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Los Angeles Property Management Blog

How to Choose a Commercial Space in LA County

How to Choose a Commercial Space in LA County

Commercial spaces in LA County are a profitable investment option for commercial real estate investors. However, many investors are uncertain about choosing the right commercial property that will yield consistently high results in the long run. 

At Bell Properties, we have helped several commercial property owners achieve their investment goals. We have managed commercial spaces across LA County and recommend that you ensure that the space fits your requirements before investing the money. Conduct thorough research regarding its location, the amenities surrounding it, proximity to transportation, and other factors that will positively affect the growth of your commercial space. 

What Is A Commercial Space? 

Commercial space is any non-residential space within a real estate property. It consists of buildings, lands, and units used for business purposes and other profit-generating activities. It includes office buildings, hotels, retail stores, malls, warehouses, multi-family housing buildings, and garages. 

Class Of Commercial Spaces 

Commercial spaces are categorized into different classes based on their demand and desirability. They include: 

  • Class A

This class represents commercial spaces of the highest quality situated in a prime location. These spaces are newer and have high-end construction and updated infrastructure. 

Due to their high demand, they cost a higher rent and attract better quality tenants. If you choose to invest in such a property, the buying price will also be high.

  • Class B

Commercial properties of class B can also be of high quality, but they usually have older construction and need minor renovations. Even though these properties are functional, their age is the reason for a lower price. 

They are situated in a prime location, have several amenities, and are available at a reasonable price. It is why many investors choose to buy these properties and flip or renovate them to attract high-quality tenants.

  • Class C 

These commercial spaces cost the lowest and are situated in less desirable locations. The buildings are distressed, older, and require heavy maintenance and renovations. 

Since they may not have functional amenities and may not yield favorable results, they fail to attract many tenants and buyers. These properties are also a popular choice for investors as they can purchase them at a low price and develop them for a more profitable investment.  

How to Choose an LA County Commercial Space?

Property owners invest in commercial properties to build wealth over several years. While the right investments can diversify your portfolio and help you achieve your long-term financial goals, the wrong property can bring in several risks and hinder your cash flow.

Here are a few tips on how to choose a commercial space in LA County -  

Identify Why You Want to Buy the Commercial Space In LA County 

Before buying a commercial space, you should clearly see its potential use. Your plans for the space can only succeed if you have a concrete strategy in place. Therefore, it is necessary to determine a tentative objective and then look for an investment property that fits the requirements. Here are a few ways in which you can use your commercial property:

  • Land Banking

Land Banking requires you to purchase large sections of land that are in the process of being developed. The goal here is to carry out a substantial market study before purchasing the property, hoping that it appreciates with time.

  • Development Of Commercial Real Estate

The development of commercial real estate requires the investor to plan the development and potential construction of the property. This includes developing commercial spaces like office buildings, industrial facilities, and retail centers.

  • Fix and Flip

The Fix and Flip market in LA County is rapidly gaining popularity due to its highly profitable nature. This type of investing requires the investor to buy a property and conduct repairs and upgrades. The property is resold at a higher value due to its upgraded appearance.

  • Wholesaling

Wholesaling commercial real estate can fetch you a good deal. It requires putting the property under contract and selling the contract to another investor or an owner-occupant.

  • Owner-occupied

Owner-occupied commercial spaces are where you purchase a commercial space and run a business yourself. This includes investing in an office space where you plan to run your business. Many people develop commercial spaces to run their own stores, restaurants, or similar small businesses.

  • Value-adding (BRRRR)

BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. As the name suggests, value-adding a property requires you to purchase a commercial space that needs repairs. You need to add value to the property by making substantial renovations and rendering it habitable again. You then rent it out to tenants to generate a steady cash flow and use that money to buy another similar property. 

  • Passive Investing

Passive investing is for commercial investors who do not have the time to run a deal. It is a long-term strategy that enables investors to invest in a space without much involvement.

Decide On The Class Of Commercial Property You Want To Invest In

Commercial spaces can include a variety of spaces like retail shops, industrial complexes, offices, or apartment buildings. Before choosing a commercial investment property, you need to determine which class of commercial real estate you want to purchase.

Commercial real estate is of the following categories - 

  • Multi-family commercial properties 

Multi-family commercial properties are like residential properties but have more than four units. They include duplexes, garden apartments, or multiple units spread out across an apartment complex.

  • Office space

Office spaces are designed to be used by offices and have enough room to allow multiple tenants. They can include medical offices or suburban office buildings.

  • Retail

Commercial spaces are used for retail, i.e., to sell goods or services to consumers. These spaces are located in areas that are conveniently accessible to everyone. Retail spaces include shopping malls, stores, or other shops. 

  • Industrial

Commercial properties used for industrial purposes host industrial operations, like heavy manufacturing or light assembly. They include warehouses and distribution centers. Chatsworth, Van Nuys, and Burbank are some cities that have the best industrial spaces in LA County.

  • Hospitality

Spaces used for hospitality provide food, accommodation, or entertainment, like hotels, restaurants, or rentals.

Secure Financing For Your Commercial Space In LA County

Before looking for a commercial space to invest in, ensure that you arrange the required investment capital. This helps you know your budget, find an affordable place, and speed up the purchasing process.

To secure financing, you can find a lender by comparing several options and choosing the flexible one. Make sure that you discuss interest rates, fees, or penalties before finalizing the deal. You can also opt for a loan, depending on whether you have collateral. 

Review The Location Of Your LA County Commercial Property Investment

The value of any commercial space depends on its location. If a property is in a prime location within the city, it is likely worth more than in an isolated part of the city. The cost of the property will rise with a popular location and its demand. However, you need to check whether the location is worth the cost. 

You should also consider if it is more profitable to purchase a space in a less desirable location. Huntington Park, Covina, Inglewood, and Baldwin Park are some areas known for their commercial real estate opportunities in LA County. 

Do Your Due Diligence

Buying a commercial space requires a lot of research by the investors and you need to do your due diligence before purchasing the property. Run the numbers to check if investing in the place will help grow your real estate portfolio and determine the profits you may earn. It will help you gauge the affordability of the commercial space and whether it will potentially be rewarding as an investment.

Determine The Potential ROI

Once you have decided to buy the property, the seller will provide you with updated financial records of the space. They can help determine the estimated return on investment that the property will generate. You can use the cap rate formula and divide the net operating income (NOI) by the property's value. The resulting product is the estimated annual return percentage. 

Consult an LA County Property Manager 

Talk to Property ManagerConducting all of the above steps to choose a commercial property on your own can be a complicated process. Instead, simplify the process by consulting an experienced and knowledgeable property manager from LA County. They can help you correctly calculate the ROI of the space and choose a property that meets your needs. 

A qualified LA County property manager can help you choose the right commercial property. Bell Properties has over a decade's worth of experience in commercial property management. We can employ a comprehensive, multi-step process to help you find the required space for your business. 

For more details, give us a call at Bell Properties.