Dealing with commercial real estate is definitely exciting; however, it is usually a massive endeavor with many aspects that have to be approached properly. Perhaps you are confused about where to start. Finding the right information about commercial property ownership isn’t an easy feat, but this article will help point you in the right direction.
Location, location, location is important to consider. What type of neighborhood is the property in? Look at the growth in similar areas. You’ll want to choose an area that is on the upswing and will continue growing for at least a decade into the future.
Nit Building
If you are trying to choose between two good commercial properties, think big. Getting the financing you need is going to be complicated whether you choose a five-unit building or a fifty-unit building. However, buying several units will cause the price of an individual unit to decrease.
If your real estate deal includes inspections (and it always should), make sure to ask to see the credentials of all of the inspectors. You need to be especially diligent when it comes to hiring a pest control service, as many people who work in this field aren’t accredited. This helps avoid major post-sale problems.
When renting out your own commercial properties, keep in mind that is always best to have them occupied. If you have any open spaces, then you are losing money. If you’re struggling to keep your properties rented, you should consider why that is, and try and fix anything that might be scaring away prospective tenants.
Lower the risk of default by eliminating as many things that can be labeled “event of default” as you can prior to negotiating a commercial property lease. If you cover all the applicable issues, then you make it far less likely that potential tenants will default on their lease. You don’t want tenants defaulting on your leases.
Advertise the commercial property to both locals and non-locals. There are a lot of people who make the big mistake who think that only local people want to purchase their property. There are many private investors who prefer to purchase reasonably-priced real estate that is not local to where they reside.
Keep your focus on the largest issues when writing your letters of intent. Keep it simple and save the smaller issues for later in the negations. This will diffuse tension during negotiations and will facilitate compromise on the minor issues.
There isn’t just one type of broker for commercial real estate. Full service brokers speak with landlords and the tenants, while others represent tenants solely. If you are a tenant, you may be much better off by using a broker who only works with tenants as they have a lot more experience with successful tenant representation.
Dual Agency
Make sure you try to read any disclosures for your agent. Some agents work for a dual agency. This means the same agent will be representing the two parties. The real estate agency will represent both the seller and the buyer. You and the other party should both agree if dual agency is to be okay.
Take the time to find a good agency who actively believes and demonstrates that the client comes first. Otherwise, you could end up having costly, but avoidable, consequences from your deal.
Don’t be afraid to question any potential real estate agents, and ask for references. Inquire about the metrics they use to quantify results. Look for online ratings or complaints. You should only employ a real estate agent if you are okay with their business practices.
Don’t ignore the environment that a property you’re considering is in. Since the responsibility lies at your feet, if there is any environmental waste that needs to be cleaned up, you will be the one who has to do it. Do you want to buy property in a area that is prone to flooding? Be sure to consider this issue very carefully. There are environmental assessment organizations who can provide information about a specific area if you contact them.
Each property has a certain lifetime. It’s important to factor maintenance costs into your projections of what you’ll need to spend on the property over the long term. It could require major repairs, such as a new plumbing system or a new roof. All buildings have these kinds of requirements, depending on the specific building, some may require more repairs than others. Make certain you are prepared to deal with these issues long range.
As you know, there’s a lot of work that goes into owning a commercial property. To have a good experience, you’ll need to educate yourself, work hard, and most important, have patience. Perseverance is another important attribute for anyone interested in this market. If you truly want that most desirable location, keep the pointers from this article in mind, and never give up your search.