Real Estate Investing How To Buy A Commercial Property

Being listed among the top builders in India and with more than thirty years of experience, the Omaxe Group has been helping its clients to find their dream space for both families and corporations. Founded in 1987 by Mr. Rohtas Goel, Omaxe has delivered 11.77 million sq. meters of construction and real estate so far. Our team of expert professionals sticks true to our motto of “Turning Dreams into Reality” and seek to provide our clients with supreme quality real estate spaces.

How to Buy A Commercial Property?

Buying a commercial property is similar to buying any other real estate but only on a larger scale. Commercial properties often have higher purchase rates, longer leases, and larger rental income as well. Investing in commercial property will require the investors to do some research and mind due diligence.

Investors should consider the following points if they want to invest in a commercial property:

• Location

Location is key when buying real estate let it be commercial or residential. Investors should look for locations that have less than 5% vacancy rates which means the tenant is less likely to vacate and leads to higher rent. Locations with high vacancy rates can lead the tenant to vacate or renegotiate rents.

• Financing

Investors should be certain about financing before they even purchase real estate. This way, they will be aware of how much they can afford and be able to close a deal faster.

• Lease structures

Commercial lease structures are slightly different from residential lease structures and are designed for either 9 or 15 years with a hike every three years. As an investor, you should be aware of the lease structure and inherit the risks involved.

• Mind due diligence

You, as an investor, should run the numbers before investing. Purchasing a commercial real estate property can have risks, but you should ask yourself if the investment is worth taking that risk? You should also check all your options before being committed to one. You should go ahead with the deal if it is beneficial for your portfolio.

Can Purchasing A Commercial Property be Considered As A Good Investment?

Yes, commercial properties can be considered as a good investment. Commercial properties tend to bring a higher return on investment when compared to residential properties. Purchasing commercial real estate can result in not only profits but also lead to better professional relationships, limited business hours, and more flexible lease rates.

The cost of construction for real estate developers decreased because of the introduction of GST as it subsumed multiple other taxes under the same tax. The result of this was positive for the developers as the margins between cost and selling price increased. Another added benefit was the reduction in the cost of logistics.

Furthermore, as the construction costs for the buyers have increased, consumer preference has shifted to already constructed properties. The result is a direct benefit for developers.

Pros of Investing In A Commercial Property:

• Consistent and regular returns

. Lease agreements for commercial properties have a clause for an annual increase in rents irrespective of market conditions; therefore,

This shift has alerted the Indian Real Estate developer towards the high potential and much-ignored tier 2 real estate market.

Since GST was an addition to the already existing construction taxes and other charges, the overall cost of construction has increased. The initial result of this was a decline in buyer interest; however, that has subsequently changed.

• Zero furnishing costs

One of the main advantages of investing in a commercial property is that you need not spend a single penny on furnishing the space. The tenant of your commercial space will furnish the property as per their choice.

What will be the trends for Real Estate in 2021?

As the year 2020 suffered unique trends in the real estate sector and the economy as a whole, similarly, the reverse migration happening from metropolitan and Tier 1 cities towards Tier 2 cities have raised the property demands in the latter cities considerably.

Reverse migration is the process where the labourers and the working class return to their native places in the backdrop of unavailability of employment and shelter. 

Cons of Investing In A Commercial Property.

• Dependent on economy

The weakening of the economy reduces the demand for commercial property.

Investors should keep the points mentioned above in mind before they invest in commercial real estate properties. As an investor, you should always explore all your options and only then commit to what seems to be the perfect choice according to your requirements.

Contact us or visit our website for more information on investments in real estate.