Investing in a commercial project is a lot like any other investment strategy. There’s a great deal to consider and a lot of potential. There are also shortfalls that you might worry about, such as:
Dealing with commercial tenants you didn’t pick
An attractive part of a commercial property is the passive income from occupants. However, relying on passive income means hoping that your tenants are solvent and reliable. That isn’t always the case when taking over an active commercial property. You’ll have to closely consider rent revenues for all the tenants before moving forward.
Handling environmental requirements
Building a development from scratch, whether it is a commercial property or a potential residential development, means working through California’s tight CEQA regulations. This isn’t an easy process and requires dedicated legal attention.
What corporate structure will the property be under?
Commercial property can act a lot like a business. Are you going to organize that business under your current corporate structure? Is it going to be its own corporation? How you incorporate your acquisition into your existing portfolio matters.
How will you secure funding?
Securing funding in a commercial real estate matter requires extensive paperwork. You’ll have to ensure – either yourself or with the help of a skilled attorney – that you’re meeting every deadline and crossing every requirement. Lapses, mistakes and oversights will add complications, complications will add time to your project. Time added to your project costs money.
Developing an exit plan
Your commercial property investment is an investment. That means at some point, you may need to liquidate it. It’s best to understand how you will move on from the beginning to make transitions smoother later.