Tips to commercial real estate investing

Monday, September 19, 2005

When it comes to investing, everybody has certain goals and aspirations. However, there are certain guidelines every aspiring real estate investor needs to know:

* Be careful - Tax laws may change

Don't base your tax investment on current tax laws. The tax code is constantly changing, and a good investment is a good investment regardless of the tax code. The right commercial property with the right financing is what you should look for as an investor.

* Know the costs going in

Know the financial statements inside out. What are operating expenses? What are loan payments? Vacancy costs? Taxes? What does the cash flow statement look like? These are key issues that must be addressed before making a solid investment.

* Know your tenants

If the last rent increase was recent, your commercial tenants may be considering a move. If tenants have a short-term lease, they may be operating there simply to attract unsuspecting buyers.

* Assess the tax situation

Taxes are an integral part of successful real estate investing, and they often make the difference between a positive cash flow and a negative one. Know the tax situation, and see how it can be manipulated to your advantage. It may be a good idea to consult a tax adviser.

* Investigate insurance coverage

If seller's coverage is based on lower-than-current replacement value, your insurance cost may increase when you pay a higher purchase price.  

* Confirm utility costs

Ask the local utilities to verify recent utility expenses, especially if any of these costs are included in your commercial tenant's rent.

* Consult your accountant

Taxation is a key element of successful real estate investing, so be sure to find an accountant who is well-versed with the constantly evolving tax code as relates to commercial property.

* Inspect

Make sure that you always perform a thorough inspection of the commercial property before buying it. Never, ever buy any property without at least examining the site. In some cases, hiring professional inspectors to examine the structural mechanical system may be a sound investment.

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