Did you know that real estate investments can provide investors with an average return of 10 percent? This means that if you put $100,000 into a real estate investment, in just five years, you could earn $50,000 – in ten years, you could double your money. But before you dive into your first real estate investment, it’s important to learn about the pitfalls you could hit. 

As with any investment, real estate investing comes with risk, but smart investors can avoid some of these downfalls. Read on to discover common commercial real estate investment mistakes and learn how to make smarter investments.

Choosing the Wrong Property

When you’re first investing in commercial real estate, one of the biggest mistakes you can make is choosing the wrong type of property to put your money into. There are four primary types of commercial real estate: office, industrial, retail, and multifamily housing. You can also invest in storage facilities, special- or mixed-use properties, or even undeveloped land.

Which type of property you invest in depends on your priorities and goals. For instance, multifamily housing investments tend to have higher returns, but they also require a lot more management and maintenance. You need to make sure to pick an investment that suits both your time needs and your financial goals. 

Not Doing Your Homework

As you’re trying to decide which property to invest in, it’s a good idea to do some research and learn about your local real estate market. You need to know about how much properties in that area go for, what direction the market is moving, and how many properties are available. This will help you recognize a good deal when one comes up and make education decisions about when it’s time to dive in with a property.

In Orange County, the median price per square foot for real estate is about $600 as of this writing. Right now, properties are selling for a little under list price in an average of two months. It is strongly a seller’s market, meaning there are more people looking for properties than there are properties available.

Not Planning for Taxes

Although commercial real estate investment is a type of passive income, it does still count as income and is taxed as such. When you’re planning your investment, it can be easy to get caught up in the profit you’re making and forget about those taxes. And unlike your other income, taxes may not be automatically deducted from these profits before you get them.

Work with a financial professional or tax advisor and figure out what percentage of your profits you can expect to pay in taxes. Then make sure you account for any potential tax liabilities you may face, including rising property taxes. And in the long-term life of your investment, you need to prepare for capital gains tax if you eventually sell your investment for more than you bought it for. 

Overreaching

When you start looking at your potential return from an investment in Orange County real estate, it can be easy to get swept up in the profits. You might be tempted to put as much money as you can afford into this investment – after all, the more you spend, the more you earn. But while real estate can be very lucrative, it also comes with its fair share of risks.

You want to avoid going into too much debt for your business investment – in fact, if possible, it’s best to avoid going into debt at all. Instead, start investing with the money you have saved, and don’t immediately dump all of that into one real estate investment. Remember that real estate investing is a long game, and give your money time to grow before you start pouring funds into the major investment properties. 

Forgetting Renovation Costs

Oftentimes, the best deal you can get on real estate is on properties that may need a little love before they’re ready to go on the market. Buying properties that need some work can be a great way to get into real estate investing if your budget is limited and to make your money work for you. But you need to make sure to account for those renovation costs when you’re budgeting for your investment. 

Ideally, you shouldn’t go into any debt to finance the renovations for your new property. You also need to build a buffer into your renovation budget to cover any unexpected costs. It’s almost guaranteed that you’ll find something you weren’t planning on, a job will be more expensive than you expected, or you’ll have to call in a professional to help you finish a job on time.

Flying Solo

The phrase “two heads are better than one” is an important lesson for any commercial real estate investor to learn. The truth of the matter is that, no matter how much research you do, you aren’t going to have all the answers about how to manage your property. An unexpected situation will come up, and you don’t want to try to flounder on your own for answers. 

Instead, reach out to investment professionals, trusted colleagues, and a network of fellow investors for advice. There is no situation you’ll come up against that someone in the investing world hasn’t already faced. Learn from their experience, and don’t be too proud to ask for advice when you’re in over your head. 

Learn More About Commercial Real Estate Investment

Commercial real estate can be an incredible investment, but it’s not without its risks. There are a number of common mistakes new investors make, but with the right precautions, you can avoid these and make smarter investments. Always do as much research as you can, choose a property that fits your priorities, and be sure to live yourself some wiggle room in your financial plan. 

If you’d like to learn more about commercial real estate investment, check out the rest of our site at Commercial Orange County. We are a full-service commercial real estate brokerage proudly serving Orange County. Give us a call today and find the hottest listings in Orange County.

Are you thinking about starting a new business in Orange County, CA? Or, do you plan to expand your current operations into a new location around this area?

If so, it’s important to know what kind of buildings are available. From small storefronts to large-scale warehouses, there are many different options to consider. 

Today, we’re taking a closer look at the types of commercial real estate you’re most likely to find in Orange County, and how we can help you find the exact space you need. 

Retail Properties

Let’s start with retail. 

A retail property is a type of commercial property that’s specifically zoned to be one of three entities:

• A service business
• A store
• A shopping center

If you’re a retail business owner looking to open a storefront in Orange County, your space must be zoned for retail use. This means that the local government has established an ordinance that dictates the building can only be used for that purpose.

In some of the more populated areas of our region, you’ll often find mixed-use zoning. This means that both residential and commercial properties can exist in the same location. In this case, the government instates zoning overlaps to allow joint use to occur. 

What happens if you fall in love with a space, only to find that it’s strictly zoned for residential use? In that case, you can submit a request asking for the government to rezone the property into a retail property. After the relevant agencies review your application, they can decide whether or not to grant your request. 

While this can lead to a positive outcome, most requests are not successful. That’s why it’s so important to work with a commercial real estate agent while exploring different properties. Our team can show you properties that are already zoned for retail use, so there’s no legal legwork to contend with. 

Where to Find Retail Properties

There are retail properties all around Orange County. However, certain areas tend to attract specific types of businesses. For instance, if your store sells convenience goods, then you’ll likely start your search in a heavily-traveled area that’s zoned for multiple retail properties. 

Then, there are niche-style businesses that are more strategically located based on the clientele they want to attract. For instance, beauty salons are often located near residential areas, so they have access to a wide range of nearby customers. Similarly, you’ll find technology companies and insurance companies in designated business parks, which are less accessible to the public. 

As you begin your search, think about where your clients will be, and how they’ll interact with your business. Then, choose a retail property that allows you to cater to them as naturally as possible. 

Industrial Properties

Industrial properties are very wide-ranging and nuanced. There isn’t one type of property that will appeal to every single manufacturer or business owner. The type that you need will depend on a range of factors, including the type of industry that you’re in, the size of your team, and more.

Some managers lease an industrial property because they want direct access to it. They want to rent it for their own business and plan to move their operations to that location. Other times, they’ll purchase it outright as a short-term or long-term investment.

Let’s take a look at the different types of real estate that fall into this sector.

Heavy Manufacturing

Buildings zoned for heavy manufacturing use are usually very big, with machinery and special features designed specifically for large-scale manufacturers. These locations are customized to fit the needs of each manufacturer, and new tenants often perform extensive renovations any time they move into a different space. 

Light Assembly

While heavy manufacturing buildings are large and complex, light assembly buildings are much simpler and smaller. This means they’re also easier to reconfigure if you need to change something about the previous tenant’s layout.

Business owners can use a light assembly space to:

• Assemble products
• Store goods
• Set up office spaces

Bulk Warehouses

As its name implies, a bulk warehouse is very large. Most contain between 50,000 and 1 million square feet and are designed to be easy for trucks to enter and leave. Due to this requirement, they’re often located close to major highway systems. 

Bulk warehouses are ideal for companies that perform regional distribution activities and require space for large amounts of product and team activity. 

Flex Warehouses

Flex warehouses are smaller than their bulk counterparts. These buildings pull double-duty, combining industrial spaces with office spaces.

Like light assembly spaces, they’re simple and relatively easy to convert. You can arrange them to fit the needs of your company without major modifications. 

Office Spaces

If you need a light manufacturing area plus office space, then a flex warehouse might be just what you need. However, some individuals are interested solely in offices when investigating Orange County commercial real estate.

If that’s you, then let’s talk briefly about office building classifications. 

Class A Properties

Class A office buildings feature excellent construction. They’re also located in highly desirable locations, which makes them especially popular with real estate investors. 

Class B Properties

Class B office buildings are also well-constructed and designed to meet the highest possible industry standards. However, the one drawback is that their location isn’t as ideal as a Class A property. 

Class C Properties

Class C office buildings are ones that do not fall into either of the above two categories. While these won’t have as desirable construction or location, they can be suitable for many businesses, especially those operating on a strict budget. 

Browse Our Available Types of Commercial Real Estate

As you can see, there are many different types of commercial real estate located in and around Orange County, CA. Do any of these sound good for your business?

If so, we’d love to help you find the building of your dreams. We’re a full-service commercial real estate company with a great history and reputation in this community. Whether you want to buy or lease your next property, our experienced agents are here to help.

Browse our available properties to learn more about what’s out there, and contact us to connect today! 

Set aside the gloom and doom news you might have heard about California’s economic woes in this post-pandemic world. Many experts actually believe California is in for a robust few years ahead, and the state and country continue to recover from the pandemic. While the pandemic certainly had reared its ugly head in many ways, including for the Orange County commercial real estate market, things are rebounding.

Orange County is one of the world’s most recognizable counties, and as such, this big piece of Southern California real estate naturally attracts experienced people in business and investors. With their real estate investing, these people will bring Orange County back to its pre-pandemic status.

Get to know what Orange County has to offer and the types of commercial real estate Orange County has. Read on to learn more about some of the Orange County commercial real estate market trends.

Higher Than Normal Office Vacancies

In the pandemic world, the social distancing and lockdowns forced office buildings to go dark and workers to break open the computer at the kitchen table instead.

It’s probably not surprising to hear the office real estate in Orange County hit record-high vacancies. In fact, it had been almost a decade since that much commercial real estate sat vacant in Orange County.

Very slowly, Orange County office space usage is seeing a return to some form of normalcy like before the pandemic. Companies are slowly bringing workers back into the office from working at home.

This means that office space that has sat empty is seeing a shifting trend. It’s slowly filling back up with workers and businesses.

This is not happening quickly but as a slow decline in vacancies in the commercial office market.

High Vacancy Rates on High-Value Commercial Sites

The high-volume sites are one type of commercial real estate that seems to continue with high vacancy rates. Businesses are not coming back to the big open office space found in towers like they once were before the pandemic.

Orange County is seeing many large tower offices with higher-vacancy rates. It’s a twofold reason businesses are running back to those big office spaces:

• Cost
•  A shift away from large, open-plan offices

The market identifies these four and five-star properties as beautiful, luxurious, and even spacious, Yet, they simply cost more than some other options.

As business recover from the pandemic slowdowns they weathered, they aren’t quite ready to opt for these higher-rent options.

The other reality is that their workers are excited to return to big office spaces with open walls and many co-workers around them.

The market is seeing a slow and steady rebound for the smaller, more compact office building spaces. Some experts believe that the market overbuilt the high-value sites, and there’s more than the demand requires for the area.

Leasing Market Inching Towards Pre-Pandemic Status

Post-pandemic, it appears that the commercial real estate market is slowly improving if you plan to lease the property. The market has not entirely rebounded but is showing steady and favorable improvements.

It’s worth noting that most experts believe the market may have hit a bit of a plate on leasing, though.

Some experts suggest the challenges in measuring the lease growth for commercial properties. This is because while many businesses may have leases, there is a high volume of releasing between businesses.

Companies don’t want offices they’ve leased sitting empty if they have workers who aren’t returning. Instead, they are opting to sublease the property to avoid a loss.

Reduced Levels on Commercial Construction Sites

Interestingly, the commercial construction market is not rebounding as the leasing and buying markets have. While some new commercial construction has resumed in Orange County, it’s far from pre-pandemic levels.

It could be that the construction community recognizes the abundance of empty pre-existing real estate. They could also recognize an overzealous amount of building done pre-pandemic.

Either way, commercial real estate construction is only building at a rate of about half what they were doing before the pandemic. Experts believe it will take much longer for the commercial construction market to rebound fully compared to the leasing and buying property markets.

Commercial Property Sales

Commercial property sales trends come with a mixed bag of results, some good and some less favorable results.

Real estate investors are back to buying commercial property in Orange County but not at the same volume the real estate market had seen before the pandemic. That’s the less favorable trend.

However, the good news is that the value of commercial property sales is actually significantly higher than in previous years.

So, while fewer commercial properties are being sold, the ones selling are going at a much higher rate than in previous years.

Interested in Orange County Commercial Real Estate?

Whether you’re in the market to lease a commercial property or buy property, you need an expert who can guide you through the process.

If you’re ready to make a move in the commercial market, then you need to work with a commercial real estate expert who can assist you to get the right property for your business needs.

Whether you need help defining what kind of space your business needs or assistance narrowing down the best property that checks off all of your needs, a commercial real estate specialist can help you find the right commercial property for you.

Real Estate Trends in Orange County, California

There’s no question that the pandemic was highly impactful on the Orange County commercial real estate market. The good news is that as California recovers from the pandemic, the trends show the commercial real estate market following suit.

If you’re looking for commercial property in Orange County, whether to buy or rent, we can help. Let us help you find the right property for your business. Contact us today or call us call us at (877) 775-9625 for all your commercial real estate need, so we can get started working together.

It might surprise you to learn that houses in the United States now cost over $350,000 on average. Some areas of the country are seeing an increase in home value faster than others, such as Texas, California, and Florida.

Interestingly, many people overlook the opportunity to invest in commercial real estate. In Orange County, there are plenty of opportunities to invest in commercial real estate. With the right approach, you can make a smart investment that will pay off in the long run.

Here are a few tips on how to invest in commercial California real estate.

Research the Local Market

Before you invest in any property, it’s essential to do your homework and research the local market.

This will help you understand the current trends and what types of properties are in demand. You’ll also get a better sense of the potential rental income you can generate. It’s also a good idea to consult with a real estate agent or broker who specializes in commercial properties.

They’ll be able to provide you with valuable insights and guidance.

Choose the Right Location

When it comes to commercial real estate, location is everything.

You’ll want to choose a property that’s situated in a high-traffic area. This will increase the chances of attracting tenants and generating rental income. It’s also important to consider the surrounding businesses when choosing a location.

You’ll want to make sure the property is near complementary businesses. For example, if you’re investing in retail property, you’ll want to make sure it’s near other stores and restaurants.

Consider Your Future Goals

When investing in commercial real estate, it’s important to think about the future.

You’ll want to choose a property that has the potential to appreciate in value. This will ensure you make a profit when you eventually sell the property. It’s also crucial to consider the future uses of the property.

For example, if you’re investing in retail property, you’ll want to make sure it can be easily converted into office space if the need arises.

Think About the Risks

Of course, no investment is without risk.

When investing in commercial real estate, it’s important to be aware of the potential risks. These include things like tenant turnover, vacancies, and repair costs. However, if you do your homework and choose a property wisely, you can minimize the risks.

This will help you maximize your chances of making a profit from your investment.

Work With a Professional

This is something you simply can’t overlook.

When investing in commercial real estate, you’ll want to work with a professional who knows the ins and outs of the industry. They’ll be able to guide you through the process and help you make the best decisions for your investment.

What Should I Look For in a Broker?

Finding a broker might seem difficult at first. But, there are key attributes to keep in mind to help you make the best decision for your situation.

Let’s take a look at some of the most notable.

How Experienced Are They?

Look for a broker who has experience in commercial real estate.

They should know the ins and outs of the industry and be able to guide you through the process. They will also help you avoid common pitfalls that you may have otherwise encountered. Keep this in mind when moving forward.

Do They Specialize in a Particular Type of Property?

It’s also a good idea to find a broker who specializes in the type of property you’re interested in.

For example, if you’re looking to invest in an office building, you’ll want to find a broker who specializes in office properties. They’ll have the required knowledge and resources to help connect you with the property that’s best for you.

What Is Their Track Record?

When it comes to finding a broker, you’ll also want to consider their track record. Ask them about the deals they’ve closed in the past and whether or not their clients were happy with the results.

This will give you a good idea of what you can expect if you choose to work with them.

What’s Their Network Like?

A good broker will have an extensive network of contacts in the industry.

This will come in handy when it comes to finding the right property for your needs. They should also be able to help you navigate the negotiation process. Although working with a professional who does not have a large network doesn’t mean you can’t get the results you want, it is less likely that you will be able to.

What’s Their Fee Structure?

You’ll also want to find out how the broker plans on charging you for their services. Most brokers work on a commission basis.

This means they only get paid if they’re able to successfully close a deal. However, some brokers may charge an hourly rate or a flat fee. It’s important to find out how the broker plans on charging you before you agree to work with them.

This will help you avoid any surprises down the road.

It’s Easier Than You Think to Invest in Commercial Real Estate

Just be sure to do your homework and work with a professional who knows the ins and outs of the industry.

This will help you make the best decisions when you invest in commercial real estate. Looking for other ways we can help you out in the future? Be sure to reach out to us today at (877) 775-9625 and see what we can do!