Commercial Building Business Plan, Marketing Plan, How To Guide, and Funding Directory
The Commercial Building Business Plan and Business Development toolkit features 18 different documents that you can use for capital raising or general business planning purposes. Our product line also features comprehensive information regarding to how to start a Commercial Building business. All business planning packages come with easy-to-use instructions so that you can reduce the time needed to create a professional business plan and presentation.
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Commercial buildings can be highly lucrative real estate investments provided that the owner has an understanding of how tenant businesses operate. For the purposes of this discussion, we’re going to focus on retail focused commercial buildings as well as office spaces. One of the more difficult things to operating a commercial building focused real estate investment firm is that these companies must make a determination as to whether or not the business is economically viable. Tenants can from time to time go bankrupt, and it is important that the commercial building owner have an understanding of how these businesses operate so that this risk can be kept to a minimum. Vacancies tend to remain for much longer period of time given that businesses do not often move and there are less individuals are looking to rent commercial space than residential buildings. As such, the capitalization rates for commercial building are generally significantly higher than the residential counterparts. It can be expected that the capitalization rate will range anywhere from 15% to 25% depending on the location, risk of tenant default, and related metrics that apply to these businesses. One of the more important aspects of owning and operating a commercial building is that capital is usually readily available to these real estate investment firms given the fact that it is a tangible asset that is being purchased. Provided that the owner or group of investors has a 10% to 20% down payment, almost all lenders are willing to extend the appropriate loans in order to acquire these buildings.
A commercial building business plan should be developed. This business plan should feature you through your profit and loss statement, cash flow analysis, balance sheet, breakeven analysis, and business ratios page. As it relates to commercial building ownership, there are approximately 25,000 real estate investment firms within the United States that either directly invest capital from the owner works the source capital from investors with the intent to purchase commercial properties. This industry generates an excess of $30 billion a year and provide jobs for about 75,000 people. The growth rate of this industry is expected to remain strong has capital markets have become more efficient given the power of the Internet. Many more people now have access to buying shares of individual commercial buildings that can be highly lucrative and ongoing investments.
The business plan should also so feature information regarding the demographics of tenants that will be acquiring space from the business on an ongoing basis. This includes an examination of annual revenues, annual profits, type of services offered, whether or not they need retail space, number of employees, and other related information to the operations of tenants. A tenant default operations manual should be developed so that in the instance where a tenant no longer pays – the appropriate legal procedures in place for removing the tenant from the premises. Almost all commercial building businesses do have legal counsel on retainer in order to handle these situations on an ongoing basis.
A commercial building marketing plan should be included as well within the overall documentation. This can be done somewhat on the lighter side of things given that most commercial buildings will hire a real estate brokerage in order to place tenants in the property. Usually, a fee equal to two months to four months of rent are provided to the to the brokerage in exchange for sourcing and appropriate tenant. However, a commercial building real estate investment firm should also have a proprietary website that showcases all available properties for rent. One of the things that many of these firms do as well is that they will take out listings among major platforms such as loopnet.com in order to further increase the visibility of any vacant spaces. A presence on social media is not necessary for a commercial building real estate investment firm – however, there can be some recommendations that may be made to fellow entrepreneurs who are looking for office space. As such, a small presence on social media can boost the brand-name visibility of the business, expand the visibility of commercial buildings owned by the company, and provide a limited amount of referrals on an ongoing basis.
A commercial building SWOT analysis should be produced as well. As it relates to strengths, commercial buildings are able to generate highly predictable streams of revenue on a monthly basis from the ongoing rental fees charged to customers. The availability of capital for acquisitions is immense, and these businesses are generally able to remain profitable in most economic climates. This is especially true of the commercial building focuses on something along the lines of healthcare were related industry that is relatively immune from negative changes in the economy.
For weaknesses, although the capitalization rates for a commercial building are substantially higher than that of their residential counterparts – there is a much greater risk of tenant default. As such, and again – it is important that a proper manual was put in place to deal with these issues as they come up from time to time. There is going to be further risks that are associated with commercial buildings, and these need to be focused on frequently.
As it relates to opportunities, a commercial building real estate focused investment firm can readily expand by simply acquiring additional buildings. Additionally, many commercial building firms will hypothecate their initial property in order to get the capital they need in order to purchase subsequent properties. One of the benefits of these businesses is that they are able to generate income not only from ongoing rental fees but also from capital appreciation of buildings as well.
For threats, outside of a major economic recession there is really going to be not too much that is going to change as it relates to commercial buildings. As it relates to buildings that focus on retail operations, there may be some decline in demand over the next 10 years as more and more people have taken to making purchases online rather than visiting a retail location. However, this risk can be ameliorated by the fact that there are certain businesses where people are going to continually want to go in order to directly make purchases. As such, it is important that the real estate investment firm owner focus on industries that allows for people to easily find retail businesses that are in ongoing demand.
Commercial buildings can be great investments provided at the real estate owner has an understanding of how these businesses are different than traditional residential properties. Usually, most people that get into the commercial real estate space have extensive experience as a landlord problem with was it residential properties. However, these can be highly lucrative investments for a person that has an understanding of industry and is willing to make a long-term capital investment in order to develop and expand their operations.