Real estate remains one of the most reliable and predictable forms of investment. If you’ve historically invested in residential real estate and are considering a shift into commercial real estate, there are a few things to know before you get started. Here are a few tips on how to get into commercial real estate investing in MA.
Select a Property Type
There are various types of commercial properties, such office, retail, industrial, and medical. Each comes with unique challenges and needs. It’s best to focus on one type of property when building your initial portfolio. This allows you to gain specialized knowledge. Once you become a seasoned investor, branching out to other types of properties will be much easier.
Set Your Goals
The next step is set your overall goals. This includes timelines, income, cash flow, and property appreciation. Are you looking to purchase properties for long-term rental income? Or is your goal to identify properties with high potential for high short-term appreciation? Thinking through these variables will help you select properties that help you achieve those goals.
Understand the Metrics
A key step to commercial real estate investing in MA is reviewing metrics. The most common are net operating income, cap rate, and cash-on-cash return. Operating income is a quick look at predicted income and expenses, before any added tax benefits. Cap rate evaluates cash flow and potential profits. Cash-on-cash incorporates financing costs to determine an overall rate of return. Combined, these three metrics will help you evaluate commercial real estate investments against your overall goals.
Evaluate Loan Options
Financing your investment is another key component to commercial real estate investing in MA. Commercial mortgages are handled differently than the residential mortgages that you may be accustomed to (since they are not backed by the government). Lenders will review both your personal financial history and the property’s ability to generate income to cover the debt. The qualification process can be a bit stringent with extensive underwriting review of information. Be prepared for this and explore options before you start viewing specific properties.
Get Expert Advice
Last but not least, work with an experienced and local real estate brokerage for commercial real estate investing in MA. Your broker will play an essential role in identifying potential properties and guiding you through the due diligence and purchase process. Brokers also understand real estate market conditions and will assist in determining fair market value for properties in the area. They are your most important resource as a commercial real estate buyer in Massachusetts.
If you are not already working with a real estate agent, contact ABG Realty for assistance. We specialize in commercial real estate in Greater Boston and Eastern Massachusetts. We are locally owned and operated, so our agents have unique knowledge of the area and can assist with all of your commercial real estate needs.