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Essential Guide to Commercial Property Investment
Aug 27, 2024
Investing in Commercial Real Estate
Introduction
The goal is to prepare you to buy your first commercial property.
Five helpful downloads will be provided.
Choosing the Right Property Type
Property Types
Office Buildings
Retail Spaces
Warehouses
Multi-family housing
Considerations
Align property type with your investment goals.
Determine if you want steady cash flow or long-term appreciation.
Decide on tenant type (corporate vs. individual renters).
Assess day-to-day management involvement.
Consider hiring a property management company.
Assess your skills and preferences (hands-on vs. passive).
Specialization vs. Diversification
Specializing can offer expertise.
Diversifying can spread risk.
Market Research
Research markets with strong fundamentals (population growth, economic development).
Focus on promising sub-sectors.
Types of Commercial Real Estate
Multi-family
More than one unit, familiar to residential investors.
Creates multiple income streams.
Office Real Estate
Multi-tenancy with varying tenant quality (Class A, B, C).
Capital intensive but potentially high value.
Industrial Properties
Flexible, lower cost of entry.
Tenants tend to stay longer.
Retail Real Estate
Shifts towards experiences due to online shopping.
Hospitality Real Estate
Serves travelers; includes hotels and temporary stays.
Financing Options
Creative Financing
Possibility of 0% down payment through seller financing.
Traditional Loan
20-25% down payment range.
Owner Occupied
Possible 10% down payment through SBA loans.
Raising Capital
Utilize investor capital for down payments.
Finding Investment Opportunities
Regularly communicate with your network.
Utilize social media to express interest.
Consider off-market deals through brokers.
Use various online listing services.
Making an Offer
Submit a non-binding Letter of Intent (LOI).
Provide proof of financial ability.
Negotiate deal terms (purchase price, closing date).
Due Diligence
Organize documents in a project folder.
Verify all legal and financial documents.
Physically inspect the property.
Engage property managers and contractors for inspections.
Closing the Deal
Conduct a final walkthrough.
Prepare down payment and closing costs.
Sign all necessary paperwork.
Post-Purchase Actions
Plan upgrades and renovations.
Communicate with tenants.
Analyze and optimize property expenses.
Consider reconfiguring spaces for better income.
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