Buy and Sell

9 Things You Need to Know Before Buying Your First Commercial Property

Are you the type of person to “jump before you look”? If so, this post is for you. But even if you’re not that type of person, it’ll still be worth your while. Let’s face it. Buying your first commercial property can be very different from buying your first home. It should never be taken lightly or without thorough research into what to expect once you own it and what you need to do to make sure you don’t lose money on it.

Follow this handy checklist of what you need to know before you embark on your first commercial property investment.

  1. Get Your Financial House in Order:

One of the most important things you can do before buying a commercial property is to get your financial house in order. Lenders will want to see that you have the financial means and income to afford the mortgage payments for this new property.

  1. Be Prepared With a Down Payment:

In addition to having enough money coming in each month, lenders will also want to see that you have enough money saved up for a down payment on this new commercial property. You may be used to putting down only 3% when it comes to a residential home, but with a commercial space, lenders typically require at least 20%. And sometimes even higher!

  1. Consider Hiring a Real Estate Broker

Consider hiring a real estate broker. A good real estate broker will help save you time and money by finding properties that match your specifications, as well as giving you valuable insight into the local market. If you’re looking at several areas, consider hiring one broker in each market — they’ll know their local area better than anyone else. Don’t pay anything upfront; instead, hire someone who will work on commission only once they find a property

  1. Choose a Location with Care

Different areas of the city may be better suited for different types of businesses. For example, a retail business might do well in an area with a lot of foot traffic and other stores, while a small manufacturing operation might do better in an area with large industrial properties. Consider the neighborhood and competition around the property, as well as its proximity to roads and freeways.

  1. Determine How Much Space You Need

It’s important to know how much space you’ll need, but it’s even more important to know where you want to be. You don’t want to end up having to move again because you didn’t consider the long-term potential of your initial location. You need to know how much space you’re going to need. This is most often determined by your business plan because the square footage you’ll require is directly related to how many employees you have and what they do.

  1. Don’t Forget About Zoning Laws

Commercial zoning regulations exist to make sure that businesses are conducted in areas where they won’t negatively impact residents. Before you buy commercial real estate, you should be absolutely positive that your business can be conducted in that location without any problems arising with local authorities. Even if you’re not planning on conducting your business out of the commercial property you’re purchasing, it’s essential to verify that whatever you are planning on doing is allowed by local zoning laws.

  1. Have a Contingency Plan in Place:

Even if you get a tenant lined up, a sale contract signed, or an investor ready to buy your property, things can still go wrong. Make sure that you have a contingency plan in place so that if something does go wrong, you aren’t stuck holding the bag.

  1. Make Sure You Can Afford Maintenance Costs:

The costs of owning commercial property go beyond mortgage payments and taxes. You’ll also have to pay for maintenance and repairs, which can add up quickly. Make sure that you have enough cash set aside to cover any unexpected expenses that come along with ownership.

  1. Negotiate a Fair Lease

If you’re planning on leasing out your property, don’t just accept the first lease agreement that comes your way without negotiating first. Even if it seems like the tenant wants something more than you do, remember that they’re still going to need to make repairs and other improvements before.

So now you know a wealth of information. Whether you decide to start evaluating real estate opportunities or not, I hope that this article has helped you understand the process and made it less intimidating. If you are still a bit leery about buying your first commercial property, take some time to do a little more research on the subject—there’s no telling what kinds of deals you can unearth if you look hard enough!

 

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