have gotten a
bargain if you purchased a zone that was slated to be
redeveloped by the state as you would see an increase in
rental
returns and property pricing of your property.
Now that we have covered the broad picture of human traffic,
the following will list three important reasons why human
traffic or the lack thereof is very important when choosing a
retail real estate to invest in.
Firstly, retail commercial property include shops, retail
malls, short retail strips. As mentioned, places with good
human traffic flow, mean more prospective customers and thus
higher rental returns. But it depends once again on the type
of
tenants that you have. If your tenant mix is made up of
convenience stores, and lots of office workers go past as
opposed to residents, then the rental may not reflect such
human traffic flow. Thus while the general rule that the more
human traffic the better the rental, qualified human traffic
is
even better. Thus spending some time to scout around the
neighbourhood is always better than going to the neighbourhood
blindly.
Secondly, commercial prices of buildings and property is
directly proportional the rental income. Thus in addition to
present human traffic, as mentioned earlier you might want to
consider new developments in the area and their impact on your
rental prospects. If for instance a new shopping mall is
opening around your building and your shop space is on the
ground floor, then you will realise that you might be getting
a
whole lot more for your property in terms of value, or the
developer might want to purchase your property at a price
higher than what you purchased it for.
Thirdly, commercial real estate that enjoys good human traffic
will increase the ability of you being able to lease out the
place. Have you ever noticed that some places are bustling
with
business activity. Choose a retail property in such a place
and
you will be able to have tenants coming around to ask to rent
your property. Banks know that a good tenancy would mean a
higher chance on your part to pay their interest so would be
naturally more interested. Thus it can be said that high
rental
occupancy ratios also leads to a perception of the banks of
greater credit worthiness on your part.
In conclusion, human traffic flow is one of the key things and
if not the most important factor to consider when you are
thinking of purchasing a retail rental property. Spending some
time to explore the neighbourhood at different times of the
day
would help confirm whether the real estate agent is pulling a
fast one on you in terms of human traffic flow. Take your time
to analyze the real estate in your area and then take massive
action to generate the returns that you want to get today.
About The Author: Joel Teo runs a real estate investment
website with articles and information on real estate investing
at www.realestateinvestment101.info. To learn how you
can start making money with mortgage foreclosures in real
estate investment today go to:
www.realestateinvestment101.info/Mortgage_Foreclosures.
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