Industrial real estate investments are easy to own and manage compared to other real estate properties. The following 8 helpful tips will go a long way in assuring your industrial real estate experience is a positive and profitable one. 1. Not putting you in the "next buyer's" shoes. Ask yourself, "based on the future of the location and condition of the property, will the next buyer find my property a good industrial real estate investment?" If you hesitate in saying "yes", definitely do more analysis before you commit to buying the property.
2. Not having the property inspected by licensed contractors prior to purchasing. Most seller's will allow a 30-45 days contingency period to inspect the property to determine environmental, zoning, flood zones, earthquake faults, roof, mechanical systems, or other costly issues that may affect the return on investment or intended hold period.
3. Work with an experienced industrial real estate lender. Save yourself time and money by working with a lender that has experience making loans on industrial real estate. Your industrial real estate broker should know the lenders that are active in the area of the property.
4. Do your homework on accuracy of information provided & market conditions. Do not buy on the assumptions of the seller’s opinion. Make sure you do your homework as to the accuracy of all claims, especially market conditions and trends. This is where an experienced industrial real estate broker can add tremendous value to your team of professionals advising you.
5. Work with an experienced industrial real estate broker. The broker that specializes in industrial real estate full time and is active in commercial real estate associations, such as; the CCIM Institute (CCIM) or Society of industrial Office (SIOR) has the experience and professional support to help you with the analysis of a property.
6. Examine operating expenses and other financial issues closely. Before you say YES to the project, ask to see the seller's last two years of tax returns and financial statements for the property.
7. Factor enough vacancy and reserves. During the ownership of your industrial real estate you will have empty space and have to perform repairs. Factor these potential costs in to your reserves to get an accurate estimate of the properties potential cash flow.
8. Use your lawyer effectively by bringing them in on the front end and by clearly defining their role in the transaction. This will minimize the risk of a law suit and save you thousands of dollars in unnecessary legal fees or judgments. A good industrial real estate lawyer can add value to your team of professionals.
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