If you’re considering commercial real estate for the first time, it can be both exciting and stressful. There are many misconceptions about commercial real estate options that contribute to the anxiety first-time investors experience! Here at Jones Aur, we’re on a mission to match Memphis business owners with the perfect property, and we want to make that process positive and stress-free. With that in mind, let’s look at some of the myths surrounding commercial real estate, explore why they’re wrong, and discuss how our expert team can help your business move up the ladder!
Myth #1: Commercial real estate costs too much money upfront
It’s true that some commercial properties call for a significant capital investment and residential properties tend to be available for less money upfront. However, there are still many opportunities to procure a commercial property with an affordable initial investment! In fact, some lenders are more attracted to commercial properties than residential ones since they offer greater potential for profit and come with a stable recurring income.
When you seek funding from a bank, there are a few things to keep in mind. You’ll need to show lenders that you have the skills, experience, and drive to maintain your business in the new property. If you can convince them of this while offering enough profit potential, obtaining financing for a commercial property will likely be less of an issue than you’d think.
Myth #2: There are no “good deals” in commercial real estate
There are always good investments in real estate, whether you’re looking at a residential or commercial property. How good of a deal you find will depend mainly on how you intend to proceed! Some people prefer to buy properties when the market is down because the property is likely to appreciate over time. Others find that triple net lease properties are almost always available, no matter the market. While these come with greater responsibility for the tenant, they also provide a reasonably stable risk profile and come with a lower base rent. You can ensure you get the best deal for your business by doing your homework now: know exactly what kind of commercial investment you’re looking for so that you’re ready to strike when a good deal presents itself!
Myth #3: Experienced real estate brokers are optional
Thanks to Zillow and other online tools, everyone is an amateur real estate agent these days! While this technology allows you to be more empowered and knowledgeable in your search for commercial properties, it doesn’t prepare you to handle a transaction independently. Experienced brokers like those at Jones Aur know the ins and outs of investing, are often aware of unpublicized information, and will be in possession of important knowledge like comparable sales data, investment analysis, and underwriting skills. This isn’t an area where you want to assert your independence, and attempting to go it alone is asking for trouble you don’t need. Having a broker represent you will ensure the best results in the shortest amount of time and with the least amount of stress possible.
Myth #4: Leasing a commercial space will be just like renting a home
In general, renting a home or an apartment is a fairly straightforward process. Commercial real estate leasing, on the other hand, can be a bit more complex. Assuming the two types of leases are the same can sometimes create an overinflated sense of confidence in an inexperienced investor! Almost every commercial real estate deal comes with extensive negotiations between the landlord and the tenant. This is in contrast to residential leases, which tend to be pretty standard and simple to navigate. The bottom line is that previous experience with renting residential properties doesn’t mean you’re equipped to handle commercial real estate leasing on your own.
Myth #5: Commercial property investments are risky
The truth is, there’s a certain level of risk associated with every kind of property investment. There are many factors that go into determining the risk level of a property, and some property types will be riskier than others. This is yet another reason for working with experienced brokers who can help you understand the risk profile of any given property along with the associated lease conditions. Having trusted professional advice from a team of experts like Jones Aur will help ensure there are no surprises in the leasing process.
Myth #6: Commercial real estate is fading into obscurity
You’d be surprised at how often we hear people say that brick-and-mortar businesses are becoming a thing of the past. There’s no denying that e-commerce has become hugely popular in the last several years, but that doesn’t mean that retailers are going out of business altogether!
There are still thousands of businesses housed in commercial properties that are increasing their revenue annually by evolving in their response to consumer demands and adding locations in high-traffic areas that are experiencing growth. Many of these businesses rely on commercial real estate investments as they expand so they can continue providing products and services to a growing customer base.
Myth #7: It’s cheaper to lease commercial real estate than it is to buy
It’s easy to understand why people believe in this particular misconception. After all, leasing doesn’t usually require a sizable upfront investment like a down payment. However, leasing office or warehouse space can still be quite costly depending on your particular situation.
For example, poor credit can be problematic, and leasing may require an enormous deposit. Building a space out from your own savings can also be costly. Keep in mind, too, that you have no way of recouping the money you’ve spent on tenant improvements if you choose to move out once the lease is up. You may be surprised to learn that monthly rent payments are often higher than mortgage payments.
In short, there are pros and cons to leasing and buying. Working with an established brokerage like ours will help you understand the benefits and drawbacks of each so you can make the right decision for your growing business.
Find the right space for your Memphis business with Jones Aur
Now that we’ve debunked some of the most common commercial real estate myths, it’s time to get down to business! Our professionals have decades of combined experience in the industry and are standing by to help you lease, purchase, or sell a commercial property anywhere in the Mid-South. If you’re looking for a trusted partner in your search for the perfect space, we’ve got you covered! Contact us today to get started.