Tapping into the commercial real estate market can be a challenge, especially if you’re just starting out or operating in a new city. As a new investor, there’s a lot that you have to consider, and the potential return on investment, opportunities for business growth, and local market information are only a few of the important items to research before selecting the location for your business or investment property.
Fortunately, you’ve got the Jones Aur Commercial Real Estate team on your side, and we’re here to be your guide to commercial real estate in Memphis.
Commercial Real Estate 101
Before you start looking for your next investment property in Memphis, you’ll need to arm yourself with general knowledge of the commercial real estate process. Learning the basics of the field will give you an edge that will come in handy throughout this investment journey and those in the future, as well.
Understanding Key Terms Is the Key to Your Success
It never hurts to consult the commercial real estate dictionary to stay on top of the upcoming paperwork for your next investment. You’ll have a professional, experienced, and licensed real estate agent at your side to help you through it all, but understanding the lingo yourself will make all the difference.
CRE: Short for “commercial real estate” in the language of the pros.
Broker: Your representative during the buying, selling, or leasing process. At Jones Aur, your Memphis commercial real estate broker works together with a team of other professionals to provide you with the best service possible.
Internal Rate of Return: Your property’s IRR helps predict your investment return over a set number of years. Essentially, this metric tells you how much cash flow you can expect to receive after purchasing a property. We’ll help you calculate the IRR on your potential Memphis property investment so you don’t have to.
Net Operating Income: Your NOI helps you assess your investment’s profitability after subtracting the expenses required to maintain and operate the property. The Jones Aur team in Memphis is here to help you calculate your NOI using a standard formula that takes your unique expenses into account.
Capitalization Rate: Similar to the IRR, the “cap rate” is another key metric tool that the team at Jones Aur uses to assess a property’s profitability. By dividing the property’s net operating income by the current market value, you’ll better understand the relative value of an investment property compared to similar properties.
Weighing the Pros & Cons
Investing in commercial properties like apartment buildings, office buildings, warehouses, or retail buildings is an excellent way to build wealth. Like all investments, however, commercial real estate has its pros and cons, and you should consider them all carefully before jumping in head first.
Pro: Portfolio Diversification
Because real estate is a physical asset, its value is typically more stable than other investments like stocks and bonds, bolstering your wealth portfolio. Investing in a commercial property in Memphis can help diversify your portfolio and help protect your wealth against a changing economy.
Con: Higher Risk
CRE investment properties almost always see a higher volume of foot traffic than residential properties. With more people going in and out, these properties are at a higher risk of damage or accidents either to the physical space or the people navigating it. You could be responsible for these incidents, and you’ll need to be prepared no matter the cost.
Pro: Long-Term Growth
CRE investors are long-term investors, which allows them to coast through economic cycles that might harm shorter-term investments. Commercial properties tend to stand well against changing tides and times, making them excellent for investors willing to invest for the long haul.
Con: Higher Investment Cost
Compared with residential real estate, commercial real estate investments initially cost more money out of pocket. It may take you more time to save for the down payment and maintenance costs, but this larger investment will still pay you more in the long run.
Pro: Cash Flow
One of the biggest reasons to invest in commercial property is to earn consistent investment returns. The passive income generated by your commercial investments makes it possible to enjoy a large monthly paycheck without adding extra work to your to-do list – at least as long as you utilize a property manager.
Con: More Work
Be careful not to bite off more than you can chew when deciding to invest in commercial real estate in Memphis. These properties require detailed management, and if you’re doing it yourself, you’ll have another full-time job on your hands.
Research the Memphis Commercial Real Estate Market
Deciding to invest in any market requires research, and investing in Memphis commercial real estate is no different. Keeping up with trends in the market will protect you from choosing high-risk investments and boost your business’s success in the long term. As Tennessee’s second largest city, Memphis is a great place to invest in commercial real estate for several reasons.
Located in the heart of the country, this city is a major transportation hub and tourist destination. The city boasts a low cost of living and conducting business, and the city and state offer incentives for businesses moving into the area. Investors looking to stake their claim in the Memphis market should consider buying industrial or multifamily properties. Both of these markets are promising prospects for either new or seasoned investors.
Let’s Talk
Checking out the Jones Aur guide to commercial real estate in Memphis is an investor’s first step – contacting the Jones Aur team is the second. No matter what property type you’re looking for or the area of Memphis you want to invest in, our team of experienced real estate professionals has you covered. Contact us today to get started!
