Commercial real estate deals are an entirely separate entity from residential deals, with their own unique risks. Here are some common risks to look out for:

Complexity: Commercial property deals are highly complex. Figuring out how much a property will cost, what the maintenance expenses are likely to be, and how much rent you can expect is just the tip of the iceberg. You also need to understand commercial leases, the types of businesses that work best in the property, local zoning laws, and even how desirable the building is likely to be in the future.

Economic Conditions: Commercial property is far more sensitive to the economy than residential property is. When the economy is strong, you may you able to make a fortune from tenants. But when there is a downturn, your tenants might decide to move out and operate from home or from a smaller space in a less expensive area. Likewise, the neighborhood you invest in might be doing well now, but new growth on the other side of town could lead to a mass exodus.

Valuation: Valuing commercial property is not easy. If you’re lucky, your property may be in a shopping center or complex where you can use the neighbors as comps. In most cases, though, you will need to use a complex income approach to figure out the value of the building. This looks at the profit a property can make in a year, and then reduces the value based on a multiplier that takes into account everything from the condition of the property to the credit rating of the tenant.

Long Vacancies: Although commercial leases are generally much longer than residential leases, it can take much longer to find a tenant, since the tenant must be the right match for the property. In addition, the terms of a commercial lease vary widely, and setting up the right lease for you and your tenant can be tough.

If you are ready to move forward with a highly experienced and knowledgeable team that can handle all of your commercial real estate needs from a single point of contact, we invite you to contact Lee & Associates New Jersey today at (973) 337-1144. We look forward to developing a lasting professional relationship with you.