If your’re a knowledgeable investor looking for a commercial real estate property; it’s essential to know there are 5 TIPS to enhance and increase the value of an investment property.
An analysis of the property is important to review the financial performances. The value of the commercial real estate is the cash flow the property it generates. Any strategy you empower; has the potential to increase the cash flow by decreasing the operating expenses. It is important to increase the overall equity and the value of the property.
Now focus on the 5 strategy TIPS to Increase the VALUE of your Commercial Property; when determining how you can make the most out of your commercial real estate investment.
TIP#1 MAKE IMPROVEMENTS TO THE PROPERTY
Improvements can be cosmetic or structural improvements to the property.
Cosmetic improvement includes new paint, new decor to the common areas, updating the landscaping, and new flooring.
A substantial renovation involves making structural improvements to the property. It may involve renovating units of a multi-family property, changing the facade of a shopping center, or major renovations to the lobby of an office building.
It will increase the value of the property for not only your Tenants, but for your own portfolio.
TIP# 2 INCREASE RENT
In analyzing the historical data on a property, take notice of whether the Tenants are paying market rents; or if there is a potential for a reasonable increase in rents. Upon accepting a new Tenant, determine a property rent by carefully analyzing the current markets rents.
TIP#3 DECREASE OPERATING EXPENSES
Evaluate the operating statements for the past three years of the property to determine if you can decrease the expenses. An Owner would bid out certain operating expenses. To ensure the value of work done on the building is within a responsible budget for the property. The owner of a commercial property may reduce expenses without significantly impacting the operations of the real estate.
It is common in a standard commercial lease to pass the operating expenses through to the Tenant. The definition is called NNN (triple-net), this encompasses property taxes, building insurance and maintenance.
TIP#4 INVEST IN YOUR PROPERTY
“You have to spend money to make money.” Perhaps you have heard the saying in business before; it involves an understanding for your commercial property portfolio. Investments beyond repairs, maintenance, and capital expenditure could have a major impact on your commercial property value.
An efficient property can demand a valuable property. If your utility bills are high, consult an energy consultant about opportunities to reduce expenses. They can advise you on different energy-efficient solutions to help obtain competitive rates.
If you evaluate the property, consider adding amenities to the property to create a more appealing and long term value.
Adding value enhances amenities to include something as simple as creating a playground in a multifamily property. Add some amenities.; such as a daycare center in the office building or an outdoor courtyard for a hotel property.
In summary, when researching commercial properties; look beyond the historical data and see what strategies to make the property more valuable. It is important to know the property’s potential before you go under a contract.
The BEST deals are made when you BUY a property RIGHT!
TIP #5 MAINTAIN YOUR BUILDING
The condition of your buildings has a huge impact on your commercial property value. Maintain your building as if you would sell tomorrow. Manage repairs, maintenance and capital improvements to strengthen your competitive edge in the market and attract the best Tenants. For many Tenants, the appearance and condition of your building extends their brand of business, and they will pay for the added value.
The Owner will need to be aware of capital expenditures. Such as, the roof, parking lot, stripping, exterior lighting, heating and air units, signage, to name a few. The Owner shall have a reserve funds set aside for building expenses that may come up in the future.
Ultimately, maintaining your building is a proactive Owner. The real estate will depreciate because of the aging of property, but it’s up to the Owner to continue to maintain the building as this will protect the investment and generate cash flow.
Looking for a professional commercial brokerage firm; Sylvia Pell with Pell Realty Group will be happy to assist you with your real estate transactions.
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