Five Important Steps When Purchasing Commercial Property
Investors looking for a sound investment and business owners that want to own property rather than lease need to know the proper steps of buying commercial property.
It is very important to understand the basic concepts of commercial real estate before diving in and making a purchase. Prospecting the location, determining the costs and benefits of the property are just a few things that should be researched before going all in.
Here are five steps to help you get started in making a commercial property purchase.
Own or Lease
One of the first decisions you need to make is whether you will be conducting business on the property or lease it out to another business.
If you plan to use the property for your business, it is paramount that you find something that meets all of your business needs. This includes proper location, accessibility, and plenty of parking for employees. Keep in mind that as your business expands so will the need for office space. Leave room for growth.
If you are planning on leasing the property to another business you will have to understand the property needs of these potential clients. Commercial property leasing options include retail, industrial use, and a business office to name a few. Before making a purchase it is important to know the client you’re going after.
Investigate Benefits and Risks
This is where a sound support team can make all of the difference. A backing of business professionals such as a REALTOR®, accountant, and a lawyer can help save you a lot of time and hassle. These professionals have been in the trenches and understand what to look for when assessing both benefits and risk of commercial property.
There are a few benefits of owning commercial real estate. For instance you have the ability to gain a return on your investment through ownership of property. Real estate is an asset that can be added to the equity of your company. It can also be claimed while filing taxes. These are three things you would miss out on if you simply leased property.
There is also plenty of risk involved when owning property. This includes lower than expected returns on investment and poor resale value. If you are leasing the building out to other companies, you must keep in mind that tenants may not always pay on time.
How Much You Can Afford
Sit down with a lender and see how much you can afford and assess how much you are willing to borrow. Once you have the number figured out, it will be much easier to locate property that fits your business needs.
Site Selection and Acquisition
Once you have found the commercial property you want to purchase, your work still still incomplete. It’s important to do a thorough check of the property’s condition and its resale value. You don’t want to get stuck in a situation where the building is a money pit. Check for liens on the property and research the area regarding future development. You want a thriving area with room to grow.
Before signing off, it is best to have both a REALTOR® prepare and a lawyer review all terms and conditions. This is an necessary piece of protection to make sure you don’t have any surprises in the future.