Connecting the dots when it comes to commercial real estate simply means using common sense in deciding which property or properties to purchase when investing in commercial income properties.
Examples or illustrations are the best method to understand how to connect the dots. When single-family houses become difficult to borrow money on or get approved by lenders, the next best thing to look at are apartments. When the public is forced to go into apartments, rents will go up, landlords will be happy and investors will get great results. When apartments get filled storage facilities do very well.
Most apartment dwellers need additional storage for their furniture and accessories thus the storage facilities profit and investors profit along with them. When retailers today start to suffer in sales and close stores and consolidate, the on line Internet sales requiring warehouses all over the country for distribution greatly benefits.
Medical facilities, surgery centers and other related hospital requirements such as office space and labs need to be located right near the major hospitals in the area of the population centers. The areas that contain senior citizens such as Florida and parts of California require assisted-living memory care in order to keep up with the demand for the elderly. When universities and colleges are growing at a fast pace, student housing is required and the closer the housing to the campus the better.
Diversification into different asset groups has been discussed for years in the stock market and is just as important in the commercial real estate sector.
When one sector is going up another sector could be going down and putting less money into different asset groups protects the commercial real estate investor regardless of the timing of rise and decline. Retail, warehouse, office, medical, apartments, student housing, senior care, storage or just a few sectors that a savvy real estate income property owner should consider.
There are many forms of commercial real estate investment such as:
- triple net leases,
- value add properties,
- single tenant,
- apartment and student housing facilities,
- medical facilities,
- office ,
- day care and learning centers to consider.
Each category has its own strength and weakness and only a true professional real estate broker will be able to explain the differences to the average commercial real estate investor. In addition, a real estate broker with years of experience in the nationwide market that perhaps is working with a local real estate broker is your best bet to consider hiring.
Once you pick out a sector, then you need to decide the type of building, the area that it’s in, the price per square foot, the rent per square foot, the sales per square foot if it happens to be connected to retail, the convenience to highways and demographic population that is surrounding the building. Demographics include income levels, age levels, traffic counts, spendable dollars, population per mile just to name a few.
The building that you purchase may or may not be a specialized facility just for the one tenant or tenants that are in there presently. Keep in mind, vacancies occur in your building and the need to be more generic in nature to attract more types of tenants may be a good idea.