Commercial Real Estate Logan Utah
There are good times and bad times for getting involved with commercial real estate Logan Utah, but 2014-15 is one of the best times there has ever been. Utah has one of the fastest-growing economies in the country, and there is accelerating demand for commercial property in all sectors. Thanks largely to the state’s business-friendly environment and fiscal stability, both institutional firms and private investors, including many from outside the state, are seeking commercial acquisitions in Utah in increasing numbers.
Advantages of Commercial Property Investing
There has seldom been a better opportunity to get into commercial real estate investing, or to increase the holdings you already have. If you have been playing safe and sticking to residential property, now may be the time to make the transition. It can be an exciting move, and one that brings many benefits compared with residential real estate.
The biggest advantage is that the returns are higher for commercial holdings, and are generated over a longer period of time. This is true whether you are looking primarily for profit from property appreciation or for cash flow from renting out the property. The yield per square foot is higher than for residential property, and so is the yield on the initial investment.
This is partly because business property is valued in a different way. The valuation of residential properties depends on a wide range of factors, including neighborhood comparison and various subjective elements such as attractiveness. The value of a business property is largely related to the income it could generate, in terms of the area of usable square feet.
Investing in commercial properties also helps diversify risk. You are unlikely to lose all your tenants in one go, whereas with a residential house, losing a single tenant could leave the house empty. Leases for commercial properties are usually much longer, helping with the stability of your cash flow.
Managing Your Property
There are, of course, two main ways to earn money from business property holdings: through rental income, or through selling and profiting from the increase in value. If you choose to enjoy the cash flow from renting or leasing, you will also have the headache of managing the property. Those who are already in the business know this is incredibly hard work.
The primary concern, in order to maximize your return on investment, is to maintain a high level of tenant occupancy at all times. Primarily, this means keeping the existing tenants happy to prevent them from leaving, which can mean being at their beck and call 24 hours a day. It also involves maintaining the building to a high standard, which may require employing and supervising various property maintenance contractors, as well as doing regular inspections yourself. It will also almost certainly mean dealing with tenant complaints and disputes.
When tenants do leave, you need to get the vacancy filled as soon as possible. Effective marketing and advertising campaigns will ensure the property is displayed to the best advantage. It is also necessary carrying out comparison analyses of rents for comparable properties in the area to keep your rates are competitive.
This is just some of what’s entailed in commercial property management. As you see, there is labor intensive even for a single property, let alone for several. Without the expertise of an experienced property management company like ourselves, you will find it difficult to make a profit from your investment. It is a wise choice to put these duties in the hands of our team at Coldwell Banker.
Selling is Complicated
You may be primarily interested in profiting from your property’s appreciation — either from increased market demand, improvements you make to the property, or both. However, if you think you can simply put commercial property on the market and sell it as you would a house, you need to think again. Selling commercial real estate is a very different proposition.
First, the valuation for commercial properties is a lot more complex. While residential properties are valued largely on the basis of comparable properties in the area, valuers of commercial buildings focus mainly on the income the building is generating, or is likely to generate. One method of calculating this is by finding the property’s NOI or net operating income, which is the gross income minus operating expenses, and dividing this by the cap rate, or capitalization rate, which is the projected income for a year. You need to know how much to ask for your property, but calculating this, and providing the documentation for it is extremely complex, and is a job for a professional.
In addition, the appraisal process is much more complicated than for residential property. The appraisers not only inspect the property, but look into zoning and public ownership records, and compile data on replacement costs, rentals and comparable sales. They then analyze all this information in relation to the property’s value. It’s essential that the seller provides all the material the appraisers may require, such as income statements or property drawings.
All this requires professional help, but it’s only the beginning of the process. It’s important to identify the right type of buyer, and to investigate potential buyers to ensure that they will close and not default. A good professional will have a database of qualified buyers, as well as the ability to market to a wider pool of potential purchasers across the country.
Remember that buyers of commercial real estate tend to be much more sophisticated than those for residential houses, and are quite likely to be corporations or partners, looking to rent or lease the property to a third party. There will be much tougher and more complicated negotiations involved, and anyone who is not used to the commercial property world is likely to come off worse in the exchanges. A highly professional marketing package is essential to present the property to purchasers at this level.
Commercial real estate Logan Utah is a booming industry right now, with demand for properties like office buildings, shopping malls and apartment blocks increasing in response to the flourishing state economy. You have the best opportunity in a long time to make a substantial return on your investment, but you need the help of Coldwell Banker to do it. The sooner you call us, or contact us using our contact form, the sooner you can start the process of realizing your profit.