Find the Best Commercial Real Estate Deal in 2017
As the New Year approaches, brokers and investors in every market are looking ahead to 2017. As you plan out your investment strategy for the next 12 months one thing is certain, no matter the area or asset type you choose to invest you will always be looking to get the best deal. While commercial real estate assets are always a smart investment, how do you properly assess the right properties for you? And more importantly, how you tell a fantastic deal from a serious flop? Seeing success in commercial real estate investing is just like anything else – you start with a solid plan. Here are our best tips to help you find and gauge a great commercial real estate deal.
[bctt tweet=”Start 2017 on the right investment foot, here’s our top strategies to finding the best #CRE deals. ” username=”SVNPercival”]
Define and Set Your Parameters
In any type of investment the best strategy is knowing exactly what you want, what you need, and how to get it. When finding a commercial real estate deal this is the most important starting point. What can you afford? What rate of return do you want to see? What is your timeframe? What are your financing options?
While there are many questions that pertain to each specific asset type (multifamily, office, industrial, land, etc.), it’s super important to get a very clear and accurate picture prior to shopping for any type of commercial real estate investment.
Determine Your Investing Strategy
It’s not enough to simply find the best commercial real estate deal; you also need to know how to produce returns on that investment. There are several different strategies for making money in commercial real estate, and here are the three most common.
Buy and Hold
The most popular commercial real estate investment strategy, the “buy and hold” is exactly as it sounds: purchasing a property and then holding it for an extended period of time. Either you can see returns by leasing the property and collecting monthly cash flow or simply hold on to the asset until you can sell at maximum market price.
Flipping is an investment strategy that involves purchasing a commercial real estate property at a low price (typically a distressed asset), improving it, then selling it for a financial gain.
Wholesaling is the investment strategy of scouting out amazing commercial real estate deals, writing a contract to acquire that asset, and then selling that contract to another interested buyer for an “assignment fee.” This fee can be between $500 and $5,000 depending on the deal. Generally in wholesaling the investor never actually owns the property they are selling but instead acts as a middleman.
Learn the Key Commercial Real Estate Metrics
In order to assess whether a commercial real estate investment is a “good deal” you first need to understand the key metric used to define returns. The two most common are included below.
Net Operating Income (NOI)
Before you make any commercial real estate investment, you want to ensure that the asset(s) have a positive Net Operating Income (NOI). To calculate a property’s NOI you take the yearly gross operating income and subtract the yearly operating expenses.
Capitalization rates, commonly referred to as “Cap” rates, are used to estimate the present value of future cash flow for income producing properties. Pretty important when trying to find the best commercial real estate deal. Examples of properties that use this valuation are office buildings, multifamily properties and retail centers.
Be Adaptable When Searching for Commercial Real Estate
One of the most important rules to finding the best commercial real estate deal is being adaptable! There is no “one right way” to finding potential investments, so use all the tools that are available to you.
- Farming, i.e. physically driving around a market location that interests you
- Online listing platforms
- Classified ads
- Hiring a professional commercial real estate broker
Need help finding the best deal? We’re here for you!
If you are in the market to buy, sell or lease commercial real estate investments in 2017, you’ve come to the right place. Our knowledgeable and professional Advisors have the above tips and strategies down pact and are here to help. Contact one of them today at 704.632.1000.
Percival Partners is one of Charlotte’s most recognized and respected commercial real estate firms with more than 50 years experience in the region. Our professional and experienced real estate Advisors are in the business of listening, understanding, and adding value. No matter the commercial property type you own or seek, you can count on the Percival Partners team to maximize your return and peace of mind. To reach us, you can call us at 704.632.1000 or follow us on Twitter at @SVNPercival, LinkedIn or Facebook.