Under the right circumstances, commercial real estate can be a profitable, long-term investment. A property in good repair, with reliable and long-term tenants, can offer a steady guaranteed income, along with appreciating property value. But investing in commercial property is a unique undertaking, and it’s important to be prepared, to avoid getting in over your head in commercial investment.

1. Is the Property in Good Condition?

An old or decrepit commercial property can be a major headache for a new owner. You may miss problems in the purchasing process, particularly if you’re seeking to buy quickly and waiving contingencies, like a thorough inspection.

For your own peace of mind, and the health of your investment down the line, do as much due diligence as possible on any commercial property. Speak to current tenants and neighbors about problems they may have that the current owner fails to disclose. Don’t forget to inspect the grounds and parking lots, as problems in either can create significant hassles.

Another important — and related — consideration is the location of the property. Is its neighborhood expected to grow in vibrancy, causing the property to appreciate? Or does the area show signs of decay? Understanding the property’s local context will help ensure you make a smart purchase.

2. What Types of Tenants Does the Property House?

A piece of commercial real estate is only as valuable as its occupants. You want to ensure that current tenants are reliable, ideally plan to stay for the long-term, and show signs of business stability. A building filled with struggling shops is unlikely to be a good investment. Likewise, a history of vacancies in the property may suggest tenancy problems. Again, speaking with the current occupants will help answer some of these questions.

2. How Will You Fund the Purchase?

Commercial real estate isn’t cheap, and banks may be reluctant to lend on an unproven investment, particularly to a new business owner. That said, if you have good credit and a solid business plan, a typical bank loan will generally offer longer-term and reasonable rates. SBA loans are another, related option.

If you own another piece of property or have equivalent collateral, an asset-based loan may make sense, and will likely allow you to close on the purchase quickly.

Ultimately, there is no shortage of reasons to purchase commercial real estate, but it’s important to thoroughly vet any potential investment, to ensure it’s realistic and fiscally prudent.