5 Important Tips to Buy Commercial Real Estate in Atlanta

Buying commercial real estate is a profitable investment, but it can take time and involves many steps. Whether you want a business space or grow your portfolio, these 5 questions can help you better decide on commercial real estate.

1. What is Commercial Property and Its Types?

Commercial property is real estate used for business purposes. This includes storefronts, land that can generate profit, and rental properties. Commercial property laws, financing, and taxes differ from other properties.

Examples of commercial properties are office buildings, factories, malls, manufacturing plants, and more. There are 5 main types of commercial properties you can invest in:

• Multi-Family Properties

• Hospitality

• Office Spaces

• Retail

• Industrial

Office spaces are divided into three classes: A, B, and C. Class A offices are high-end, often recently renovated, and priced competitively. Class B offices need some upgrades, while Class C offices, usually over 20 years old, require immediate work.

The industrial category includes plants, warehouses, and factories for manufacturing and distributing products. Retail spaces cover malls, stores, and shopping centers where products and services are sold.

Hospitality real estate includes short-term rentals, hotels, and motels. Multi-family properties are considered commercial if they have five or more units, such as condos or apartment buildings.

2. Why Invest in Commercial Real Estate?

Before looking at commercial properties, it's important to ask yourself why you want to make such a large investment and if it's right for you. You might regret your decision without clear goals and understanding the reality of owning significant real estate.

To figure out your 'why,' you can consult business space consultants or a commercial real estate advisor in Atlanta.

3. What’s Your Ideal Location?

Our experienced real estate advisors in Atlanta recommend buying property near a recently renovated area. This strategy is the reverse of the "broken window" theory, which suggests that run-down properties contribute to a community's decline.

A newly renovated area with exciting businesses attracts a lot of foot traffic, which means more visibility for your business. Buying a property that needs work but is near a vibrant, revitalized area can often get you a better price.

Plus, you'll benefit from being in a prime location with built-in marketing potential.

4. Do You Know the Industry Lingo?

You should be familiar with industry lingo before searching for commercial real estate. It might take some time to get comfortable with the vocabulary. So, be patient with yourself. Here are some common phrases:

• Cash on Cash: This is the annual income you earn from your investment compared to the amount you invested, such as your down payment.

• LTV (Loan-to-Value): This ratio compares the amount you want to borrow to the value of the commercial property you're buying.

• Vacancy Rate: This is the percentage of vacant suites in your property at any time.

• Ad Valorem: A tax based on the assessed property’s value.

• DSC (Debt Service Coverage Ratio): This ratio measures operating income compared to total debt, indicating how much debt you can cover annually based on your income.

• Cap Rate (Capitalization Rate): This is the income of your property divided by its value.

5. Is Your Financing Secure?

Before investing in commercial real estate, you'll need financial assistance. Research banks, companies, and credit unions that offer commercial property loans.

Meet with different lenders to find what interest rates they can offer you based on your credit. If you don't qualify for traditional financing, you might need external help. For example, Terra Alma’s expert commercial real estate advisory can help you achieve your goals.

Knowing your financing options beforehand will help you understand your budget and prevent delays during the buying process.

In Conclusion

Buying commercial real estate in Atlanta can be profitable but takes careful planning. You need to know the types of properties, have clear goals, choose the right location, learn industry terms, and secure your financing.

By understanding these steps and working with commercial real estate advisors or business space consultants like Terra Alma, you can make smart choices and find the best property for your needs.

Feel free to contact Terra Alma for further queries.