Purchasing commercial real estate requires new strategies and a different knowledge base compared to buying residential properties. Read on for a few suggestions and tips that could help you get a great deal.
Whether you are buying or selling, don’t shy away from negotiation. It is important that your concerns and opinions are heard and recognized by the other parties; you must always put forth the effort to ensure fair pricing for the commercial property.
Consider the economy in the area you’d like to buy real estate in before investing there. If the building is near certain specific buildings, including hospitals, universities, or large companies, you might be able to sell it faster and for more money.
Bugs and rodents are always looking to ruin your property, so factor pest control into your business strategy when renting commercial property. If you are renting a space that has known vermin problems, be sure to find out exactly who is responsible for pest control.
Buying commercial real estate is much more complicated and time-consuming than buying a home. You should understand that although this is a huge undertaking, when all is said and done you will receive a big return on the investment.
If you intend on putting your commercial property on the rental market, find a simple, but solidly constructed building. Tenants are more likely to move in when they know the property is well taken care of. Because these properties are in great condition, the property owners and the occupants will have a simpler time with basic maintenance service.
Do your best to have your properties occupied at all times. Having unoccupied spaces mean that you have to pay for their upkeep. If you have multiple vacant properties, figure out why this is, so you can understand why your tenants are leaving.
Ensure there is adequate access to utilities on the commercial property. Water and sewer access will be needed in addition to electricity. You may want the option to use natural gas, as well.
Advertise your property for sale locally and outside your region. Too many sellers assume that their property is likely to only sell to someone local. This is a way of thinking you should avoid. Some private investors will be interested in properties outside of their areas if the price is low.
Before you begin searching the market for a new property, outline what you need. List all of the features that are necessary for your operations, such as the overall size requirements for your rooms and amount of restrooms required.
It is important to know how to deal with emergency maintenance. Talk to the building’s landlord about the person who currently handles emergency repairs. Know their phone numbers and also what their likely response time is going to be. Take advantage of this information to devise a contingency plan in order to prevent and respond to customer complaints resulting from maintenance issues.
Dual Agency
When searching for a real estate agent, keep their disclosures in mind so you know who they are working for. Dual agency is a possibility that you need to be aware of. In this case, the agent is two-faced: she is representing both parties to the transaction. In other words, an agency simultaneously provides services to both the landlord and tenant. Whenever dual agency is part of a transaction, it must be disclosed to both parties of the transaction. Both sides must also agree to the dual agency.
If you want to invest in a piece of commercial real estate, think about the kind of tax breaks and benefits you might receive. Investors receive depreciation benefits as well as interest deductions. Other investors deal largely with “phantom income” – income that is not paid in cash, yet is still taxed. It is important to know about this kind of income prior to investing.
This allows you to make sure the lease matches rent rolls, along with the pro forma. The pro forma shows the minimum requirements of the lease, while the rent roll shows the total amount of rent collected from each tenant.
There are many ways available to cut down on repair costs when cleaning up the property. If you hold an ownership interest you are responsible for the cleanup of a property. The environmental cleanup, plus the waste disposal, can bring on some costly fees. Consult an environmental assessment company to get a clear idea of what problems must be addressed. This can cost you a good bit of money, but it will save you in the long run.
Buying a piece of commercial property presents many challenges. Remember what you have learned in the preceding article, and you will be able to get a good deal on a piece of real estate that meets your needs.