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Looking to invest in commercial real estate in the US? Discover the key factors to consider before making a purchase. Find out what to check when buying commercial real estate to ensure a successful investment.


Investing in commercial real estate can be a lucrative venture, but it requires careful consideration and thorough due diligence. Whether you're a seasoned investor or a first-time buyer, knowing what to check when buying commercial real estate is crucial to make an informed decision. In this article, we will explore the key factors to consider before purchasing commercial real estate in the US.

  1. Location, Location, Location

When it comes to commercial real estate, location is everything. The right location can significantly impact the success of your investment. Consider the following when evaluating the location:

  • Accessibility: Is the property easily accessible by major highways, public transportation, and airports?
  • Demographics: Analyze the local population and consider if it aligns with your target market or tenant base.
  • Economic Growth: Research the economic growth in the area, including job opportunities and industry trends.
  • Competition: Assess the level of competition in the area and determine if there is room for your business or tenants to thrive.
The 2% rule is the same as the 1% rule – it just uses a different number. The 2% rule states that the monthly rent for an investment property should be equal to or no less than 2% of the purchase price. Here's an example of the 2% rule for a home with the purchase price of $150,000: $150,000 x 0.02 = $3,000.

How do I choose a commercial real estate?

10 Interesting Tips for Buying Commercial Properties
  1. Do market research.
  2. Analyze the location.
  3. Commercial property types.
  4. Lease Framework.
  5. Review the layout setup.
  6. Select an expert builder.
  7. Recognize the risk issue.
  8. Analyze the income when insurance and taxes.

What questions to ask when looking at commercial property?

Questions to Ask When Viewing a Commercial Property
  • What type of commercial lease is being offered?
  • What is the minimum lease term?
  • What amenities are included?
  • What insurance coverage is required?
  • How much parking is allotted to the renter?
  • Is there room for expansion?
  • Can you make changes to the office space layout?

What makes a good commercial real estate deal?

Most investors will want to look for a property that has a cash-on-cash return of at least 8-12% or more.

What is the 50% rule in real estate?

The 50% rule or 50 rule in real estate says that half of the gross income generated by a rental property should be allocated to operating expenses when determining profitability. The rule is designed to help investors avoid the mistake of underestimating expenses and overestimating profits.

What questions to ask when buying commercial real estate?

12 Questions You Should Ask When Buying Commercial Real Estate
  • Why is This Property Being Sold?
  • What is the Market for Commercial Property?
  • What's the Ideal Business Your Property Serves?
  • What is the Maximum Occupancy for Your Property?
  • What's the Developer Like?
  • Does the Property Need Repairs?
  • What's The Location Like?

How to negotiate effectively when buying commercial real estate?

How to negotiate effectively when buying commercial real estate
  1. Think about your needs.
  2. Set your budget.
  3. Find good advisors.
  4. Cast a wide net to save on price.
  5. Investigate your site thoroughly.
  6. Make an effective offer.
  7. Before you close the deal.

Frequently Asked Questions

What is the biggest problem in commercial real estate?

The commercial real estate (CRE) industry has faced some challenges in recent years that have softened demand while raising operating and financing costs. These include higher interest rates, an economic slowdown, the hybrid work environment, a tight labor market and more.

What questions to ask in a commercial real estate interview?

10 Questions to Ask A Commercial Real Estate Broker
  • What locations, cities, or specific neighborhoods are you most familiar with in your practice?
  • Where do you see the market going right now?
  • What is your experience as a broker?
  • Have you negotiated a tenant improvement allowance and worked through a build out before?


What factors affect commercial real estate?
Factors influencing the commercial real estate market
  • Utility management.
  • Office space to work from home.
  • Smart amenities.
  • Newly available lease.
  • Less demand for commercial spaces.
  • Great uncertainty about retail business.
  • Priority to maintenance.
  • Operations of essential business.
What is cap rate in real estate?
Calculated by dividing a property's net operating income by its asset value, the cap rate is an assessment of the yield of a property over one year. For example, a property worth $14 million generating $600,000 of NOI would have a cap rate of 4.3%.

What to check when buying commercial real estate

What determines value of commercial real estate? The pure price per square foot approach: Most often used for office, industrial and retail properties, this approach determines a commercial property's value by multiplying the property's square footage with a pre-determined price per square foot.
Things to consider when buying commercial real estate 4. Find The Perfect Opportunity · Economic and industry trends · Networking potential through tenants, business owners and commercial brokers · Affordable leasing 

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