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Five Strategies to Improve the Value of Your Commercial Real Estate

Written by Posted On Thursday, 11 October 2018 21:29

Have you been eyeing a piece of commercial real estate? Maybe that storefront on the corner, where you’ve always dreamed of setting up shop, is finally for sale. Or, perhaps you’re a business owner looking to relocate your team to a newer, more spacious building. Whatever the reason behind your interest, it’s important to understand the value behind your investment.

 

When you secure a piece of commercial real estate, there are myriad improvements you can make to it that can immediately increase its resale value. Knowing this can help you see the true potential behind a location, even if its historic background or current curb appeal could use a little improvement. Ultimately, the value of the property will be determined by how much cash flows in and out of it. As such, by investing in repairs, maintenance and beautification projects, you can help make your building more attractive, accessible -- and profitable. Here are five ways to get started.

 

1. Improve the physical property.

When you think about increasing the value of real estate, the first thing that likely comes to mind is making physical enhancements. This might mean cutting back overgrown shrubbery and installing new landscaping. For others, it might mean tearing the interior down to the studs and starting all over again from scratch.

 

Other times, it might mean adding enhancements to either the outside or inside of a location to make it more customer-friendly. For instance, if your restaurant or coffee shop offers outdoor seating, a sun-blocking shade can help turn it into a year-round hot spot. Thus, it’s in your best interest to find out more about the myriad options you can choose from that fit your aesthetic and functionality.

 

Whether it’s a fresh coat of paint or a major lobby renovation, the scale is infinite and only limited by your budget. Any time you invest in the physical aspect of a property and seek to beautify and improve it, you can expect to see a return.

 

2. Find ways to cut expenses.

A commercial property might be the most valuable on the block, but if you’re spending thousands every month on unnecessary expenses, you’re not seeing those profits. Take a look and a walk around the location to determine if there are any areas in which you can save money. For instance, you might find that the offices are being illuminated with outdated flourescent overhead lighting. Replacing those bulbs with LED ones is both cost-efficient and eco-conscious.

 

Apartment owners can use this opportunity to determine if there are any aspects of the property upkeep they can fairly and transparently share with guests. For instance, rather than paying for all the gas in a multi-family property, owners might inquire on whether the gas company can individually meter those same units instead.

 

3. Go up on rent.

Another way to improve the value of your commercial real estate is to increase what it’s worth. Put simply, that can come in the form of upping the amount that tenants pay to rent a space within it. Keep in mind, however, that this is no place for price gouging. Instead, examine the historical data and current market concerning rental rates in your area. Are you on point with your rates? If so, keep them as they are. If you could comfortably raise them just a little and still be in keeping with your local average, you might have the wiggle room to do so.

 

In your efforts to justify the uptick, you may consider making physical improvements to the property as detailed previously. This can help tenants see the value in the property, an advantage that becomes even more obvious if the improvements you make create a more functional and accessible living environment.

 

4. Tack on more amenities.

Are you looking to buy an apartment complex or other multi-family building? If so, it might already come with a playground, fitness center, clubhouse and swimming pool. If not, see if you have the funds in the budget to add these amenities. While you don’t have to go all out and break the bank with these features, guests are likely to pay more when they’re getting more for their money.

 

If yours is the only condo unit in town without free wireless internet for tenants, you could quickly lose out to the competition. See what you can reasonably afford. You may even consider interviewing or talking to people who live in the units to see what they’d like to have added to the property.

 

5. Think outside the box.

Today, it’s not uncommon to see an old, abandoned factory building transformed into a hip, artsy coffee shop or makerspace for local artisans. What was old, outdated and a little worn around the edges is suddenly hip again and real estate investors can cash in on this potential. Look for lower-priced options in your area that might lack immediate curb appeal but have the square footage and potential to be useful. Then, don’t be afraid to think outside the box and use them for a different purpose than they were first intended.

 

That might mean turning an old hosiery mill into a breakfast restaurant. Or, you might buy the bar down the street and turn it into a pizza joint. Don’t limit yourself by remembering what the location used to be, but rather let your imagination guide you toward a more lucrative use of the space.

 

Succeeding in the Commercial Real Estate Realm

Making commercial real estate work for you requires injecting your personality into a space. Historically, these entities tend to be cold, impersonal and lacking in character. That’s where you come in. Analyze the property, check for soundness and sturdiness, then let your dreams take shape.

 

While there are a few ways you can quickly transform the property by adding or improving certain features, the potential of a space comes down to how detailed your vision is. So, take some time to brainstorm what you want from this building, what you hope to accomplish there, and where you want to go with it. Then, you’ll be one step closer to signing on that dotted line and walking away with a new set of keys.

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