How to Tell an Investment from a Loss in Commercial Property



When seeking to invest in a commercial property, the investor makes certain assumptions about the future. They believe that this location will return their inlay of capital and time. They hope that the current combination of zoning laws, taxes, and maintenance outlays will lay no substantial inroads into their profitability or capital. Most of all, they generally expect the property to create sufficient profit that they will be able to go on and invest again. Here are three general steps to make sure that the path to profit is smooth.

Assess the Foundation

This does not mean that the prospective commercial property investor should only investigate the foundation of the facility, although they absolutely should not overlook that essential first step. A thorough investigation of the foundation by trained experts will reveal long-term problems that could easily destroy profitability, and the same can be said for every aspect of the structure, the financing arrangements, the local legislative climate, and a host of other issues. Hidden costs can make the difference between an investment and a loss.

Make Careful Calculations

Clear and precise accounting can make or break a business enterprise. Make exact notations of expenditures and project them out through time. This will give an excellent idea of what sort of profit can be expected, what sorts of hidden costs will rise to be overwhelming, and how best to prepare for unforeseen events. Detailed research is essential to this.

Stay Within Full Compliance of the Law

Although it may seem as though the property can be managed with handshake arrangements and back-of-the-envelope calculations, the difficult and unpredictable situations that inevitably arise with tenants, repair personnel, real estate agents, tax assessors, and others will have the potential to drain the entire profit away.  In the worst case scenario, the investor could lose the entire property. Even the slightest risk, when compared to the potential for loss, will rarely be worth the reward.

If you have questions about how to determine the viability of a property investment, contact your agent at Harkins Commercial Real Estate. We can help you understand the Central Florida area and help you determine the odds of success.

« Previous   Next »

Request a call back