Cincinnati has become a prime destination for real estate investing. This mid-size market offers stability and long-term growth potential, provided you choose the right property.
Whether you’re a seasoned real estate investor or just beginning your journey, our commercial real estate investing guide can help you achieve your goals. Here’s everything you need to know about investing in commercial real estate in Cincinnati, including how a real estate lawyer can help.
Why Invest in Commercial Real Estate in Cincinnati?
Commercial real estate investment in Cincinnati is appealing because of the city’s:
- Affordable Property Values: Cincinnati’s real estate market offers lower entry points compared to similarly sized metropolitan areas
- Diverse Economic Base: Sectors like healthcare, logistics, education, and finance make the city appealing to real estate investors of different backgrounds
- Population Growth and Urban Development: Cincinnati’s economy and population are growing at a healthy rate
- High Rental Yields: Rental properties can offer strong, consistent returns
The bottom line is that investing in commercial real estate in Cincinnati can be a wise move. Commercial properties like office buildings can become key long-term rentals that stabilize your portfolio. Other real estate investment opportunities include developing or refurbishing existing spaces and then selling them for a nice profit.
Key Steps to Investing in Cincinnati’s Commercial Real Estate
If you are ready to start investing in commercial real estate in Cincinnati, start by taking these steps.
Decide on Your Goals
Why do you want to participate in real estate investing in Cincinnati? Do you want long-term passive income? Or are you looking to capitalize on the hidden value of run-down properties?
Building a portfolio of rental properties is a long game that provides more stability. Finding and fixing run-down assets is a bit riskier, but the returns can be significant. When you’ve decided on your goals, you’ll be ready to focus on finding specific types of property and the right financing structure.
Build a Team
Next, you’ll need a team of experienced professionals who can help you start investing. Find a trusted real estate agent who knows the commercial market, a reliable lender, and property inspectors you can rely on for due diligence. If you plan to buy a commercial space to use for rental income, you may also need someone to manage properties.
Secure Financing
You’ll need to secure cash to pay for your rental properties. Commercial mortgages and investor partnerships are two common approaches. Make your case by presenting lenders with a strong credit score and a solid business plan.
Research the Market
Identify which Cincinnati real estate markets align with your goals and purchasing power. Try to focus on Cincinnati neighborhoods that are trending upward in terms of value and demand. For instance, Hyde Park and Downtown Cincinnati both have high investment potential.
Some of the most desirable Cincinnati neighborhoods are largely residential, but they still have strong demand for retail spaces and other commercial offerings.
Make an Offer and Perform Due Diligence
Submit a letter of intent (LOI) and make use of your due diligence period. Take a deep dive into the property and any structures. You need to know everything about it, from what it was previously used for to how it is zoned.
If you find any concerns, you may need to cancel the deal. You can also use your findings to renegotiate the property’s purchase price.
Get to the Closing Table
If everything checks out, it’s time to get the deal to the closing table. A real estate attorney can help protect your interests when you purchase commercial income properties. They will also work to finalize all legal documents, title transfers, and escrow agreements.
Due Diligence Before Making a Commercial Real Estate Purchase
Now that you know how to invest in commercial real estate, it’s time to focus on due diligence. Before you commit to an investment property, take the following under consideration.
Title and Zoning
Make sure that the investment property has a clear title and is zoned appropriately. This is especially important if you have a specific use in mind for the property after you purchase it. Any title issues must be resolved before you take possession of the investment property.
Environmental Factors
You may need to arrange an environmental site assessment (ESA), which is a thorough investigation of a property’s ownership history and usage. The goal is to identify any historical uses or environmental conditions that could be hazardous or shift liability to you after the sale. If the Phase 1 ESA reveals concerns, then a Phase II ESA will be required.
Financial Performance
Review the site’s financial performance if you are purchasing an investment property currently being rented. You want to calculate overhead costs, as well as income potential. The goal is to ensure that the property will yield a healthy return and produce regular income.
If the numbers don’t check out, you’ll either need to renegotiate the price or move on from the deal.
Building Condition
During the due diligence period, you will have an opportunity to evaluate the property’s key systems and overall condition. The inspection will include systems such as HVAC, plumbing, electrical, and the roof.
A property that is in disrepair should be more affordable than a pristine piece of real estate. However, you need an accurate estimate of repair and replacement costs before you take ownership.
Regulatory Compliance
Make sure that the property is up to code and compliant with regulations such as the ADA. Once you take ownership, you’ll be responsible for any shortcomings that make the building unsafe.
Best Neighborhoods to Invest in Cincinnati
When you engage in commercial real estate investing, it’s better to target locations that are in or near hot job markets. With that in mind, turn your focus to neighborhoods with growing populations of young professionals. These are some of the best Cincinnati neighborhoods for that demographic:
- Oakley
- Hyde Park
- Clifton
- Central Business District
West Price Hill and East Price Hill are popular and could represent good investment locations. Over-the-Rhine is also an attractive option.
The right neighborhood for you will come down to your budget and real estate investing goals. Hyde Park and Price Hill, for example, are some of the most affluent areas in the city. However, they also feature high property prices, which could limit your investment opportunities.
Common Challenges and Risks in Cincinnati’s Commercial Real Estate Market
Before you invest in Cincinnati commercial real estate, prepare for these common challenges and risks.
Tenants
Finding and keeping trustworthy tenants is a recurring challenge for many rental property owners. You need to know your market and find reliable, long-term renters so you can avoid cash flow disruptions.
Managing Your Portfolio
Managing a single piece of Cincinnati real estate is relatively simple. However, as your portfolio grows, you may find it hard to keep up with all of your tenants and assets. Many investors outsource property management to a third-party company.
Financing
Commercial loans are harder to secure than residential ones, with lenders demanding higher down payment percentages. Keep that in mind when exploring your investment options. Mutual funds and real estate investment trusts are good workarounds for individuals who want to diversify their portfolios but lack the capital for traditional real estate investing.
Zoning and Land Use
Local ordinances may limit what you can do with a property. Make sure that you verify zoning and potential uses before making an offer.
Market Fluctuations
While Cincinnati real estate has experienced steady growth, the market is not immune to fluctuations. Changes in demand can impact property values and lower your ROI.
Investment Property Options in Cincinnati
There is a diverse range of real estate asset classes that you can invest in. These are some of the most promising real estate asset classes in Cincinnati:
- Office buildings
- Retail centers
- Industrial properties
- Multifamily commercial units
- Mixed-use properties
Sticking with asset classes that you have experience with can provide a smoother investment experience. On the other hand, diversifying your portfolio can offer better stability. When in doubt, talk to an experienced real estate attorney for guidance about each of these investment options.
Maximizing Investment Success in Cincinnati’s Commercial Real Estate
Follow these commercial real estate investing tips to make the most of your next acquisition:
- Don’t Go It Alone: Build a trustworthy team of professionals that includes real estate brokers, lenders, and a real estate attorney
- Understand Lease Structures: Choose the best type of lease for your investment strategy so you can avoid any surprise expenses
- Negotiate: Evaluate the past performance and condition of the property to negotiate a fair price
- Stay Informed of Zoning Changes: Rezoning can create new opportunities or derail your plans
- Diversify Your Portfolio: Invest in different asset types and neighborhoods to reduce risk
Cincinnati offers a strong real estate investment market, but it is not immune to fluctuations or changing demand. That’s why you need a rock-solid investment strategy and a team of reliable professionals in your corner.
How Linn Legal Can Help With Your Commercial Real Estate Investments
At Linn Legal, we understand that investing in commercial real estate in Cincinnati requires more than capital. You need a proactive strategy and legal foresight.
Our firm supports commercial real estate investors through every stage of the process:
- Drafting and negotiating a purchase and sale agreement
- Reviewing the title and zoning issues
- Structuring lease agreements
- Guiding due diligence efforts
- Raising investment funds from other investors
- Advising on financial topics like property taxes and creative seller financing, including assignment and assumption of existing mortgages.
To learn more about our commercial real estate services or to speak with a dedicated real estate lawyer in Cincinnati, get in touch with Linn Legal.
