carmencs  /   February 8, 2024

4 Proven Tips to Analyze Property Like a Professional

As more people discover the benefits of investing in commercial real estate or Corporate Real Estate, they are also seeing how it’s not exactly like other ways of using money.

Some people invest in Corporate Real Estate through real estate investment trusts (REITs), which is like buying shares of companies in the stock and bond markets. But there’s another way: you can directly invest in real estate. This means you can directly buy buildings with the help of a partner, like CARMEN Corporate Real Estate.

As an investor, you may be required to evaluate and analyze the property to figure out if it meets your financial goals. If you are new to commercial real estate, you might be unfamiliar with how to analyze real estate from an investment perspective.

If you decide to invest alone or with others online, you need to think differently. If you invest alone, you get all the benefits of ownership, but you also have to analyze wisely and take on all the risks. But, if you invest with a group or online, the benefits, efforts, and risks are shared among many investors.

Here’s a guide from CARMEN Corporate Real Estate’s real estate analysts to help direct investors understand how to check if a commercial real estate property is good for investing.

1. Know the Market

Before investing in commercial property, it’s important to know about the market where the property is located.

To understand this, you need to look into some basics like how much is the vacancy rate, how much rent is going up, the amount of new construction, and the number of comparables in that area.

Likewise, it’s important to understand the trend of investments and real estate in that area. This means knowing about the economy if there are more jobs and people, and what big companies are there.

Assets with good fundamentals and important things going on are likely to be more popular with investors. So, they might not make as much money for you compared to places that aren’t as popular.

2. Analyze the Asset

Before you decide to invest in a property, it’s crucial to analyze it carefully.

Look closely at the physical aspects of the property because they directly impact whether it’s a good investment. Consider when it was built, how recently it got renovated, what amenities it has on-site and nearby, and the budget for improving the property. Also, think about how the property looks because that affects if people want to live or work there.

The location of the property is another important thing to consider. Is it in a central area, easy to reach by major roads, and close to shopping and things people need every day? These are important for people who might want to rent the place.

To understand the property, you can visit it, do research online using investing websites, hire a trustworthy company like CARMEN Corporate Real Estate to check it out or talk to the person selling it. These are smart ways to learn a lot about a property before you decide to buy it.

3. Trust Experienced Property Managers Only

Having a good team to manage a property is super important for making a commercial real estate investment successful.

When people buy property, they might take care of things on their own, hire someone to manage it, or keep the current management team. If you’re investing with others, there’s usually someone from outside who takes care of everything. No matter who is in charge, certain things in a property manager are really important.

The best managers listen and take care of what people living or working in the building need. They know what people in the real estate market want and can give it to them. Good managers also find ways to save money and work together with the owners to make sure everyone is happy while staying within the budget.

Fortunately, you can get it all from CARMEN Corporate Real Estate if you are from Chicago or nearby. Even if you can change the manager, a building that’s been taken care of well is better in the market and might be worth more money than one that hasn’t been managed well.

4. Calculate the Risk Factors

Every kind of investment has some level of risk, and commercial real estate is no different.

The market, the property itself, and how it’s managed all bring in risks. Understanding these factors, as mentioned before, can help lower the chances of problems and make the investment more likely to give good returns.

It’s also smart to know about the risks when it comes to how the investment is financed. Usually, if a commercial real estate investment is financed carefully, with less borrowed money (loan to value or LTV), the risk is lower. But if there’s more LTV, the risk goes up.

In group investments, how the partnership is set up also affects risk. The rules in the investment documents decide how things work every day, including what happens with the money from renting, getting new loans, and selling the property.

The setup also decides how the investors get back the money they put in and, based on the manager’s investment, how much of the profits go to the manager. All these things impact how risky the investment is. So, it’s good to think about them in advance.

In Conclusion

Investing directly in commercial real estate is a proven way for people to grow and protect their wealth. The more someone knows about the market, the property, the manager, how it’s financed, and how it’s set up, the better they can decide what to do with the property in the short and long term.

More questions about investing in commercial real estate? Feel free to reach out to CARMEN Corporate Real Estate for the best advice about commercial property analysis.