If you’re thinking of investing in commercial property, here are a few things to keep in mind.
- Think of how the property fits into your long-term goals
Investing in commercial real estate is a huge step. Take some time to reflect on your current situation and what you want to achieve. Ask yourself:
- How does investing in commercial property fit into your long-term goals?
- Where do I want to invest?
- Should I buy or lease?
- Can I afford it?
- How much work am I willing to put into this?
- Work with professionals
Buying commercial real estate can be tricky. Avoid making mistakes by working with experts like lawyers, mortgage brokers, and a real estate agent who specializes in commercial properties. From hunting down properties to closing the sale, they will serve as your guide through every step of the buying process.
A commercial real estate lawyer can advise you on:
- Matters that impact ownership and sale such as property taxes, disclosures, title insurance, and more
- Commercial tenant rights concerning property maintenance, insurance coverage, eviction, utilities to be paid, and more
- Environmental issues like aboveground storage tanks (AST), underground storage tanks (UST), asbestos, mold, and more
- Other federal and state laws governing commercial real estate
- Figure out your finances
Where will you get the money to invest? Consider banks, home mortgage company, and credit unions. How much are they willing to lend you and what kind of interest rate are they offering?
Note that commercial real estate loans are made to business entities and not individuals. If the entity is new and does not have a financial track record, the lender may ask the individual owners with a credit history to guarantee the loan. Otherwise, the intended property itself becomes the collateral in a non-recourse loan; if the borrower defaults on their mortgage, the lender can seize the property as recompense.
Read up on other financing options such as second mortgages, lease options, and seller carry back, and the like.
- Find the right property
Assess how the property fits into your plans and goals. What is its potential to yield the extra income you want, provide tax benefits, or diversify your portfolio?
Where is the property located? Consider ease of access, area demographics, and the type of businesses in the area.
Once you’ve decided on the location, look for the right building. Ask yourself: will the building layout be conducive to your operations? How much work do you need to put in to make the space fit your business? Is there room for future expansion?
Then, calculate the costs of doing business there. Rent, utilities, and renovation costs are some of the things you need to factor in.
- Make an offer
Once you have found the property you want, it is time to make an offer. Work with your real estate agent to make sure that your offer is the best it can be. Then, have your lawyer draft an LOI or letter of intent. It will contain the basic terms of the transaction, but will not be legally binding in case something goes wrong with the actual contract down the line.
- Close the deal
Before money changes hands, make sure everything is on the up and up. Have your lawyer go through all the documents again. Order an ALTA or American Land Title Association survey as part of your due diligence. An ALTA survey includes boundary lines, the location of structures within the property and the improvements made on them if applicable, and the easements or access rights by providers of gas, water, telephone, and other utilities.
Get an escrow officer to oversee the transaction. As a neutral third party, the escrow officer will help in the transfer of titles and funds and make sure both you and the seller are protected in the business deal.
If you’re looking for commercial Parker County Real Estate as well as other areas in North Central Texas, our team of real estate professionals at HBS Real Estate can help you find the right one. Give us a call today at (817) 550-6666.