Tips for Investing in Commercial Real Estate

Commercial real estate investing is a good way to build wealth. If you’re looking to break into commercial real estate in New Orleans, here are some tips to ensure your success:

Pay attention to location and tenant type

Two of the most crucial factors that determine demand are location and tenant type. Clients who are looking to put up corporate offices are more likely to want to set up shop in a highly urbanized center. Someone wanting to run a mom-andpop store, on the other hand, may find a pocket space within a smaller, close-knit community more appealing. Determine what your clients may need and see if it matches what you would like to invest in.

Analyze comparables

To get a better idea of how the property you’re eyeing might perform, it’s essential that you study the local market carefully. This means doing some deepdive research: What future developments are being planned? What do the “comps” show?

Comps help you determine the current market value of the property you’re evaluating by comparing how much similar properties in the area recently sold for.

Get down with financial metrics

Familiarize yourself with real estate finance. Seek to understand the metrics you can use as reliable barometers of your success. These include:

• Net operating income:

  How much can you potentially earn from your investments minus your cost of operation before taxes? Can you cover expenses like insurance, utilities, upkeep, property management costs, and taxes and still earn a good profit?

• Cap rate:

  What’s the ratio of your net operating income to your property asset value? Knowing your capitalization or “cap” rate will allow you to better estimate your future profits or cash flow.

• Cash-on-cash:

  If you’ve relied on financing to buy your property, this will help your accurately analyze your investment performance. Cash-on-cash determines the returns on your out-of-pocket cash relative to the portion that was financed.

Investing mistakes to avoid

To succeed in investing, you should also know the pitfalls to avoid, such as:

• Not making proper valuations.

  What unique points of the commercial property you’re buying went into its valuation? Don’t pay more than market value; carefully study every feature, highlight, and flaw of the property to ensure you’re spending the right amount for it.

• Financial ignorance:

  Projected return on investment (ROI) is a useful indicator of an investment asset’s viability, but you should also seek to familiarize yourself with financial intricacies such as in loan-to-value (LTV) or debt service coverage ratio (DSCR).

• No due diligence:

  Take the time to learn about the property you’re buying even when you are competing against others. Ensure that the investment puts you in a position to generate returns; never let the aphorism “act in haste, repent at leisure” hold true for you.

• Don’t go it alone:

  Hiring a competent team of professionals to do the job is often well worth the time and money spent. They will know the process involved better than you do, and can ensure a stress-free and cost-efficient experience

Entrants to the commercial real estate market can rely on the help of the top realtor in New Orleans to find the perfect commercial property investment! Give the Axis Realty Group a call at 504.336.3000 or send an email to Nicole(dotted)AxisRealty(at)Gmail(dotted)com to get started.

You can also click here to learn more about our experienced and dedicated team.