Buying commercial real estate is an expensive undertaking that requires business owners to conduct proper due diligence. Without proper planning and research, you are bound to encounter numerous challenges such as insufficient funds, environmental lawsuits, unplanned construction costs among others.
Despite the fact that the cost of commercial real estate has increased in recent years, the option of buying is still more viable for entrepreneurs compared to renting. Other than avoiding paying rent every month, your property can appreciate in terms of value as time passes by.
Here are five things to know when looking for commercial real estate:
Understand the local market
Before deciding on what to buy, it is important for business owners to understand how the local market operates. Each commercial real estate market is unique from the other. That’s why you should conduct proper research in order to understand them well.
For example, every local market has different tax rates, environmental laws, and approval processes. You can’t assume any of these factors because they are likely to affect the price of commercial property in that area. You also need to consider the availability of skilled labor.
Consider your long-term plans
One of the factors that should determine the type of commercial property to purchase is your plan for the business. Are they long-term or short-term? Try to envisage the future of your business and determine if the place you want to purchase commercial real estate is appropriate or not.
In case you have a different place in mind, then it is better to lease the property for a certain period of time. In other words, you should be guided by the future prospects of your business. You don’t want to purchase commercial real estate in an area that you won’t stay for even a few years.
Put your financing in order
Getting your financial application approved for commercial real estate is not a walk in the park. Banks and financial lenders will require you to demonstrate your ability to repay the loan before considering your request.
They will ask you to provide a tone of financial documents to help them determine your financial muscle. Without a credit facility, it will be difficult to purchase your commercial property.
It is always good to explore different lenders in order to get those that offer reasonable interest rates. Other than the interest rates, you should also consider how much the bank or financial institution is willing to fund your commercial real estate project.
Consult an accountant
Affordability is one of the major factors to consider when it comes to commercial real estate. As such, you should hire an experienced accountant to streamline your budget before heading to the bank. Ensure your budget is inclusive of all hidden costs.
Tax implications can be a complicated matter in real estate transactions. That’s one of the reasons why working with a professional accountant with experience in commercial real estate is important.
For example, your accountant should be in a position to advise you whether the commercial property should be considered as a personal or commercial transaction.
Hire the right builders
The success of your commercial real estate largely depends on the type of builders you hire. There are several commercial construction companies available but knowing which one can do a good job can be a challenge. Consider factors such as experience, timelines, qualifications, and knowledge about the industry when interviewing builders.
It is also advisable to hire a local company that understands the area as well as the laws pertaining to construction in that state. This will help prevent delays and unnecessary interruptions.
