Five Ways to Increase the Value of Your Commercial Real Estate Property

If you are thinking about purchasing commercial real
estate, it's important to know that there are things that
you can do to enhance and increase the value of your
investment. As such, when you search for a commercial
property, look at the property's potential in addition to
its historical data.

Because the value of commercial real estate is primarily
driven by the cash flow that the property generates, any
strategy you employ has the potential to increase your cash
flow, decrease your expenses, and increase your overall
equity and the value of the property. Below are five
strategies you should consider when determining how you can
make the most out of your commercial real estate investment.

1) Make Improvements to the Property

Improvements can take the form of cosmetic improvements or
substantial rehabilitation. Cosmetic improvements include
such things as new paint or wallpaper, new décor to the
common elements, new landscaping, new carpeting/flooring,
etc. Substantial rehabilitation involves making structural
improvements to the property – for example a substantial
rehab may involve redoing all the units of a multifamily
property, or changing the structural façade of a shopping
center, or making major renovations to the lobby of a large
office building. In any case, you increase the value of
the property for not only your tenants, but for your own
portfolio as well.

2) Increase Rent

The value of your commercial real estate property can also
be increased by increasing the rent. In reviewing the
historical data on a property, take notice of whether the
tenants are paying market rent or whether there is
potential for a reasonable mark up in rents. Determine how
the improvements you make to the property can justify your
rent increase. Pay close attention to both the upper and
lower level of rents that are being charged for similarly
situated types of real estate so you don't price yourself
out of the market.

3) Decrease Expenses

Evaluate the historical operating statements of the
property to determine if there are areas where you can
decrease the expenses. For example, perhaps improving the
property with more energy efficient light bulbs in the
common areas will drastically reduce your monthly
electrical bills. Or perhaps you find that the gas company
can individually meter the units so that instead of paying
for the gas, you can fairly pass that expense onto the
tenants. In the vast majority of instances, a commercial
property owner can cut expenses without significantly
impacting the operations of the real estate itself.

4) Alter or Change the Property's Intended Usage

Often times, changing the use of a commercial real estate
property can drastically change the value of the property.
For example, suppose you find an old industrial warehouse
in the middle of a bustling epicenter. Instead of keeping
it as an industrial warehouse, you can seek a zoning
variance to convert that warehouse to a hotel, or a condo
building, or an office building, or any commercial use that
makes sense for that location.

5) Add Amenities

Finally, you can also consider adding amenities to the
property to make it more appealing and valuable. Value
enhancing amenities can include something simple like
creating a playground in a multifamily property or adding
free wireless Internet for your retail tenants. Or you can
add more extravagant amenities like a daycare center in
your office building or an outdoor courtyard in a hotel
property.

In sum, when scouting for commercial properties, look
beyond the historical data and see what strategies YOU can
employ to make the property more valuable. Know your
property's potential before you close the deal. The best
deals are made when you buy a property, not when you sell a
property!

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Contributed by VEC Financial Group.
The VEC Financial Group (VEC) is dedicated to providing
commercial mortgage and business financing to property
owners and entrepreneurs across the country. VEC Financial
provides these services by connecting the right broker with
the right borrower, who ultimately finances with the right
lender.
http://www.vecfinancial.com