For a long time, real estate has stood out as one of the most lucrative areas one could invest in. However, there are some tough challenges that one needs to overcome before they can successfully invest in this area and this is why some people find it difficult to venture. Real estate is a large field, and you could choose to specialize in a specific part of it when investing. The two most common options for investors is to select between residential and commercial real estate. One of the major advantages of real estate is the ability of the property to appreciate steadily over time. If you want to invest in commercial real estate, you should understand that there are things you could do to improve and increase the value of your investment. Usually, the value of commercial real estate is dictated by the cash flow generated by the property, and all of your strategies should be aimed at increasing this flow. Here are the tips;
Improve The Property
Commercial real estate property is rented out to businesses who use them to generate money, and if you improve some small things, you could end up increasing the cash flow generated by that investment. Improvements can come in varying forms, and the first ones you need to work on are the aesthetics. If the paint is old, try repainting it or installing new wallpapers. Make substantial renovations that will make the building better, for instance, redoing all the units and changing the floor. Your tenants will be pleased with this since they will also be able to attract more customers owing to how their premises will look better. Making simple improvements can cost you some money but it will pay in the long run as your commercial real estate value will increase significantly.
The rent income can accurately be used to measure the cash being generated by a commercial property. If you increase this, you will definitely make the investment more valuable. However, note that it is not easy to raise the rent as some of the tenants might start to complain or migrate to other premises with attractive rents. It is important first to review the rents and check whether they are aligned with the current market rates. If the rents are below the market rates, you might have one valid reason to increase the rent. Another way of going about it is by doing some renovations as it was mentioned in the first tip and seeing whether they can justify your rent increment. However, do this with caution as pricing your premises outside the market margins can be detrimental to your income and reputation of your investment.
If you have a commercial investment that is full of tenants, you might want to consider adding some amenities that will increase your cash flow. What kind of people work in the businesses that have rented out your offices? Can they be interested in hitting the gym for a few minutes after work? Do they have conference halls to hold their meetings or they are forced to look for venues elsewhere? Analyze all the needs that your tenants have and try to see if you can set up an amenity that will increase the amount of money you get. A gym, conference hall, coffee bar, and trade halls are just examples of what you can put on your property. People are attracted to convenience and would not want to walk for long before they can access some of these amenities, and if you set them up, you will surely get customers.
Require Tenants To Pay For Their Utility Costs
If you are the one paying for the utility bills in your property, it might be prudent to change tact. These costs may be too much, and the fact that your tenants will most probably be forced to pay a flat rate means that they could misuse some of these things such as power, water, and gas. If you have one main meter, consider installing sub-meters in each of the units occupied by the tenants so that each of them can pay according to what they use. This way, you can revisit your collection process and add these utility costs to their monthly bills as opposed to forcing them to pay a flat rate. Tenants like to pay for what they use since some of them are disadvantaged by the flat rate in that they do not consume as much as others but are still required to pay for that. The primary goal is to increase the cash flow, and you should also do that by reducing the expenses.
You can go an extra step and also look at other expenses that you incur in a month or year. Is there any possible way of reducing them? Take a look at what your real estate management firm charges for managing your property and compare with all the other options. If you find a more attractive and cost-effective option, do not hesitate to jump ship and reduce your expenses. Hiring new managers can also be beneficial in that you get people who give you new insights that will help to manage the property better and thus increase its value.
Change The Use Of The Property
In some cases, changing the use of a property can significantly increase its value. Taking an example of a warehouse, it is seen that only a few people can rent it and there is very limited provision for installing amenities that can generate more money. In such a case, restructuring it and building stalls where people can sell commodities can change the purpose of the building and even increase the income generated.
In a nutshell, commercial properties have huge potential, and you could easily push their value within a short time. You need to look beyond the historical information and check out some strategies that you can use to make it more valuable. You need to understand the potential of any property before you finalize the deal so that you struggle to ensure that it is performing to its potential.