Few investments have the potential for great gain or great loss as commercial real estate. Huge fortunes have been generated through wise land purchases for multi-family commercial development.
For investors with foresight and ability to observe current development that is already in place, and where that development may lead, serious money may be waiting. The question is just how does one conclude that a particular property has commercial, multi-family appeal?
While no one can be sure of what may happen in the future, there are some common things all commercial real estate investors do before deciding to invest in a dense housing property.
Initially Qualifying the Property
When assessing whether a property has real commercial potential, just any old property will not do. All property fit for commercial development shares some common traits.
Property location is the most critical assessment component. There is an old adage that the most important factor of a successful business is location. The same holds true for the multi-family housing those businesses may serve.
When assessing location, first look at what is currently there. Is it housing, multi-unit housing? Is it near a thriving business sector, or is it empty and forested?
Is housing infrastructure, meaning sewage, gas, water access in place? If not, the cost to get it there must be calculated into the project evaluation.
What are the road or street conditions like? Is there adequate ingress and egress to the property? In other words, is it easily accessible, or is there enough room to make it so?
What about natural waterways? Are they present? If there are any creeks, ponds or lakes on the property, you are better off to leave it alone, unless your pockets are deep enough to fight the EPA and win.
Water is great if you are just looking for a place to build a single house, not so great if you are planning a commercial project. What is the natural terrain of the property? Is it relatively flat, hilly or mountainous? Uneven terrain with heavy trees is expensive to clear and prepare.
Be Considerate of the Neighborhood
Do not presume your project, no matter how nice you think it is, will be warmly received in the area you are considering. Spend some time at the local hangouts in the area and drive through the neighborhoods nearest the property you are considering. Try to get a feel of the community that will be most directly impacted by a multi-family housing development.
Look at traffic studies for your proposed development and try to gauge increased traffic impact on the surrounding communities.
Be honest about whether a multi-family development is really a good idea for the communities in the area. Is your development one that will add to community and house values, or will it only lower them?
Next Confirm Ownership
If the property passes all the initial inspection and considerations, the next step is to the local courthouse or tax assessor’s office. Ask the clerk for the plat book the property is recorded in. Between the courthouse and tax office, you can identify the owner.
Which office has which information can vary from state to state, and even from county to county. Most counties now have this information online with free access. Verifying ownership is the first real step toward making an offer on the property.
Another critical step is to make sure there is clean title to the property, meaning there are no liens or other indebtedness against the property . Hiring a closing attorney for a title search will cover this step, if after your preliminary assessment you are still interested.