DC Fawcett’s Gem – The 7 steps to make a successful real estate deal

In spite of commercial real estate values dropping down during crisis, there has been a steady increase in the number of investors planning to invest in commercial real estate. So here are 7 steps for you to find a good commercial real estate deal as reviewed by DC Fawcett. 

Step 1: Research thoroughly

Know the ins and outs of the commercial real estate industry. Commercial real estate industry calls for more incoming of money. The inflow of cash resulting from office spaces, retail spaces, it parks, malls, shopping complexes, hotels and multi residential complexes is obviously enormous as compared to single residential complexes. Also leases for commercial complexes are longer than for residential homes. Multi residential homes often have leases for one year and office and retail spaces for a period of 5 years. You need to have some good hot cash to lay down before you buy a commercial property.

 Step 2: Set parameters

You need to have a plan. Chalk a plan comprising of answers to questions like how much can I pay? How much will I profit? How to maintain a balance between obtaining maximum rent and keeping the vacancies and tenant turnover minimum? And so on. Commercial real estate agencies can help you to come up with a fine plan as they often advise on these lines. Their specialized knowledge on commercial real estate which varies from city to city, state to state and suburb to suburb can come in handy.

Step 3: Keep yourself sharp to identify the most lucrative deals

You must keep yourself informed and updated about various real estate commercial strategies which will ensure to get you the best or at least a safe deal. You must assess the various risks involved like damages that can occur, cost of repairs and also make sure that the deal meets your financial targets. Know to

Step 4: Learn about commercial real estate metrics

Some of the metrics are

·         Net operating income : the gross operating income for first year minus operating expenses for the first year

·         Cap Rate – to find the value of income producing properties

·         Cash on cash : formula which  helps investors to decide their principal investment based on the comparison of first year performance of rival properties

Step 5: Target sellers who will let you make the best of the deal

Aim at finding sellers who are willing to negotiate the property prices. They must be ready to sell below the market value.

Step 6: Make a thorough study of the demographics of your neighborhood 

Do this to estimate the price of commercial real estate and its demand in that area. Factors such as age, race, gender, vacancies, migration, population etc comprise the demographics of an area. They can influence real estate crucially.

Step 7: Be open to sources of information

Browse the web, read classified ads and use real estate agents to keep your information bureau updated. Real estate agents often give you the best of information about deals. You could plan strategically to hit the best deal.