Are you thinking about making a commercial property investment in Detroit? Before you do, there are a few things you should be looking for. Check out our latest post to learn more about what to look for before you buy!
Investing in commercial property is the natural progression for many investors who want to expand their portfolios. While commercial property in Detroit can be an excellent investment, there are a few things you should know before diving in. Keep reading to learn more about what to look for when buying commercial property in Detroit.
Explore Your Options
When it comes to commercial real estate, there are several different types of properties to consider. You could choose to buy a building that houses a restaurant, or one that holds many boutique retail stores. You could choose to purchase an office building or even a large apartment building, which are considered commercial once they are larger than 4 units. While certain industries might appeal to you more than others, it should all come down to what the numbers are telling you. Don’t rule out housing a restaurant simply because you don’t like to cook! Always keep in mind that not all business types will thrive in all locations.
The location of your building is one of the most important elements of choosing a property. This is particularly true if the business occupying the space is dependent on foot traffic. The location should be easily accessible, visible, and close to other successful business. It is important to look at any future plans for the area. Look for things that can increase or decrease your property value over time. Future planning is critical to the success of your commercial property in Detroit!
Getting a commercial real estate loan is a bit different than getting a residential one. You’ll need to be able to calculate your expenses as well as your potential profits. You can start by running some comps in the area, taking a look at recent commercial sales, as well as what is being charged in rent. You’ll want to have a positive cash flow, which is the difference between your rental income and the expenses for the property. You’ll want to take a look at the capitalization rate, which can be figured out by dividing the net operating income by the current market value. Most investors like to see this number at least 10% if not higher. It’s important to run a full analysis, looking at utility costs, insurance, taxes, and maintenance expenses. How much will the property cost you if it sits vacant for a month? While it might seem like a lot of work, getting all of your numbers together before making an investment is absolutely critical to your success.
A Strong Team
No matter what kinds of real estate investments you are making, it’s important to have a strong team by your side. Your team should consist of:
- An experienced agent who can help you through difficult transactions
- An accountant to ensure your books stay balanced and that the profits are there
- A lawyer with whom you can discuss your plans and learn about any hurdles you’ll need to clear
- Contractors who you trust to make repairs at fair prices
- A property manager who can help you manage repairs, screen tenant and much more
- Professional buyers and sellers who you can partner with on the best commercial property investments in Detroit
- Other investors who you can network and learn from
Having a team in place will make all the difference in your investment success. These are the people who will get things done, making sure everything is handled correctly and according to the law. You’ll turn to them time and time again to help you with your investments in Detroit.
An Exit Plan
Hopefully, you are never in the position where you have to sell your commercial property fast in Detroit, but you should always have a plan in case you do. maybe you aren’t seeing the profits you’d like or maybe you need to sell quickly to reinvest elsewhere. You should always have an exit plan in place, giving you the opportunity to liquidate quickly if need be.
Owning commercial real estate in Detroit is a great way to expand your portfolio, create security, and build wealth. If you have never made a commercial property in the past, we can help you learn the ins and the outs of commercial real estate investment as well as information about the local Detroit real estate market. Our team has years of experience helping people buy and sell residential and commercial real estate in the Detroit area! Learn how we can help you avoid commissions and lower your costs!