Starting a business is an exciting and sometimes stressful time for many individuals. As you begin to venture into the possibility of investing in physical space to expand your business, it’s important to know what you need.
Here are things to look out for when searching for your ideal commercial property.
- Survey the Entire Structure
The first step you should always take when purchasing any type of commercial real estate is the structure of the building. Make sure to have it properly surveyed to see if it’s up to code and if there are any foundation or structural issues that may need to be addressed.
The foundation, for instance, may need soil improvement to support a building structure and ensure there are no future settling issues.
- Understand Building Classifications
There are different building classifications based on the commercial property. For example, office buildings are divided into Class A, Class B, and Class C. They’re differentiated based upon risk, location, and demographics of the market.
Industrial and retail buildings have their own unique set of classifications. Having full knowledge of these categories and your overall goal will make a big difference when buying.
- Research the Location
Having the right location for your commercial property is essential for the success of your investment. You have to understand the market and that requires research on your part. Your intended goal for the property will make a huge impact on where you intend to buy.
You’ll want to know if there are any competitors in the area, along with any zoning restrictions. In the future, if you plan to sell your building, this will also dramatically change your approach when finding the right buyer for your commercial property.
- Wear and Tear
With every pre-built property comes previous owners. It’s important to know what the property was previously used for and have a thorough walk-through to note any wear and tear that has occurred.
It’ll ultimately be your responsibility to make any repairs. Hidden costs can dramatically impact your overall budget.
- Have Your Financing In Order
Once you’ve found the perfect commercial property for your needs, you’ll need to secure your financing. More than likely you’ve already set up your budget. This includes things like savings and investors. But you’ll also need to acquire a loan if you don’t have enough money to pay cash upfront.
There are several different types of commercial loans you can apply for such as Hard Money Loans, Bridge Loans, or SBA 504 Loans. Make sure to get pre-approved before making an offer. A seller won’t take you seriously if you don’t have the finances to back it up.
- Your Downpayment
The downpayment for any commercial property is known as earnest money. It can be roughly around 1% of the purchase price but occasionally can fluctuate based upon the demand of the property.
The earnest money you put down to show you’re serious about buying the property will then be credited towards the final purchase once the deal has closed. Note that if the deal doesn’t go through, there’s a chance you won’t be able to receive a refund for your earnest money.
Make sure to look over any agreements in writing before putting money down to see if you’re able to make that kind of gamble.
- Look Over Legal Terms of the Deal
You must hire a professional for this portion of the commercial real estate buying process. You may not have the expertise to understand everything that’s within the contract.
Have a lawyer look through the terms of the deal so you know what your responsibilities are, along with any liabilities you may not have realized.
Remember, this is an investment you’re making for the long term. There could be potential roadblocks within the contract that could be a problem in the future.
Buying commercial property is significantly different from leasing, and even more different than purchasing a home. Know what’s required of you ahead of time and always hire a team of qualified contractors and surveyors before making any type of purchase.