The commercial real estate market indeed took a serious hit following the pandemic. However, experts are optimistic about where the market is headed in 2024, especially for those willing to take the long view when it comes to this type of investment. If you’re interested in commercial real estate, you have two options when it comes to business buildings: design-build or turnkey.
With a turnkey property instead of designing and constructing retail buildings, you get real estate that’s almost instantly ready to use. So what are the benefits of this type of property? And how can you tell if you’re ready to buy one in the Colorado Springs area? In this guide, we’ll be answering these questions so you can decide if this type of investment is right for you.
What Is Turnkey Commercial Real Estate?
Turnkey commercial real estate refers to types of property that are completely ready to be bought and rented out. They can refer to new builds, or old buildings that have been repaired and restored to a new condition.
Compared to other properties, which might require extensive repair before you can rent them to individuals or businesses, turnkey real estate requires little time and effort to get on the market.
Because they don’t require any work, turnkey properties do tend to be more expensive than fixer-uppers.
What Are the Benefits of Investing in Turnkey Commercial Real Estate?
One of the biggest benefits of turnkey commercial real estate property is the overall low entry barrier. Traditional investment real estate can be quite intimidating to get into.
Not only do you have to think about acquisition, but you also need to worry about renovating and preparing the property for tenants. For many people, turnkey properties allow them to get their feet wet before deciding if more investment properties are the right call.
There’s also the added benefit of near-instant rental income (as long as you find a tenant). There’s no purgatory period where you’re bleeding money on renovations before you can start seeing a profit.
Lastly, there’s less risk. For a turnkey property, everything has been inspected and vetted. As such, you aren’t likely to find something like a mold infestation or foundational problems that could cost you thousands or even millions of dollars.
That being said, there are also the benefits of design construction you should consider. In some cases, that might be a better fit for your specific project.
How to Tell if You’re Ready to Buy Turnkey Business Buildings
Your savings are one of the most important factors for determining whether or not you’re ready for a commercial property investment. It’s true that with turnkey properties you likely won’t need to use your savings to pay for unexpected expenses.
But you will need them to put down a down payment on your loan. This is important because the more money you can put down on a down payment, the more favorable the loan conditions will be.
You also need to be comfortable with numbers. To determine when you can pay your mortgage off you need to figure out what rental percentage costs will help you do it as quickly as possible.
Ideally, you’ve been researching investment strategies that will allow you to do this. Lastly, make sure you have some goals in place for your commercial real estate investment.
What’s your end goal? Do you just want some passive income to cushion your savings? Or do you want to build an extensive investment portfolio of assets?
Asking these questions is an important part of getting started.
What to Consider When Buying Commercial Property in Colorado Springs
If you’ve decided that a turnkey commercial property is right for you, you might be eager to buy the first one you see. However, it’s important to fight this urge.
Without the proper research and considerations, it’s easy for your investment to turn into a financial disaster. So make sure you consider all of the areas in this section before you proceed.
Real Estate Providers
One of the first things you need to consider is the different real estate companies to purchase a turnkey property. Reputation is important here. The last thing you want to do is buy a property from a provider that claims it’s turnkey only to discover a variety of problems with the facilities.
In some cases, you’ll be working through a real estate company that serves as an intermediary between the construction company and the buyer. Other times, you can work directly with the construction company on turnkey packages that they offer.
When choosing a provider, pay close attention to how long they’ve been in business. This will tell you a lot about both the experience level and customer service the company offers.
Real Estate Market
The last thing you want is to buy commercial real estate property in an area that could become a ghost town in a few years. That’s why it’s important to pay attention to the projected future of the real estate market you’re interested in.
The good news is that’s not a huge problem here in Colorado Springs. According to The Gazette, Colorado Springs is on track to have one million residents by the year 2049.
As such, most commercial real estate property you buy in the area will likely be used for one purpose or another during the market cycle. However, it’s still important to pay attention to the specific property location the building is located in.
As we mention in the next section, if the location is far away from certain parts of the city it might not appeal to as many people.
Property Location
One of the first things you usually hear about commercial real estate is that the three most important things are location, location, and location. While this is an oversimplification, the location of your commercial property can indeed be vital to its success.
When selecting a location you shouldn’t just look for the best deals. You also need to think about how the building will be put to use. For example, if you want to turn it into an office space or similar type of commercial building, you want to make sure it’s in a central location.
That way, employees or clients don’t need to travel too far to get to it. Downtown parts of cities are great for this purpose. If you plan on turning the building into a rental property, you want to choose a part of town that has an appeal to renters.
Maybe it’s close to a local university, like UCCS. Or if it’s close to a park, that can be included as a perk in the rental description.
That’s why it’s so important to define what you plan on using the commercial real estate for. It ultimately helps determine where the best property location will be.
Financing
The right type of financing can often make or break a real estate deal for commercial investors. The key to making your commercial property a success is to find a loan with favorable interest rates. Unfortunately, that’s been easier said than done lately.
That’s because the Federal Reserve decided to increase interest rates eleven times over the past two years. With these high interest rates, typically lenders have much higher lending standards than they have in the past.
This makes it a challenge for a real estate investor to qualify for any loans at all. However, the good news is that rates have remained unchanged in the past months.
As such, this year we can expect both less restrictive lending standards and more favorable interest rates. When searching for financing we recommend doing as much research as possible.
Compare quotes from different lenders so that you find the most favorable conditions for your specific project.
Possible Renovations and Upgrades
Most of the time, a turnkey building is ready to go without any renovations or upgrades. However, in some cases, you might still require some. Often this is to include amenities that might appeal to certain types of renters or businesses.
The good news is that because all other aspects of the building are taken care of these upgrades can usually happen quickly to suit your needs. However, you will need to find the right type of commercial contractor for the job.
We recommend asking these questions to get a better sense of whether or not they’re qualified for the job. Otherwise, they might end up prolonging the process considerably.
Ready for Turnkey Real Estate in Colorado Springs? Contact Hammers Construction
We hope this guide helped you learn more about whether or not turnkey business buildings are right for you. Here at Hammers Construction, we’ve been helping the Colorado Springs area with its commercial building needs since 1991.
We know that different investors will have different preferences for their investment, whether that’s a design-build construction or a turnkey building. That’s why we cater to both demographics.
So whether you’re looking for a ready-to-go property or you want to build it from the ground up, we can help you. Get in touch with us today for a free estimate on your next project.