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Purpose of Your Real Estate Investment
October 30, 2017|Commercial Real Estate

Purpose of Your Real Estate Investment

What is the purpose of your business real estate purchase? Is it to divide up large buildings into small offices and rent them out? Or is it to lease space for companies that need warehousing? These are just two of the many questions you must ask yourself when contemplating a business real estate investment. While a piece of property may look good on paper, in the end it might not be what you are looking for.

commercial office building

The first thing you must look at is the location of your building. If it is in a metropolitan area, then the obvious choice would be to create office space. With the rise of startup firms, there is a constant and ongoing need for small affordable office space. Combine that with productive common areas such as board rooms, presentation spaces, and kitchen areas, and you have the formula for a successful leasing operation. The key is to keep the segregated areas small so that you can utilize the most space, to keep the cost low. This is a wise investment choice because most companies take care of their own space and equipment thereby limiting any damage or liability to the structure.

If your building is in a suburban area you can use the same idea as above, but possibly think of medical units. Doctors love to be close to housing developments where the majority of their patients dwell. They know that being close by is an asset to the growth of their practice. People love the idea of being able to go down the street and visit a local doctor or dentist. If you’re going to go this route you must realize that the design structure of the building will be much different than traditional office space. Many such spaces use a lot of tile and harder surfaces because it is easier to keep them disinfected. Probably only the offices themselves will have carpeting. Also the structure of the flooring needs to be sound to be able to support the weight of medical machinery. X-ray machines, MRIs, and CAT scan equipment can be very heavy, so you want to make sure your building can hold up to the extra added weight.

warehouse building

If your building is in a more remote area, you may want to think more in the lines of storage. Your mortgage and property taxes will be lower so the need for multiple tenants is less. Also people that work every day aren’t going to want to travel as far to get to work. So these areas may be better utilized for storing equipment, supplies, and other materials that will only be accessed a couple of times per month. The utility costs will be lower as there won’t be people there every day. The only higher expenditure will be for security. Having people’s valuables in a far out location will require hiring security and having cameras to safeguard their things.

So this gives you an idea of some of the things you must consider when buying a piece of commercial property. Many first-time buyers get trapped in the sale price without investigating the practical uses of their new building. I have seen such buyers find fantastic prices way off the beaten path, and then have a hard time renting out space that they deemed for offices. Such costly mistakes could cause you to have to invest in reconstruction, and to re-purpose the use of your building. Lots of things to think about, but a little foresight can be worth its weight in gold.

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