It’s the prime time for investing in commercial property in Norman. You might be a novice property manager. You might be considering transitioning from residential property management. You could also be working toward expanding your property management portfolio to include commercial properties. Either way, here’s how you navigate commercial property management in Norman.
Step 1: Define Your Purpose or Target Market
Commercial investments will vary in size, style, and purpose, but it always involves leasing to businesses rather than residents.
When you decide to invest in commercial real estate, you’ll have to decide on what type of property you prefer, and you’ll need to start learning about zoning laws.
For example, you could purchase a commercial property that’s only equipped for businesses like hair salons or attorneys’ offices. However, if an interested tenant wants to open a business not included in the current zoning, you’ll have to petition the city council to change the zoning, which sometimes means a public hearing.
It’s entirely possible for the zoning request to be denied. Unlike residential properties, you’ll have to know who you can lease to when it comes to commercial real estate. You might have a preference for small businesses or large industries. Remember this, commercial property comes in three main forms: office, retail and industrial property. Broken down even further there are more types of properties including, mixed-use real estate, REITs (real estate investment trust) and sale/leaseback transactions.
After you make a decision, you can start narrowing down your investment opportunities.
Step 2: Look for opportunities
Towns often divide the city into sections. So, if you want to lease to industrial companies, you’ll need to start looking for vacant spaces to buy in the industrial park (or very near it if you plan on trying to change the zone of the property). The same is true for agricultural businesses, clinics, hospitals and retail.
Look for the highest concentration of the type of businesses you want to pursue, and then browse the properties for sale.
It’s also helpful to look online for commercial properties the same way you’d browse for a new home. For your convenience, at Rieger Realty we also list all of our commercial properties available on the website, which makes it easy to find hidden gems in Norman.
Step 3: Learn About The Risks
Commercial property is a different animal compared to residential property. You’ll need to make sure you’re prepared for some of the risks involved with commercial property management.
You might need to prepare for longer time periods between vacancies.
It’s not uncommon for leases to go beyond the traditional 12-month lease on residential property.
The success of your investment can fluctuate with the health of the economy.
Renovations are often more expensive than residential upgrades.
While commercial property does carry higher risks than residential property, the investment often comes with bigger rewards like a long-term reliable tenant or a higher percentage of revenue.
Step 4: Know the Property Pitfalls
When your shopping for a home, you have to be on the lookout for red flags like needing a new roof in the near future or major foundation problems. Investing in a commercial property requires the same type of due diligence. Here are a few unique considerations for property managers.
Where is the location of the property? (Will it be a good location for business growth?)
Does the industry your targeting want to move into the space?
When you find a tenant, will the price you charge in rent cover your expenses of the new investment?
How long has the property been on the market? If it’s been several months, is it still in a normal timeframe to be vacant, or is there no interest in the location?
Is the building strong? Will you need to do any major repairs now or in the expected near future?
You don’t want to find yourself owning a property that is too expensive to sustain or simply in a bad location for your target market. It doesn’t hurt to talk with nearby store owners to learn more about the area.
Step 5: Secure Financing
Before you can purchase commercial real estate, you’ll need to secure financing for the property. Talk to local lenders and learn about your different options. You’ll also need to save up for a down payment on the property, and have enough funding to complete any repairs or upgrades.
Unlike residential properties, you’ll likely have a loan with a balloon at the end. You’ll also need to know your debt-service coverage ratio. It compare’s a property’s annual net operating income to its annual mortgage debt service, measuring the property’s ability to service its debt.
Step 6: Find a Reliable Partner
Finding commercial property in Norman can be a challenge, but with the right help from an experienced realtor, you can find the perfect space to invest in sooner rather than later.
To check available commercial properties in Norman, hover over the “commercial” tab on our homepage, and a list of current properties will appear in a drop-down menu.
Or better yet, just give us a call at 405.310.2796.