Posted on: November 19, 2015
If you’re a sophisticated investor looking to diversify your portfolio, you may be interested in commercial real estate for its potential for high returns and immediate cash flow.
However, if you’ve never invested in commercial real estate, you may not know how to unlock the best value. Don’t let this deter you from pursuing lucrative commercial real estate investment opportunities!
You can either learn how to unlock the value in these properties yourself, or you can work with a trusted investment partner who already knows how to achieve maximum returns.
Here are the top five critical questions to ask when determining how to unlock a commercial investment property’s value:
1. Is the commercial property being managed well?
If a property has had poor management in the past, it may not be reaching its full potential. Improving the way the property is managed can make it much more profitable for investors.
2. Does the commercial property have the right tenants?
In many cases, a commercial property is leased by legacy tenants that are not paying current market value for the space. At renewal, it’s important to increase leases to reflect the appropriate value; current tenants can either sign on at the new rates or vacate the property to allow you to fill it with new tenants.
3. Can improvements be made to the commercial property itself?
An investment property may be distressed and in need of some maintenance or renovating to unlock its true value. You (or your investment partner) can hire construction and skilled trade companies to transform the property and increase its worth.
4. Is the property zoned to create the best return?
Sometimes legally re-zoning a property, for example from residential to commercial, can make a big difference in its profitability. It can be tough to determine whether this is the case, as you must have a good understanding of the underlying factors, the area, and the potential profit; however, if you work with an investment partner who is experienced with this, re-zoning can occasionally be a great way to unlock additional value.
5. Will the commercial property experience significant capital appreciation in the near future?
This is the most common aspect people consider when investing. It’s important to invest in an area that is showing signs of economic upturn, but where values haven’t already climbed too high. With this strategy, understanding the real estate market and economic trends is essential.
If you invest in a commercial property with significant unlockable value that is well-positioned to benefit from economic upturn, you will see an excellent return on investment.
>> MSR Holdings is your investment partner for Florida commercial real estate investment properties. We have identified Florida as a key market of opportunity for investors from Canada, the US, and internationally. Contact us to discuss investing in commercial real estate.
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