Why Buying Strip Malls Is A Good Investment

If you are looking to start a business, or invest some money in a new business venture, then you might take a look at strip malls. These properties are usually situated in major streets in residential areas. They cater mainly for the local residents and provide services like a grocery store, small restaurants, Deli's, Dry Cleaners etc. The older ones tend to be designed with stores in a straight line, with parking available directly outside. Newer strip malls have more accommodating designs and may be built in semi-circles that enclose the parking lots.

So which of the various strip malls available is going to be the right one for you? A lot of course will depend on how much money you have available, or how large a loan you are able to acquire. Even if the mall is in need of refurbishment, it may well be worth considering. When applying for your loan, or if you have the capital, the refurbishment can be taken into account and you may be able to borrow more money, albeit at a slightly higher rate.

Commercial loans, unlike residential ones, are viewed with a lot more caution. Most commercial lenders will look for the buyer to make at least a 20% contribution toward the purchase of strip malls. The other 80% will be made up of a mortgage from the bank or mortgage lender. The lender will carry out an appraisal and the purchase price will be determined by the outcome. If the lender's appraisal views the strip malls value to be less than the purchase price, this is the price, which will be used in the calculation of your loan.

Before authorizing your loan, lenders will assess your credit worthiness. For any business less than three years old personal credit of principals will be considered.

For corporations, credit ratings, business performance and a proven track record will be taken into account when finalising your loan. The market value of the strip malls will be assessed as will the rental income. An assessment will also be made of the age, the physical condition of the building, (both structural and appearance wise) the location, its accessibility, the current business occupants, and the local market forces.

Some of the larger retail players are now entering the strip mall's market. They are looking for smaller units around the 10,000 to 35,000sq feet range which means paying a lot less rental than a larger store in a huge Shopping Mall. These "anchor" stores help attract many smaller businesses to strip malls as they give the smaller businesses greater exposure to ready made retail traffic. When buying your property you should be looking to buy one that has one of these anchor stores. This will help in your renting of available units, meaning you will gain more income by having all your retail units occupied.

With most traditional types of investment yielding around 7% the strip malls are seen as a good way of increasing investment profits, as the annual yield tends to be somewhat greater than this in the majority of cases. Overall, strip malls located in high traffic areas, which have stabilized tenancies still continues to attract investment.

Whether that investment is from entrepreneurs, or financial investors, there is still a profit to be made in getting involved in a venture concerning strip malls.

About the author: David gaIan has been in the real estate business for over 10 years. Beginning with a single rental he now buys houses for cash, can stop foreclosure, and provides information for commercial properties. David gaIan is the owner and operator of houseoption.com a website dedicated to helping homeowners facing foreclosure and other house related problems. You are free to publish this article unedited on your site as long as all links back to us remain in tact. We Buy Houses e-mail: david_commercial at houseoption.com