Advertise Sign Up Log In BY TANNER MILNE PUBLISHED ON JUNE 04, 2019 CATEGORY BUYING FOR INVESTMENT Top 5 Items To Look for in an Investment Property Location, Physical Condition, and Other Factors to Consider (iStock) You may be interested in commercial real estate as an investment opportunity, but unsure where to start. Before beginning a property search, potential investors should delineate their purpose for the acquirement—such as making the purchase solely as an investor or going in as an owner-tenant—evaluate their risk tolerance, and secure equity. Once these steps are taken, investors can begin researching and touring commercial investment opportunities. As you evaluate potential investment properties, here are the top five items to look for to ensure the space is worth your resources. Location Location is one of the most important factors to consider when purchasing an investment property. You'll want to evaluate the neighborhood, visibility of the property, freeway access, traffic counts, and accessibility for clients in order to ensure the space will be attractive to tenants. Physical Condition A critical step in your property evaluation is conducting adequate physical inspections. You'll want to have a clear understanding of the condition of the roof, mechanical systems, plumbing and structural integrity of the building. Inspections such as a Phase I Environmental Site Assessment will check if historical utilization of the property poses threats to the environment, and help determine the true property value and alert you to potential problems. Projected Growth Get familiar with the current and forecasted trends of the area around the property. It's wise to choose a property where the demographics are stable or growing, and you should also learn which new businesses are moving into the area. If there are any anticipated changes to the road systems, it's smart to be aware of those as well, as property values may change when roadways are diverted or modified. Current Tenants Investors often look for properties with tenants already in place. Tenants' reputations within their specific market can speak volumes about the character of a business owner, so you'll want to take a closer look to ensure reliability. When evaluating tenants, think like a bank underwriting a loan, and look for the "Three Cs": credit, collateral, and capacity to repay. Take it a few steps further and also investigate tenants' cash flows and the growth projections for their specific industries. Flexibility You should choose a property that provides you with flexibility in the event that a tenant defaults, the surrounding area changes, or something else doesn't go to plan. In these situations, you'll want to have the ability to change use types or zoning to attract different tenants. Commercial real estate can be a great investment that can diversify your portfolio and provide you with additional income. When you select a space based on the above criteria, you'll feel confident that your property investment is worth every penny. Was this article helpful? 155 of 160 found this helpful TANNER MILNE Tanner Milne is president of Menlo Group Commercial Real Estate, a full-service brokerage based in Tempe, Arizona. He founded the company in 2008 with the objective of delivering value to clients through service, innovation, and solutions. During his career, Tanner has facilitated and negotiated projects and transactions with values of more than $500 million, establishing him as a leader in the medical, office, and condo markets throughout Phoenix. Related Articles The Top 10 Markets for Investing in Industrial Properties 3 Trends That Will Drive Real Estate in 2022 Marcus & Millichap CEO Bullish on ‘Unbelievable Amount’ of CRE Trading Core, Value-Add and Opportunistic Investing The Appeal of Industrial Sale-Leaseback Transactions Stay Informed Subscribe to receive tips, articles and tools Sign Up MORE STORIES LIKE THIS The Top 10 Markets for Investing in Industrial Properties BY LAUREN SHANESY The Best Opportunities for Investors With Budgets Up to $20 Million 3 Trends That Will Drive Real Estate in 2022 BY LAUREN SHANESY Key Takeaways From the Annual PwC, ULI Emerging Trends in Real Estate Report Marcus & Millichap CEO Bullish on ‘Unbelievable Amount’ of CRE Trading BY JOE BEETON Industry Veteran Discusses ‘Red Hot Market’ at NAIOP Event The LoopNet service and information provided therein, while believed to be accurate, are provided "as is". LoopNet disclaims any and all representations, warranties, or guarantees of any kind. About Us Contact Us Search Find a Broker Product Overview Mobile Terms of Use Privacy Policy Connect with us © 2021 CoStar Group