I am new to commercial investing.
I was wondering when I buy my first property, it is better to buy close to where I live or any where in US is ok if the returns are better?
What do I consider when I buy commercial property from location perspective?
In Buying Property - Asked by Srini P. - Jul 29, 2009
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Paul S.
Glendora, CA

Really big question. Site analysis can be very detailed (and should be if you are out of your area). If you are just starting out your best bet will be to stick to multi-family 1-4 units close to home. The best financing is available on 1-4 and the risk of an extended vacancy is less. People always need someplace to live. If your rents are competitive it should be quite easy to fill a vacancy. If however the city you are in has just had a major economic disaster in it (such as the only big employer in town leaving) even residential income property may be risky. You must take into account everything that is going on in your area when making your decision. If you buy a commercial piece somewhere you will no doubt need 35% down? 1-4 residential units can be done with far less. If the property does not cash flow after the lender discounts the income by 25%, and you personally can qualify for the negative, you may still be able to finance the property? If you see an upside, a negative for a while may not be a bad thing? The downside to residential income property is it will require management on your part or you will have to hire someone to do it for you. If you buy a commercial NNN property the tenant is responsible for everything and there is no management.
Paul Sylvester,CCIM

Jul 29, 2009
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Robyn M.
Campbell, CA

Hello Srini,
My commercial clients look for areas with strong, long term tenants and prefer NNN (triple net) leases when buying leased property. My clients have shown a preference for medical condos and look for locations that support the tenant activity - long term.

Jul 29, 2009
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Davide P.
Pinole, CA

It really depends on your personal preference. Many newer investors like to purchase their first few investments in a local area because they like the idea that they can "touch" the property and they have a better knowledge of the area they're investing in. Some investors don't care where the property is, as long as it makes an income and the numbers work. As for whether you should buy close to you, the answer could vary greatly depending on the type of market you're in. Coming from the San Francisco Bay Area, most people simply can’t afford to buy in San Francisco because the price is too high for too little a return - especially newer investors. Most will venture a bit away where prices are cheaper and the return is a bit higher. If you live in an area where unemployment is extremely high (i.e. 15%+) it might not be the best idea to invest locally!
In regards about what to consider, the most important initial questions are probably going to be what TYPE of property do you desire (apartment, office, industrial, etc), the area (which you are figuring out) and what return do you want on your investment? Once you begin to figure those out, there are many people who can assist in your purchase. From my experience most newer investors prefer apartments.
If you have any questions feel free to contact me by phone or email.
Cell – 510-815-2000

Jul 29, 2009
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Srini P.
San Jose, CA

Thank you all for the responses.

Jul 30, 2009
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Chris S.
Coeur D'alene, ID

There are good and bad locations everywhere and in every city. Its not a bad idea to stay close to home because you can watch the property better and you might already have some good ideas about what makes a good location or not. However, I would recommend teaming up with a qualified commercial broker to help answer your questions and steer you in the right direction.

Aug 3, 2009
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