The commercial real estate market in Georgia offers numerous opportunities for beginning investors. Here are some tips to help you get started.
The first thing that you need to do is to decide on the type of property that interests you and is within your budget. Commercial real estate falls into one of these five sectors:
- Multifamily residences — five or more units
- Office space
- Industrial — manufacturing or packaging
- Retail — stand-alone stores, strip malls or regional shopping malls
- Hospitality — restaurants, hotels and casinos
Each type presents challenges for investors, including vacancy losses and property management costs.
Loopnet.com is a free commercial real estate listing website. Visitors can search for sales, rental and auction properties available throughout the U.S. Commercial real estate agents have additional resources that can benefit you.
Rate of return
There are various ways to calculate the rate of return, but the simplest one is the cap rate, derived by dividing the annual property income by the property value. You often see this number expressed as a percentage on commercial listings. An 8% cap rate means you should earn an 8% return on a cash investment if the annual property income figure used in the calculation is correct.
Most commercial investors work with a real estate attorney because purchase contracts may be complex and different for every seller. In commercial real estate contracts, there is a due diligence period in which the seller provides requested documents, the buyer or their accountant reviews accounting records and an inspector checks the physical condition of the property.
A buyer should not take the owner-provided leases at face value. Forged documents are easy to create. Talk to the tenants and verify the monthly rent and lease expiration date.
Commercial property financing is usually through a specialized commercial bank or the commercial loan department in a local bank. Among other things, the lender considers the borrower’s credit score and the projected cash flow of the investment before approving the loan application.
Improve your chances for success by building a team of qualified advisors around you. Find a commercial real estate agent to help you, and begin your new endeavor.