Commercial real estate can be an incredible wealth-builder. Unlike any other land investment option, commercial properties can offer you cash flow, appreciation, tax breaks, and many other perks. Moreover, commercial real estate is historically a risk-balanced investment that offers returns that are well positioned between the high volatility of stocks and the low volatility of bonds. Therefore, these properties are an excellent method to diversify your portfolio.
Here's a simple guide with important pointers on how to add commercial land to your assets portfolio.
Create a Business Investment Plan
Although creating a business investment plan might initially seem like a tedious procedure, the time and effort you invest in it will eventually pay dividends. You'll be better able to identify your short-term targets and get closer to achieving your long-term goals. In addition, the business plan is helpful if you intend to partner with someone and get them on board by showing that you’re dedicated to the cause.
Set a Budget
When it comes to budgeting, you must be realistic about the price range you can afford for your first commercial property. You might need a more restrained budget as commercial properties can be more difficult to finance than residential ones. Most people simply don't have access to that type of money, and prime commercial lots (especially those in the center of core business districts) can sell for millions of dollars.
Explore Funding Options
Mortgages for commercial real estate are more expensive and restrictive than those for residential real estate. Higher down payments, higher interest rates, and shorter loan terms are all demands lenders typically make. Therefore, finding a commercial mortgage broker is a wise move. In addition to gaining access to a pool of lenders specializing in commercial investment property financing, you’ll receive guidance and help tailored to purchasing commercial real estate. Alternatively, search for banks that promote lending for commercial real estate on their websites.
Start Searching for the Right Plot of Land
Now that you've chosen an investing plan and determined how you're going to finance your project, it’s time to search for commercial land for sale near me. The best way to do that is to utilize one of the following methods:
- Search specialized land listing sites — the best listing sites have a vast selection of lots for sale, offer affordable rates, and can facilitate the process.
- Seek the help of commercial brokers — Having an experienced commercial broker by your side can help you find the ideal property. The best thing is that you won't have to pay for their services if you're purchasing real estate because the seller will be responsible for paying their commissions.
- Start networking — Meet local property owners by forming connections at trade shows or community gatherings. You never know when something will become available, so let them know you're looking for business investments.
- Try cold-calling — Find property owners' phone numbers and start cold-calling them to see if they're interested in selling the property. Ask them to save your phone number in case anything changes if they aren't at that moment, and then contact them again down the line.
Make an Attractive Offer
You can submit an offer once you've calculated the future expenses and earnings. You can use a Letter of Intent (LOI) to negotiate general terms and a Purchase and Sale Agreement to make a deal with more precise conditions. You can review your requirements with an attorney before signing them. Consider seeking an accountant for assistance as well. They will go through your terms and explain the tax repercussions. While having a face-to-face meeting may help you settle any issues, you should always confirm any changes or agreements in writing.
Do Your Due Diligence
After identifying the property and putting it under contract, it's time to do your homework. Review the title and survey, examine the property's physical, environmental, and ecological status, and perform physical inspections of any buildings and mechanical systems on the land or that provide services to it. Moreover, double-check the undeveloped land's allowed use and zoning regulations. Research and evaluate the local zoning laws and prior zoning permits affecting the property to ensure that the intended use is allowed in the specific zone.
Most investors are leery of lending on commercial buildings because of the increased prices and perceived dangers. And even though adding commercial land to your assets portfolio might be complex, the advantages are noteworthy. By following the steps we’ve outlined, you may begin assembling your portfolio of commercial properties and start earning a consistent income from this type of property.