Many investors in the real estate market concur that investing in commercial property is more rewarding than investing in residential property. As such, if you are looking to buy real estate, it is advisable to go for commercial property as opposed to residential property. Additionally, leases offered on commercial properties are longer than those offered on residential properties. The key to reaping huge profits or purchasing the right commercial property to let lies in your ability to spot the right deals. The following is an outline on how to spot good commercial property.

Finding a Good Commercial Real Estate Deal

1. Know what the insiders know. Learn to think like a professional. You should know about how commercial property is priced from region to region. Particularly, learn about market trends for commercial properties to let and how they are different from those of residential properties. If you are in tight credit situations, learn to always have some cash in hand since many commercial property lenders require you to raise about 30% of the total property price.

2. Have an action plan. Set the parameters involved. For instance, how much are you willing to pay? Where are you going to look for the property? How do you expect to profit from the deal? How much rental space is available? Have predetermined parameters and expectations of the property you want.

3. Learn how to identify good deals. Be like a professional who can identify a good deal whenever they come across it. Learn their best secrets. This involves having an exit plan just in case anything goes wrong. Learn how to assess all your risks beforehand and how to mitigate them.

4. Learn the vital commercial real estate metrics. Two such metrics are:

Net Operating Income. This is the difference between a properties gross annual operating income and the operating expenses. It must be positive.

Cap rate. It is also known as capitalization rate. The cap rate determines the net present value of future cash flows or profits from property. The higher the capitalization rate the better a property is.

5. Search for motivated sellers. Not everybody advertising a commercial property is a willing seller. Like any other business where the customer searches for the seller, you have to look for them. Look for the “desperate” ones who are willing to sell below the market value- it is the surest way to reap profits. Simply look for those looking to sell urgently due to some compelling reasons.

6. Practice neighbourhood “farming.” This is a great way for evaluating a commercial property to let. Study the neighbourhood in which it is located, talk to the residents and owners and know the value of property within that neighbourhood.

7. Be adaptable. Use all means possible when searching for good commercial property deals. These include talking to real estate agents, using the internet and reading classified ads. A combination of these methods will always lead you to the best commercial property deals.

Good communication and relentless efforts are necessary if you are to spot the best commercial properties. Build relationships and rapport with the owners of the properties and engage real estate agents whenever it is necessary. If you need to hire commercial real estate agents, always hire the best ones who are skilled and experienced.