Many are getting interested in investing in real estate especially residential ones because they are accustomed to it. However, to balance their portfolio, they are also targeting commercial specifically in busy cities such as New York. However, for one to be able to be successful in commercial real estate nyc, he must know the various rules and terms of the market.
Commercial vs. Residential
Here are the differences between residential estates to commercial real estate investments.
- Commercial properties help diversify the risk – if you’re owning an apartment and you happen to lose 5 tenants, you will lose one-fifth of your income unlike if you own a single, leasable house, you will lose the entire rent.
- Commercial space is valued differently. The income you can generate in a commercial real estate is directly related to the functional square footage compared to the case of a residential estate.
- It generates greater cash flow. With per square foot of a commercial estate, you can yield higher than those of a residential. If you will lease a multi-unit commercial space, you can accommodate more tenants to earn more income than having a single family unit. Moreover, commercial properties generally lease longer that aid in the stability of cash flow.
- Most banks value commercial properties and would want a higher down payment compared to residential spaces.
As with any business investment, it always pays to do your homework. Look for the vacancy rates if possible with its previous owners. Try to talk also with storefront managers for more tips and recommendations. You will surely find significant information – any plans of renewing their leases? Are there any residential properties to be built within the area? Is the site zoned accordingly? Taking the time to understand better the ins and outs of investing in commercial real estate can be extremely rewarding personally and financially.
Finding the Right Commercial Real Estate Deal
There are myriad of reasons why commercial real estate is a better investment than residential. Commercial owners are enjoying the economies of scale, cash flow, and the abundant market for affordable property managers. However, you should evaluate the best of these properties and separate the real deals from duds.
- Insiders know better – think like a pro. In simple math, you will earn more with multiple dwellings than in a single-family unit. This paves the way for steady income. Furthermore, if you are in a tight credit environment, make sure to at least have adequate cash in hand. Lenders would like to see around 30% down payment before they say “go”.
- Find motivated sellers – your job here is to find customers to drive your real estate business. Nothing matters until you find a great deal in real estate. You can always find motivated and eager sellers that are willing to negotiate so better be patient and creative to get them.
Finding and acquiring a commercial property is more than just farming neighborhoods, getting a good deal, or making signals to have sellers come to you. Basic communication, passion, and skills will benefit you the most.