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14 July, 2016
Real estate investments can be lucrative if they are made rightly in association with the expert advisers. You can’t ensure profits with the most beautiful unit. As the success of purchasing commercial assets lies behind making a suitable deal. To ensure profits, investors must consider the risks, benefits, type of property and exit strategy to secure personal belongings. After finalising your aims and expectations, you may either select a retail, industrial or office space.
Here I am discussing few key steps of making a profitable commercial real estate investment. They will help you even if it’s the first attempt.
Learn to think like a professionalUnderstand the basic difference between residential and commercial properties. Both are valued differently. As these units are typically purchased to generate income, the income can be predicted via a total of usable square footage. A huge cash flow is associated with such deals. Bigger spaces give bigger projects. Also, consider the lengthy duration of the lease agreement, while signing with a tenant. As regulatory authorities don’t allow it to break frequently. If you need a mortgage, make sure you will have a sufficient hard cash in your hand to get approval from lenders.
Make yourself familiar with key metricsNo matter you have decided to become a part-time investor, you should not ignore understanding these basic terms with their meanings. The common terms include:
•Net Operating Income, which is abbreviated with (NOI). It can be calculated by subtracting gross operating income of the first year from total operating expenses during the first year. For an investor, the answer should be positive.
•Cap Rate indicates the worth of income-producing assets. It is used to estimate the net current value of future profits or cash flow. A profitable investment always has a good cap rate.
•Cash on Cash is the common practice of real estate investors who avail mortgages to fund their purchase. Buyers who are practising this strategy do not require 100% cash for the purchase. To avail benefit with the cash on cash, investors must identify the exact amount required to buy an investment unit.
Make a strong plan of actionIn addition to observing market trends, your top priority should be setting up personal parameters to define your limits. It will protect you from becoming bankrupt or losing personal assets. You must know the minimum and maximum amount of money you can spend to fund an investment. A good action plan also includes key players and existing and prospective tenants.
Learn tactics of identifying a good dealIt is the skill, you must consider learning from qualified real estate pros. As pros are skilled enough to spot a good deal on the go. The secret of classifying the best opportunity among the heaps lies behind choosing a successful exit strategy. According to experts, a good exit strategy makes deals good. Risks of failures are always there; all you need is to decide a good exit strategy to meet financial goals.
Find out motivated sellersSimilar to other businesses, real estate sector also requires enthusiastic customers. Being an investor, you should know the tactics to find out them. As your aim is to purchase the best investment property, you have to find sellers who are strongly willing to sell their assets. Motivated individuals offer you the opportunity to purchase below market value. In contrast to that, if you are dealing with a less motivated seller, he will spend more time in negotiating the deal.
Evaluate investment carefullyThe best way to estimate the actual worth of an investment property is to analyse the neighbourhood, where it is located. Keep a close eye on community happenings and visit open houses to get a chance to meet with the owners, buyers, real estate professionals to pick the best suitable vacancy.
Use all resources to find and evaluate the best among propertiesDon’t stick to a single resource, when it comes to identifying the great deals from the market. Be flexible to use all resources from the internet, classified ads and open house events. You may also hire professionals like property brokers and real estate firms to uncover the best opportunities in the market.
Summary: However, these are a few critical steps, which helps you to buy commercial properties in Dubai, the success of the deal depends on good communication and building stronger relationships.
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