California offers real estate investors a number of benefits and favorable conditions. If you’re looking to invest in the California City market, there’s never been a better time to turn your attention towards commercial real estate.
Let’s take a look at the key factors that may drive investors in California City towards commercial properties and how it can help grow and diversify an investment portfolio. We’ll also talk about how to set yourself up for success.
Investing in commercial property is a great way to diversify your existing real estate portfolio. Typically, commercial property represents buildings that house businesses. If you own an entire apartment building, you may consider that commercial property as well. Commercial property has a different set of rules and standards for financing, taxes, and legal requirements.
Commercial property could be a shopping mall, grocery store, office building, or industrial warehouse. It’s different from residential real estate.
Investment costs will be higher than when you buy residential homes. That’s because you may have to make some customizations to your building to accommodate the tenants who will rent the space. However, your returns will more than make up for it. Generally, commercial property makes more money than residential property.
A triple net lease is available to commercial owners but not residential owners. In this type of lease agreement, the tenant will pay all real estate taxes, insurance, and
maintenance or repair costs. That’s in addition to the normal costs, which include rent and utilities.
Here’s how a triple net lease can work for California City real estate investors:
It’s a great way to grow your portfolio.
Commercial property financing is different than the type of loan you’d get for a residential property investment. You will likely need to meet higher income and net worth standards, and the required down payment might be a bit larger.
Interest rates will depend on the market, and while they’re pretty low right now, you’ll want to lock in a fixed rate so the interest doesn’t spike too high.
Establish your investment goals and stick to your criteria. Before you buy, make sure you know why you’re buying commercial real estate and what you hope to accomplish. There is no good reason to acquire an investment that doesn’t fit your goals, no matter how enticing the price.
Bring your due diligence to the table. Run the numbers before you make an offer and analyze the deal as a whole. Are the inherent risks worth the potential rewards? Is there another property that would be better suited to your goals? Don’t move forward until you are certain the property will be beneficial to your portfolio.
Partner with the right professionals, especially if you’re investing in commercial real estate for the first time. Hire a real estate agent who specializes in commercial property. Work with a real estate attorney and a CPA who has a similar area of expertise.
Most importantly, work with a
California City property manager who can help you understand what types of rents you’ll earn, how long of a vacancy you can expect, and where you’re likely to find the best tenants for your property.
We would be happy to talk with you about your goals and the best way forward. When you’re ready, please contact us at JBL & Associates.
760-373-1800 Office
