5 Rules for Buying Commercial Real Estate

Buying commercial real estate has the potential to be a great investment. Unlike purchasing a residential home, there is a lot more that goes into a commercial real estate purchase that you might not think about. Using a good brokerage can help take the worry about of your purchase.

Unlike buying a residential home, there is a lot less emotion that goes into a commercial real estate purchase and a lot more concentration on the money-making potential. Below are five rules for buying commercial real estate.

  1. Know What You Are Looking For

When you go to purchase your commercial real estate property, it is important to know exactly what kind of real estate you are looking to purchase. Commercial real estate varies across a few different sectors, so if you are looking to have retail space, you want to make sure you are looking at retail-zoned properties that offer an attractive storefront.

Additionally, if you are looking at office buildings, you can look at a more interior style entrance that traditionally gives you more space to offer each business in a lease.

Of course, there is always the possibility of purchasing commercial residential properties as well, like a condo building or row of townhomes. This is probably the most straight-forward purchase of all the commercial real estate transactions.

2. Put the Most Emphasis on Location

Location is going to be key when purchasing your property. While you can change a lot of things about your property, you can’t physically pick up and move a building, so you want to make sure you have the perfect location when you buy.

If you are a retail shop, you want to make sure you are in an area with a lot of foot traffic, so your business survives. Even if you think you found the perfect property in every other aspect, if you aren’t in the right location, your business could fail.

If the property is not for your personal business, but instead to rent out, you want to make sure the property is in a desirable area that businesses will want to be in and offers amenities like off-street parking.

3. Secure Financing First

Before you begin your journey into buying commercial property it is advantageous to secure your financing. Knowing your credit score can help get you started. This also gives you time to dispute anything you feel is incorrect and can raise your score.

Once you know that, checking the interest rates and knowing what kind of loan you want to take out is the next step. Of course, you want to make sure you are getting the very best lending deal possible, so you are paying the least amount in interest and fees.

Something that is more common in a commercial real estate transaction is seller financing, where the seller acts as the bank instead of having a traditional mortgage lender. If this is the route you want to go, make sure you have an attorney to double check all of the paperwork and make sure the terms and conditions are favorable.

4. Work with the Right Team

Just like a residential real estate agent, partnering with the right team to secure your commercial real estate property is essential. This is the team that is going to scour properties to show you that fit what you are looking for and also are in your budget. They are going to be your second set of eyes when viewing properties and someone you can bounce your questions off of at any time.

Commercial real estate can be different than residential in that it doesn’t all hit the market and is available for everyone to view. These brokerages often have large networks that they rely on for off-market information and are privy to seeing properties before they even go up for sale, giving you first dibs at potential property.

Additionally, some transactions already come with leases in place. The right brokerage can help you navigate these leases and make sure you are compliant legally and continue to help provide leases after the purchasing transaction is over.

5. Try Not to Be Emotional

When you are purchasing a residential property, it is usually the emotional connection that seals the deal. The home feels like something you can see yourself in, and you fall in love. When purchasing commercial real estate, it is best if you can keep emotion out of it.

Remember why you are purchasing the property to begin with. If it is for your business, you are naturally going to be a little more emotional about it, but if you are purchasing to rent out to tenants, keeping the emotion out can help you close your deal faster. Remember, this is a business transaction.

Purchasing a commercial property can be an exciting time for any investor. Getting through the process quickly and efficiently means you are renting and earning money that much faster.


Latest Issue

BDC 309 : Oct 2023