If you want to invest in Sacramento, an excellent choice might be the purchase of commercial property. In our latest post, we will ask you 10 questions to help you find the right commercial property in Sacramento.
Investing in Sacramento commercial real estate can be a very wise choice. There are many types of commercial investments you can make. You can buy office space, retail, manufacturing space and more. There are creative approaches, such as the purchase of a medical building, equipment and all and leasing the space to doctors looking for a place to set-up. Or you could use a warehouse to develop a space for artists to create and sell their works. The list goes on and on. Your investment can not only bring in extra cash, but you have the opportunity to invest in something you love. Keep reading to learn more about determining the commercial property that is right for you in Sacramento!
Question 1: What is your budget?
Commercial property can come in a wide array of prices. You could purchase and lease a small one-room office building. Or you could purchase a strip mall with many tenants. Before considering a commercial investment in Sacramento, it important to understand what you can really afford. What will the taxes be like? You will also need to determine your expenses and GRM, or gross rent multiplier. This will help you determine if the property you wish to purchase, is actually worth it.
Question 2: Are you buying for your business or as an investment?
If you will have your business in the building itself, the property decision you make becomes much more personal. The building will need to meet all of your needs which include things like a reasonable commute time and anesthetic you personally find pleasing, ie, the layout has to work for your specific needs. You might want to consider purchasing a smaller building and leasing out some of the space to offset the cost of your loan.
If you are investing solely for investment purposes, the proximity to where you live becomes less important. It is unlikely that you will need to visit the building very often when you have good tenants in place.
Question 3: Are there leases with other tenants currently in place?
This could be a good or bad thing depending on who they are and how much they are paying each month. Make sure to fully review the lease, understand the policy for rent increases, the ability to modify the space and more. If the previously landlord doesn’t have the proper paperwork in place, you could find yourself with low rental prices and costs to repair units that were customized by the tenants.
Question 4: How much time can you dedicate to the property?
This will help you determine if you should buy a small storefront or a 5 story office building. Not only will you need to spend more time on maintenance issues with a larger building, you will also have to deal with tenant issues and everyday things that pop up. When you have a large property, it can become a full-time job! This brings us to our next question…
Question 5: Will you need a property manager?
If you aren’t experienced handling a large commercial property, hiring a pro is a must. At least until you get a hang of it yourself. They can help you figure out the costs and ways to attract the right tenants. Not all property management services are the same. Compare a few, not only for cost but to find out what they help with.
Question 6: What’s your final goal?
Do you have a specific profit you are trying to achieve within a certain timeframe? Compare the ROI on many buildings before making your final purchase. Maybe you should “flip” commercial property as opposed to holding long-term. Or maybe you should consider a mixed-use building in a more on-demand area.
Question 7: Are you prepared for fixes on a larger scale?
If you have ten tenants, you can count on 10x more calls to the landlord. You will have ten sinks that can flood the place. Ten security deposits to manage and so on. With a large building, you can count on many more calls to the local handyman, if you don’t have someone working on-site full-time. On the flip side, something like a roof will cover all ten tenants at once. Upgrading this will have an effect on all of the tenants at once.
Question 8: What is the location like?
A great deal in a bad area might not attract the high-quality tenants you are looking for. Depending on the types of businesses, you will want to consider foot traffic and accessibility. Is it viewable from the main road? Is there adequate parking for visitors? You will also want to consider proposed development plans to see what the future of the area will bring.
Question 9: Will the time of year affect your investment?
In some parts of the country, businesses such as restaurants or service related fields will see a spike during certain times of the year. For example, many restaurants see an upswing of patrons during summer months. This is also the time you will see many new businesses popping up, all of which need a place to operate.
Question 10: Do you have a strong team?
Any investor will tell you that they are only as strong as the team they work with. Hiring a great handyman, inspector, title company accountant and attorney will all help you make your investment dreams a reality.