The surge in online shopping in recent years has led many entrepreneurs to consider reducing or eliminating their in-person operations in favor of investing in commercial real estate. While commercial real estate comes with challenges, it can be a worthwhile investment if done with diligence. To help entrepreneurs make wise decisions when investing in commercial real estate for their business, 16 Forbes Business Council members share valuable steps to take.
One key advice is for entrepreneurs to look at the big picture before making a purchase. It is crucial to consider factors such as location for operations, customer visibility, and potential resale value. Researching the market is also essential to assess local trends and calculate potential growth and return on investment. Financial analysis, including cash flow projections and sensitivity analysis, can help evaluate the property’s financial feasibility. Furthermore, entrepreneurs should be honest about their present and future needs to avoid overbuying for potential future growth.
Cash flow assessment is critical when considering investing in commercial real estate. Entrepreneurs should analyze if the investment will create value, reduce operational costs, or save on expenses. Understanding local and larger market trends is important for a successful investment. Thorough research on market trends, property location, and growth potential is essential to avoid hidden costs such as maintenance and taxes. Consulting with a knowledgeable real estate advisor can provide valuable insights.
Entrepreneurs should ensure that the market aligns with their long-term goals before jumping into commercial real estate. Understanding the area, market conditions, and potential for growth is crucial. Carefully reviewing lease or purchase agreement terms, conducting thorough due diligence, and familiarizing oneself with zoning laws and regulatory changes are also key steps to consider. It is essential for entrepreneurs to have a property management plan and to partner with a broker specializing in their industry for tailored insights. Additionally, only consider investing in commercial real estate when expanding a profitable business to facilitate borrowing from banks and generate cash flow during business expansion.
