Local Buying Tips

Analyze the benefits of buying commercial real estate, as well as the risks.

• A benefit of buying commercial real estate could be that if you are buying to maximize your return on investment, it will, in most cases, offer more returns than leasing.

• Location may backfire. Today's "hot" neighborhood can become tomorrow's "not" neighborhood. Locations are trendy. Gentrification may stall. The market may go bust. The area you choose one day may become undesirable the next. Of course, the reverse can be true, as well.

• Loss of liquidity. Businesses may tie up much of their liquidity buying real estate. It's not always easy to sell real estate, particularly in a slump. At the same time, businesses that own real estate at least have something to sell if they need a cash influx to revive a lagging business.

• Tenuous cash flow. Tenants sometimes stop paying their rent. Other times, buildings are in need of unexpected -- and expensive -- repairs.  Your cash flow can become compromised, especially if you are forced to simultaneously pay repairs and attorney fees to handle a tenant situation.