4 Important Factors for Investing in Commercial Real Estate

4 Important Factors for Investing in Commercial Real Estate

1 – Location

As the saying goes, real estate is about “location, location, location.” Location remains one of the most important factors for investing in commercial real estate in Greater Boston. It includes many variables, such as:

  • Vicinity to Other Businesses/Services
  • Access to Public Transportation
  • Parking Availability
  • Neighborhood Amenities
  • Scenic Views
  • Market Activity & Values
  • Visibility
  • Zoning

As you evaluate specific locations, include both current and future factors. What projects are approved in the area? What changes are being discussed? Are there open lots that may be developed in the future or older buildings that may be demolished? How might the business landscape change in the area over the next several years? A thorough analysis will help you better predict property performance over the lifetime of your investment.

2 – Value

The value of a building involves complex analysis that includes construction, utilities, equipment, maintenance, and market performance. Three common approaches to assessing value are: the sales comparison approach, cost approach, and income approach. Given the different methodologies for each, it’s helpful to review and compare all three. Read our article on CRE Appraisal Methods for more information.

3 – Investment Purpose

Any property that you purchase should fit with your overall goals and portfolio. An ideal self-use property may be different than one intended solely for lease. Some properties are better suited for long-term investment than short term. Only through a keen understanding of purpose can you leverage the right assets to achieve your goals.

4 – Cash Flow & Profits

For all investment purposes, cash flow and profitability are key. Projection models are helpful for short-term and long-term analysis that include income, expenses, capital improvements, asset value growth. etc. Tax benefits, such as depreciation, can be included for a more comprehensive financial forecast. Looking at the big picture is one of the most important factors for investing in commercial real estate.

Other Important Factors for Investing in Real Estate

As experienced commercial real estate brokers in the Greater Boston area, we understand the intricacies of commercial investing. We can help you evaluate the many important factors for investing in commercial real estate, including and beyond what is mentioned above. Contact us to schedule a consultation with our team of local professionals.