Many entrepreneurs and investors earn their fortune in commercial real estate without considering the difficult path. Though this market can be challenging to break into, it offers impressive returns for those who are successful. One of the most lucrative sectors of real estate investing is habitational and commercial property. Indeed, when you invest in a habitational property, you can set yourself up for long-term success and use tenants’ rent payments to cover the mortgage. Before you jump into this, though, there are a few things that you must know about owning commercial real estate.
Four Things to Consider With Commercial Real Estate
Consider the following four aspects of your investment.
Assess Local Habitational Comps
Assessing comparable properties before you commit to investing in a commercial property is vital. You might find a multiplex that seems like the steal of the century, but if other properties in the area have similar pricing, there’s likely a reason why the market values are low. As you research comps, look at the average rents in the area and the cost of utilities and home services.
Consider the Costs of Upkeep
Prospective real estate investors must also consider the cost of upkeep a property will incur. If an apartment building features lighting in a common outdoor area, the owner will have to pay for the resultant electric bill every month. Similarly, if a property offers centralized trash service, this expense will fall on an investor to cover. Seemingly small expenses such as these can add up quickly, causing a financial burden and offsetting the potential profit that the property could generate.
Consult With an Investor
Every budding real estate investor should partner with a more experienced investor who can offer guidance. Mentorships like this allow investors to make better decisions and avoid unnecessary risks. Advice from a mentor will help new commercial realty investors identify potential pitfalls such as high vacancy rates, excessive maintenance costs, or liabilities that emerge from the condition of the building. All of these factors could cause an investment to backfire and ultimately become more cost-prohibitive than profitable.
Insure a Habitational Investment
Finally, a commercial real estate investor should know how much it will cost to insure a habitational property. Risk factors such as a property’s age, condition, and location can significantly impact the cost of an insurance policy’s premiums. Regardless of the cost, investors must choose the right commercial property insurance to protect their investments. Insurance should cover risks such as general liability, pollution liability, and lost leases. You can also invest in additional coverage with a policy that includes umbrella coverage and employment practices liability coverage. Partner with an insurer who can offer you the coverage you need for your portfolio of properties.
About Haughn & Associates
Founded by Michael Haughn in 1986, Haughn & Associates is a full-service, family-owned, independent insurance agency based out of Dublin, Ohio. H&A strives to provide the best possible price and unique insurance solutions across a myriad of industries, including construction, IT, Habitation & Commercial Property, Agriculture, and Engineering. Devoted to providing the best of business insurance, life and disability insurance, personal insurance, employee benefits, and bonds, H&A is proof that success lies in long-standing client relations and satisfaction. To learn more about how H&A can be of service to you, contact us at (877) 802-2278.
