Fundamentals of Commercial Property Investing for Beginners
Choosing to invest in commercial real estate in Oklahoma can provide exceptional returns. Before you dive in, however, take the time to understand the fundamentals of real estate investment. We will explain a few tips for investing in commercial real estate for beginners.
Real Estate Investing for Beginners
Property investing for beginners can be overwhelming, but these tips can help you determine if you are ready to invest in commercial real estate in Oklahoma and how you want to begin.
Choose Your Strategy
There are three investment categories in commercial real estate when it comes to real estate investing for beginners.
Research is one of the fundamentals of real estate investment. You need to answer basic questions about commercial properties such as office space, warehouses, etc., before investing in one.
What is the monthly cash flow?
How do the risks compare with the cash flow?
What is the value add? – This refers to renovation, maintenance, etc.
When will current leases end? Are the current renters financially stable?
How is the area? Is the property value likely to increase or decrease?
What is the time between the investment and the ability to lease the property?
Multi-family units are standard in property investing for beginners. These properties include general and apartment unit investments.
General multi-family property investments are usually older buildings that require more work. These units typically have lower rent, and they are more challenging to fill before the renovation is complete. Large apartment complexes are usually better maintained and have higher rates of occupancy. They demand less work and typically have lower maintenance.
When choosing a property, ask yourself the following questions:
What is the current monthly cash flow?
What is the necessary value add?
When will current leases end?
What is the potential risk and reward of updating the property?
How does the rent compare with the market?
Triple Net Leases
When investing in commercial real estate for beginners, people often choose to reduce their risk with triple net leased properties. In this situation, the renter is required to pay for the maintenance and upkeep of the property. While this does take away from some of your financial involvement, it will reduce the monthly cash flow. An alternative is a net lease, where the tenant still maintains the maintenance costs, but the owner covers the parking, structure, and roof.
This is a quick introduction to commercial property investing. If you would like more information or help finding the best investment for you, we would be happy to help. Please contact us with any questions.