Tips to Help You Invest in Commercial Real Estate

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Tips to Help You Invest in Commercial Real Estate
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• The most basic rule in purchasing commercial real
  estate says that you should choose a good
  property in a good location for a good price.
  Sounds nice but what is underneath the bright
  advertising? How do you determine those hidden
  obstacles and how do you count the risks? These
  and some other frequently asked questions could
  become a pressing issue in making your decision.

• The first point of course is the location of your
  potential property. Each property type requires
  its own features. A set of special attributes is
  necessary for various types of commercial real
  estate. You should also mention things such as
  ingress and egress from the road. Dont forget to
  ask about office buildings benefits too. Check if
  it is a relatively easy freeway and public
  transit access. Surrounding developments are also
  another necessary thing for office building.

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• Debt coverage ratio is a special metric for the
  lenders. You should be aware of their process if
  they should and would lend money on property.
  This debt coverage ratio should be positive and
  the net operating income should be greater than
  that of the DCR.

• Pay special attention to tenancy as well. Initial
  lease term is a very important condition in your
  selection. You must always remember that long
  leases are much better than short ones. If you
  dont have all the tenants lease renewing all at
  once, you can lay out your risk.

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• What do you know about additional expenditures
  which you werent able to see at the beginning?
  Such unexpected things like roof replacements and
  the tenants improvements could become a big
  problem if you face them without warning. Thats
  why you should be ready for sudden capital
  expenditure. Plan how you are going to handle
  this situation ahead.

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• If you are an experienced businessman, you should
  know that leverage can sometimes be a good
  condition in positive marketing swings. Its
  true, but it is also sometimes a restricting
  feature. Use of debt is a limitation for the
  amount of money available for emergencies.
  Consider how you will get out in case of real
  problems and found your liquidity pool ahead.