Buying your first commercial property is a cornerstone of wealth and financial success. Most investors start off with multi-family properties and expand into larger commercial real estate investments. If you’re ready to take the leap and expand your real estate portfolio,  here are a few tips on buying your first commercial property.

1 – Get Educated on the Market and Industry 

Commercial real estate is quite expansive. You’ll want to find a specific niche to start. Larger apartment buildings may be the easiest transition if you are an experienced multi-family investor.  Other possibilities are office, retail, and industrial spaces. Whichever you choose, take the time to learn about the market, the industry, and the customer base. There are certainly many pros and cons to consider!

2 – Evaluate the Financials 

Financials are the most important consideration when buying your first commercial property.  Important factors include:

Debt Service Ratio 

Capitalization Rate 

Cash-on-Cash Return 

Vacancy Rate 

Usable versus Rentable Space 

Tax Benefits and Liabilities 

Regular Maintenance Expenses 

Capital Improvements 

Short- versus Long-term Forecasts 

You should understand all of the above terms and be comfortable with preparing and reviewing financial forecasts. Only through a deep understanding of the financial aspects of your purchase can you make sound investment decisions.

3 – Rely on Local Experts 

Be sure to rely on the services and advice of seasoned professionals for your purchase. This is true for any property but is essential when buying your first commercial property. Among the  professionals needed are:

Real Estate Broker/Agent 

Real Estate Attorney 

Property Inspector, Engineers, etc. 

Financial Advisor and/or Accountant 

Environmental Specialists 

Lender/Loan Specialist 

Legal Assistance with Buying Your First Commercial Property