What should I consider before investing in business real estate?

Real estate in California can be expensive. For many people, this is the first big road block they face when they decide to invest. Business real estate comes with an even higher price tag, even when you are just buying land. This stems from the obvious purpose of purchasing the property: to make an income.

According to Forbes, patience is one of the first important attributes of a dedicated investor. The sales cycle for these properties tend to be longer. Due diligence, for example, does not take mere days; it takes months. Finding new tenants and building out the office spaces also tend to take a much longer time. However, the longer leases tend to make up for this.

Investors will also need a strong understanding of the market or hire professionals who do. More money and longer leases mean that there is more at stake. If you become locked into a lease with a tenant and realize that unforeseen costs and rookie mistakes make the lease unprofitable, the consequences may be more serious and the losses, larger.

If you have owned residential properties before, you have likely come to think of real estate investments as passive income. It is best not to approach business real estate with this mindset. The most successful investors play an active role. Failure to do so could cost you your best tenants —or best potential clients.

Professionals working in real estate often warn investors: business real estate is a completely different industry compared to residential. There is greater risk involved and everything moves at a much slower pace. However, if you have the capital, the patience and the know-how, this may be one of the most lucrative investments you ever make.

This article provides information on business real estate. It should not be used in place of legal advice.

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