10 Rules of Commercial Real Estate Investing

real estate investment

Planning to invest in commercial real estates? commercial real estate investment is simple as long as you’re acquainted with the basic processes. Before making any decision, consider some set of rules/techniques before investing in a commercial projects in Pune to earn much higher returns from these.

1. Right location

The location which you choose for investment is very important. Because the rent and capital appreciation are heavily dependent on the location. Therefore the location can be wisely chosen by considering below points
a) The location should be easily accessible via various modes of transport and it should attain some adequate visibility in the area.

b) The location should be close to other commercial hubs.

c) The land on which the property is constructed should be free from legal disputes, and environmental concerns.

2. Quality of the property

Choose those properties which meets all the standard qualities. Look out for a LEED Gold/Platinum certification, because standard qualities will fetch the investor higher rents, better tenant retention and higher capital appreciation. Look for those buildings which have nicer looking lobbies, more elevators, higher ceiling heights and better views.

3. Scope of growth

Consider the factors like demand vs. supply ratio, market rent vs. in-place rent and yield ratio. These all parameters can affect the scope for growth. 

4. Look to diversify

The key point in real estate investment is diversification. Try to invest in various fields like selecting optimum property size to multiple property investments. This is the ultimate way to reduce the risk and maximize the returns.

5. The Status of the Interior

Usually, commercial properties are built like a bare shell covered with four walls. Other things like interior designs are done by the tenant as per individual taste. As an investor be clear from your end.

6. Lease structure

Understand how the lease is structured and know the inherent risks which are involved because Commercial lease structures are different from residential lease structures. Structures are like 3+3+3 or 5+5+5 meaning 9-year (or 15-year) lease with escalations every 3 years (or 5 years). There can also be a lock-in period (generally 3 years) during which the tenant cannot vacate the property. The longer the lock-in, the better it is for the investor.

7. Security deposit

Security deposits in commercial properties can vary between 10 and 12 months’ rent. When a tenant offers less than this period it means that they could be looking at a short-term option or have cash flow issues. Be careful with the initial deposits and lock-in periods.

8. Use Professional Property Management

Seek help from property management company. They possess a vast knowledge about  tenant-landlord laws, good marketing skills, and strong people skills to deal with tenant complaints and excuses.

9. Maintain Control

Try to own a real estate through funds, partnerships, or other paper-based investments where you own shares or other securities of an entity you don’t control and Don’t leave it up to corporations or fund managers.

10. Get the documents in order

Getting all the documents in order should be your foremost priority which is much essential for a successful commercial real estate investor. Complete all the legal ownership formalities to avoid any risks in future.

Anshul Group is one of the most prestigious names in Pune’s real estate landscape. Having expertise in qualitative residential and commercial projects, it is recognized as a leader in residential and commercial construction. Visit us on www.ansulroup.com for more information.

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