Venturing into commercial property ownership whether for your own use or as an investment option, is a smart choice. It’s a long-term investment that offers several benefits and great returns as well.
There’s a lot that goes into the purchase of commercial real estate (CRE). There are factors that most people don’t even consider, or agents and brokers miss out on telling you.
Keep in mind the following factors when you’re buying CRE in order to ensure the best deal and purchase possible.
1) Find the right broker or agent who will represent you
It’s important to have a reliable broker or agent that can help you seal the deal. A broker will know market insight and depth that you might not have access to. They’ll be able to scour out the best available listings through their directories. They will also handle your paperwork and negotiate for you.
2) Financing Your CRE is Most Commonly Done through Balloon Mortgage
There are multiple options to finance real estate purchases, including loans—both personal and bank loans, credit or cash but most common route is ballooning mortgages. These mortgages require a lump sum payment at the end of a short 5–7-year period.
Ideally, by this time, the borrower is able to accumulate enough to pay it off; however, this isn’t necessary. Take time out to go over your finance options and consult with experts, including your broker who will be able to direct you toward a better strategy.
3) Find out about zoning ordinances
These are tricky to work through. You don’t want to violate ordinances and rules through reckless construction and property development. This will lead to fines and charges that you’ll get stuck paying, on top of slowing down your work. Make sure you have the permits to carry out whatever commercial business you intend to use the property for as well.
4) Understand pricing factors holistically
Understand that pricing isn’t about the physical structure or space (if construction and development is part of your plan). For CRE, location is everything. If you’re hoping to acquire a retail property that’s located in a prime shopping district, expect prices to reflect that even when the building is decrepit.
5) Negotiate and hold your own
Don’t hold back from negotiating. It is a deal, after all. Find a balance and an amount that both you and your seller are comfortable with. Ask your broker to present the offer on your behalf.
6) Hire building and property inspectors before closing the deal
Before you seal the deal on your new purchase, hire an inspector that will evaluate the property thoroughly and find issues that you might have missed. This also gives you an added edge during negotiations.