Commercial Real Estate Services: The property being auctioned by the bank proves to be a good option for people looking for a good deal. However, there are some risks with these assets, which need to be taken care of.
The buyer of the property at auction should keep in mind that the accountability of the bank which is auctioning the property is limited to recovering its dues. Accordingly, the base price of the property is kept according to the loan amount.
Real estate has been a favorite option for Indians for investment. When it comes to commercial real estate, it is important to be careful while investing in it. For this, we are telling you some things, which you should take care of.
8 things to know before investing in commercial real estate(Commercial Real Estate Services)
Location is everything in this case. There are two ways of earning a commercial property(commercial real estate): rent and increase in capital. Both these things depend on the location. Invest only in locations where the vacancy is less than 5 percent. Due to this, the supply will be curbed, the tenant vacancy will be reduced and the rent/price will increase.
Even if there are two buildings at one location, the demand for one can be fast and the other can be slow. The reason for this is the quality of construction. Because of this, tenants can also come to you. You will get higher returns in this type of investment. Many people/companies are willing to pay higher rent/price for the quality.
Demand and Supply
Before investing in a commercial property, the investor needs to be very careful about this. There are macro markets in every city too. For example, Bangalore has ORR, White Field, Electronic City while Mumbai has BKC, Nariman Point, Parel, and others. The demand-supply situation in every macro market is poor.
If the annual supply is expected to be higher in the next two-three years than the historical demand, then the rent-price will be lower.
Quality of tenants
A good tenant significantly increases the value of a commercial property. Talk to a multinational company for rent and avoid petty people. A good tenant will pay rent on time, pay more turban, stay longer and help in increasing the value of the property.
Base Rent – Fit/Out Rent
By showing a fit-out rent, the builder often attracts investors, while the delivery of them is from raw portions. Also, the fit-out rent is not permanent while the base rent is permanent. If the base rent is Rs 50 and the fit-out rent is Rs 30, then the tenant will have to pay a rent of Rs 80 per sq ft.
The commercial lease structure is different from residential. It is carried forward again for three or five years. They are also sometimes one-sided. When the owner of the land asks to vacate it, the building will have to be vacated. However, there is also a lock-in period in which you cannot vacate for three years.
Commercial properties usually require a security deposit of 10-15 times the rent. If someone talks to you about 6 months of security, then it means that his outlook is of short duration. It is also possible that he has a problem with cash. Startups usually have such short-term contracts.
See the condition of the house’s owner
If the owner of the land comes to know that his loan is going to be a default, then he stops the work of repairing the house, etc. Check the bank before participating in the auction. If there is a problem of repair/maintenance, then estimate its expenses in advance.
So friends, hope you liked this article and you got some new information. Please tell me in the comments.