Mark Zink, Melrose Cooperative Bank

When equipped with the proper resources and accurate know-how, investing in rental properties can be a profitable endeavor. Whether you plan to rent the space out to tenants or businesses, the returns can be steady and calculable. As a commercial real estate owner, you have the privilege to designate rental rates (provided that market data supports your figures) and can ultimately determine who your tenants are. Once leases are secured, you can then benefit from a consistent stream of income. Essentially, commercial property owners control their own destiny.

Of course, for a commercial property to be profitable, a number of requirements need to be satisfied. If investing in a rental property is a new venture for you, consider these elements as you explore the endeavor.

Evaluate Expenses

Prospective commercial property owners should be prepared with a business plan and detailed budget. It is pivotal to understand how expenses will be managed and how profits will be maximized. Consider the financial impact of water and electric costs, maintenance fees, and, when applicable, staff salaries. Building regulations, fire safety policies, and capital expenditures for unexpected repairs are additional areas where attention is needed and costs could be involved. Optimal organization from the early stages of buying a commercial property will help you to have a clear view of short-term and long-term implications.

Understand the Market

Become familiar with the area around the commercial property. Seek out statistics pertaining to the current demographics, job market, crime rate and the average rent in the district. It is beneficial to understand how these factors can either help or hinder your investment. It is also helpful to pinpoint the locations of places like restaurants, shopping malls, schools and tourist attractions. All of these factors contribute to the type of renters a commercial property attracts. Competition plays a significant role as well. Research will help you to predict, if and how, competition will affect your business.

Consider the Unknown

As you sort out details, ensure you are also prepared for unexpected situations or sudden expenses. Peace of mind can be found in having a team of experts and professional resources available when critical situations arise. “What ifs” should be anticipated, and incorporating them into your plan can help you to avoid future setbacks. The more you prepare the better.

Owning and managing a rental property takes time and commitment, especially in the early stages. Follow your business plan, and be willing to adapt as necessary. It may take a bit of trial and error in order to become a comfortable and confident commercial property owner. As you interact with renters, encounter problems, and receive feedback, you will continue to learn what is and is not advantageous for your business.

Mark Zink, vice president commercial lending at Melrose Cooperative Bank, Melrose, Mass.