Real Estate Investing Articles
Estate - Three Profit Making Tips
Commercial Real Estate
Projects are, in many respects,
the same as residential real estate investments except for
their size. A commercial develpoment may well be many
times larger in scale and thus require much more money.
In this article we examine three of the most significant
non-financial issues that an investor should consider before
investing in a commercial real estate deal.
Given that most real estate investors are buying property
to generate cash flow and generate profit from asset
appreciation some time looking at the tenant mix of a
commercial building can determine the potential profitability
of a project.
Seeking creditworthy tenants may well assist in gaining
finance on good terms from potential lenders - many lenders
will make an offer that is based upon the credit rating of the
larget tenant. So, finding a project with creditworthy tenants -
or, at least, the expectation of finding them is a priority.
Analysis of the tenant mix with a view to optimising it is an
important part of the buying process.
Success in real estate investment has much to do with
land zoning. If zoning should change during redevelopment
of a property then there will be significant additional costs
associated with changing the use of the property to meet
the new regulations. Due diligence is the key here. Hire a
real estate attorney to check on the property to find out if
there is a likelihood of re-zoning and other legal issues.
Use the attorney to check that, for example, all necessary
accesses are available and that rights of way have been
established and any development will not cause rights of
3) Check Utilities
A thorough inspection of all utilities and their condition
is mandatory. Reinstalling electrical systems and piping
can be very costly and any defect should be factored into
the offer price. In the worst cases, where pipes and wires
are emebedded in walls, ceilings and underfloors the cost
of renovation may make a project non-viable without
So, spend some time
with an appropriate legal advisor,
check and optimise the tenant mix and ensure that
utilities are in serviceable condition. Although these
factors may not be an immediate part of the financial
considerations they should be as shortcomings in due
diligence can prove expensive and, of course, issues
uncovered should be reflected in the purchase price of
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