After The Initial Commercial Real Estate Investment: 3 Additional Expenses

Real Estate Blog

Investing in commercial real estate can be a great way to diversify your financial assets. If you are thinking about buying a commercial property, it's important that you take the time to create a realistic budget in order to determine what your expenses will be. While most investors factor in the purchase price and insurance costs, few take the time to consider the expenses that will be accrued immediately following the purchase of commercial real estate.

Here are three additional expenses you should be prepared for when investing in commercial real estate in the future.

1. Repairs And Renovations 

Since the primary purpose of commercial real estate is to generate monthly income from rental fees charged to commercial tenants, you must have a space that appeals to businesses. In order to charge top dollar for your rental space, you may need to invest in some repairs and renovations.

The average cost of renovating a home office space is $187.50 per square foot. You can use this number to help estimate the cost of renovating your commercial property by multiplying the number of square feet your property provides by $187.50. Being prepared to invest in repairs and renovations prior to making an offer will help your commercial property become more profitable over time.

2. Attorney Fees

In order to rent out your commercial property to a tenant, you will want to have a lease agreement in place. Since lease agreements represent legally binding contracts, it can be beneficial to have an attorney draft your lease agreement for you. Having professionally-prepared lease agreements will protect your investment should you need to take legal action against a tenant in the future.

In 2013, the average hourly rate for a one-year call lawyer (which is an attorney in his or her first year of practice) was $193. Planning for attorney fees is an important component of any commercial real estate investment budget.

3. Marketing Expenses

In order to attract a reliable tenant to your commercial property, you will need to engage in some marketing activities. Placing advertisements or hiring a real estate agent to help draw in potential tenants can be costly.

Although you might have to budget 4% to 6% of the rental price for commissions to your listing agent, these professionals can save you time and stress when it comes to finding quality tenants to fill your commercial real estate rentals.

Investing in commercial real estate can be profitable, but only if you are willing to absorb the costs required to attract and maintain good tenants. Be sure that you plan for repairs and renovations, attorney fees, and marketing expenses when considering the total cost of a commercial real estate purchase.

For more information, contact Western Realty Group Inc or a similar company.

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