Commercial Real Estate: Investing in Commercial and Office Buildings
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Commercial Real Estate: Investing in Commercial and Office Buildings

When buying commercial and office buildings, it's very important to verify who the tenants are and how much they are actually paying. Office buildings can be very tricky and a lot depends on the office space market at the time. Residential and even commercial real estate can be booming and, at the same time, office space can be in a huge surplus with many vacancies.
                                 commercial real estate buildings

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Have I verified the tenants?

When buying commercial and office buildings, but even more importantly apartment buildings, it's very important to verify who the tenants are and how much they are actually paying. It's not uncommon for prospective buyers to ask to see actual check-receipts from tenants and bank deposits from the seller. This helps to avoid nasty surprises later on. Don't be fooled into thinking that sellers are always on the up and up. It's happened more than once that an over-eager seller has filled up the units with relatives paying no rent, or with others who are paying a discounted rent. An unsuspecting buyer purchases the property and suddenly discovers the scam. Now he or she has a big rent-up (and sometimes rent collection) problem. By the way, going after the seller can prove elusive and, even if successful, could take years.

Should I get into small commercial buildings?

Another natural starting place for investors looking to move up is commercial buildings. But, before you make an offer on Trump Towers, you might want to consider that strip mall down the street. Small neighborhood malls dot the landscape of US and other and many are extremely profitable. Don't be put off by the fact that there are only a half dozen stores in them. The right tenants with good leases can turn the strip mall into a gold mine. Even better, the wrong tenants with bad leases on someone else's property can offer a diamond mine for the investor smart enough to see the problem, buy the property on the cheap, and get better tenants and leases. The key, of course, is finding it.

Should I work with agents?

Yes, of course. It makes no sense to reinvent the wheel, and agents are out there aplenty. Just be sure you get the right agent. Probably 95 percent of all agents work the residential market. They sell houses day in and day out. If you come to one of them asking about a strip mall, they might agree to show you some. Then, they'll quickly thumb through the MLS for commercial property and the next day you'll zoom out to see what's on the market. That could work. But far better would be for you to find an agent who specializes in commercial property. Sometimes, there's one agent in a large office that does so. Other times, whole offices are dedicated to commercial real estate. That's the kind you want to contact. However, just remember that you're going to be the new kid on the block, so don't try pushing your weight around too much. Ask, don't demand of commercial agents. They want to make a sale as much as you want a purchase and they'll be happy to work on a small deal, when time and energy permit.

Should I consider office buildings?

Yes, but probably not as a first venture. Office buildings can be very tricky and a lot depends on the office space market at the time. Residential and even commercial real estate can be booming and, at the same time, office space can be in a huge surplus with many vacancies. Office building vacancy rates can be astonishingly high when compared to residential property, sometimes reaching 25 percent or more. It's not just the economy, either. Many times it's simply supply and demand. Builders in the midst of an economic boom will often churn out office buildings. However, there is soon so much office space available that the square-foot costs plummet and much of it remains vacant. In some markets, it can take 10 or 12 years for demand to catch up with supply - longer if a recession intervenes. All of which is to say, if you're savvy about office space, then by all means jump in. But if you're wet behind the ears, I would look elsewhere. You just might hit the market during a down part of the cycle.

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Comments (1)

In a good dissertations written a lot of information about the investing of ofice buildings and what people could get after this. 

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