If you’re a business owner looking for a way to build wealth and you’ve experienced some success in the past with residential properties, you may be thinking about moving into the commercial real estate space next. Like other types of real estate, commercial properties can often provide passive income streams and tend to gain value over time. However, there are some key differences between a commercial and residential real estate that you should be aware of before deciding to make a purchase.

1. Ensure Your Business Is Structured Right

Prior to deciding, you’re going to purchase commercial property, make sure your business is set up in such a way that you’ll be approved for a mortgage loan. Commercial mortgages are only granted to business entities and not to individuals, so if you haven’t done so already, you’ll have to incorporate your business as a limited liability corporation, or LLC. Additionally, consider that privately held company may be better suited to taking on assets like real estate than publicly held ones.

2. Consider Locations and Shifting Demographics

Before you can make an offer, you need to find the right property that’s well-positioned to meet your goals. Location is a key factor, especially depending on your planned use of the property. For instance, if you want to rent out an office or retail space, look for cities with hot job markets and high demand. Keep in mind that changing demographic trends can affect your decisions, too. For instance, with many millennials preferring suburban-style calm alongside urban-style convenience, mixed-use spaces are becoming increasingly popular.

3. The Price Tag Will Impact Your Mortgage Loan

If you’ve had a mortgage loan for a residential property before, you may be aware that credit history is a key factor in determining interest rates and the loan amounts you qualify for. Commercial mortgages, by contrast, usually take into consideration the purchase price of the property more than your credit history. While your credit is still important, keep in mind that your rates could be determined by the value of the property. To avoid overpaying, you may want to get an appraisal done.

Purchasing commercial real estate can be a smart investment decision. Commercial properties usually appreciate over time and could provide your company with a high stream of side income. However, it’s best to be prepared before you purchase a property. With these key facts, you can navigate the commercial real estate investing world with confidence.