What Factors to Consider When You Buy Commercial Property?
Buying a commercial property can be intimidating, especially if you are investing for the first time. Beyond the complex process to buy commercial property, there are several other factors for a first-time investor to consider. Hence, it is often a good idea to hire a professional who can help with diverse aspects of commercial property investment.
Having a commercial real estate checklist can give you complete peace of mind – and can be a huge differentiator between losing significant money and making an excellent investment. According to industry experts, conducting in-depth due diligence is a must before you invest in a commercial property.
Due diligence is a process of understanding the physical state of the commercial property, market value, and documentation. This ensures you make an informed decision and have a better ROI in the long run. Here is a brief checklist that can help ensure the best value for your commercial purchases.
A Beginner’s Checklist to Buy Commercial Real Estate
Discussed here are 7 crucial factors you should keep in mind when buying commercial property:
Research the Market and Location
Before investing to buy commercial property, it is crucial to study the market thoroughly. What is the scope of development in the area? Typically, a well-developed locality is more lucrative than investing in a remote area. Also, check what are the latest demand-supply trends influencing the market. Which asset class is more profitable to invest in?
Additionally, the location should be easily accessible from other areas via an excellent transportation system. Buying a commercial property in a strategic location will ensure higher returns on your investment. The importance of a “good location” can never be overemphasized. So, keep this factor in mind when investing in a commercial property.
Investigate the Physical Aspects of the Property
This is a must-do when you buy commercial property. Commercial property due diligence includes the following elements:
- The building’s structural integrity
- State of the property
- Machinery and plant permits
- The structural integrity of the machine, such as air-conditioner report, machinery report, engineering report, awnings and roof report, etc.
- Soil/land contamination
- Safety and environmental assessments
- Understanding tenant demographic and composition in the neighbourhood
- Flood mapping, electricity and sewerage assessment, etc.
Get a property valuation report from an independent and qualified valuer when you buy commercial property. This will help ensure the property is in the good physical condition and is viable for investments.
Consider the Facilities You Get
This will vary depending on the commercial asset class you are investing in: office property, retail property, and industrial property.
For office properties, you might want good car parking, attractive views, great natural light, open-plan workspace, proximity to public transportation hubs, etc.
On the other hand, if you plan to invest in industrial property, you would look for key facilities like wide public roads, drive-through accessibility, hardstand for loading and docking or trucks, proximity to transport links, etc.
These are some important attributes to consider when you buy commercial property.
Evaluate the Property’s Documented Aspects
Before you buy commercial property, you must also verify the property’s documentation, terms & conditions. This should include:
- Title certificate
- Restrictions on lease and sale
- Current zoning and GST position
- Existing lease agreement, if any
- Tax and rates adjustments
- Property history, such as historical repairs, vacancy rates, maintenance expenditure, etc.
- Crown redemption rights
- Caveats and burdens affecting the freedom of entry/access
- Tenant history, including aged debtors, arrears schedules, tenant turnover, etc.
It is your responsibility to check every detail on the documents and ensure the property is a viable investment option.
Consider Hiring Commercial Real Estate Services When You Buy Commercial Property
Buying a commercial property can be stressful as it involves having in-depth understanding of the market and other factors as discussed above. Hiring commercial real estate services means you will have an expert to guide you through the entire process- conducting due diligence to ensure you find the right commercial property.
Having thorough market knowledge, a commercial real estate specialist can negotiate on your behalf to get you a lucrative deal. They will handle the property inspection and documentation process, ensuring you have a fair contract to your best interests. Therefore, when you plan to buy commercial property it is important that you choose the commercial real estate agent carefully. They should have vast industry knowledge and experience to help you make an informed decision.
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- Create a Business Plan
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- Choose a Location
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- Buy an Existing Business
- Licensing and Certification Guide
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- Hire Employees
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- Closing Your Business
- Paying Taxes
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Expert lawyers and professional consultancy save you time and money at these stages. We are always ready to help you.
To start and run your business in the USA, you need a lot of documentation to be prepared. When you need business licenses and permits, we can help you. You cannot be an expert in every subject you need. An expert consulting firm you can trust will save you time and money.