How to evaluate downtown commercial real estate investments

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Thinking about a downtown commercial real estate investment? There aren’t many properties hotter than those located downtown – you’ll never have a shortage of potential tenants competing against one another to win your favor. As attractive as these investments are, they don’t come without their set of warnings, and you should know what you’re buying before making any big decisions.

It might be safe to say that those investing in downtown real estate are more concerned with commercial uses than renting to a couple with child – business rentals tend to fetch a higher price than residences, especially if they’re in an attractive location. If you can successfully rent your downtown property to a business, you could be making two to three times more than you would by renting it for personal use.

Downtown commercial real estate

Here’s how you can evaluate a downtown commercial real estate investment before making your way to the bank for a sizeable withdrawal.

  • How attractive is the location, really? Just because an apartment or condo is ‘downtown’ doesn’t necessarily mean it will fetch as high of a price as you’d like, and this is much more true when discussing commercial real estate. It’s not just the location you should be looking out for – accessibility also plays a key role. When talking about commercial properties, think about a ‘reverse elevation’ measure – the higher the loft is, the less attractive it will be to business owners. If you’re purchasing second-floor or above property, know that it won’t appeal to commercial clients nearly as much as a ground level one would – it also better have a highly-functional elevator and stairs system.
  • Does the property come with modern amenities? What the property looks and feels like on the inside will play a direct role in how well your commercial tenant can do business, so you’ll want it equipped with as many state-of-the-art features as possible: top-notch HVAC system, fresh paint job, attractive visual additions, expensive furniture… Each of these will help increase the rental price significantly on top of expanding the amount of business owners who feel that the property is perfect for them.
  • How many commercial clients can make use of my property? Speaking of expanding the amount, you’ll want to avoid purchasing a ‘niche’ property that can only really be used by, say, someone with an office occupation. Instead, the downtown property you invest in with commercial uses in mind should be usable by nearly everyone. While you aren’t likely to find a place that can effectively double-up as a car mechanic shop, a sleazy burger joint, a classy bar and a medical facility, you would still do well to consider the potential uses – real estate owners should have the option of evicting a renter gone bad without having to fear their property going unused for long periods of time.
  • How good is the resale value of the property? While you might only be interested in renting for the foreseeable future, you never know how life will turn out, and you might find yourself wanting to get rid of the property while getting maximum value for it. Consider things like the age of the building, the materials used in its construction, accessibility, view from each window and so forth before making a purchase – this way, you’ll know you’re looking at a hot property that you’ll have no trouble selling for good money a decade from now.
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