Investors and purchasers within the commercial real estate industry do a lot of research. In fact, many hire expert advisers to explain how one might purchase retail, office, and industrial real estate, while ensuring the protection of personal assets.
The first thing they learn is that commercial real estate property consists of more than shopping centers and office spaces; it’s the buildings and premises used for business purposes.
To purchase your commercial property for business purposes, you have to know what you’re looking for. Please consider some of the following tips:
Ask The Right Questions: There are at least one dozen questions you should ask yourself ahead of purchasing your commercial real estate. Among them, “What kind of property are you looking for?” “Are you looking to use the building for your own business, rent it out, build equity, and something else entirely?” “What kind of location do you need?” and “Do you need to buy or could you lease the property?”
Study The Vocabulary: A meaningful way to learn more about purchasing commercial real estate is ask questions but also learn more about commercial real estate vocabulary. Arm yourself with critical commercial real estate vocabulary and acronyms known to the market, including Loan-To-Value (LTV), Debt Service Coverage Ratio (DSC), Capitalization Rate (Cap Rate), Usable vs. Rentable Square Feet, Cash on Cash, Vacancy Rate, and Ad Valorem. There are comprehensive glossaries dedicated to providing insight, terms, and definitions.
Do Your Homework: Different properties, conditions, locations, uses, and prices… there are several things consider when purchasing a property. All of these affect value, and all of those factor things together to help you with your selection and help you to know what best fits your needs. A lot those questions you’ve asked yourself, in the beginning, are going to play well here, when deciding investment, and calculating PITI (principal, interest, tax, and insurance), earned from rent.
Consider Your Financing: Banks, home mortgage companies, and credit union are some of the avenues people go when they’re looking to purchase a property. Learn what your interest rate options are, consider if there are creative methods for purchasing and financing. FIgure out if the owner/seller might be interested in helping with funding.
Ask Experts: None of us can do it alone, not well. Accountants, engineers, tax experts, commercial realtors, mortgage brokers, and environmental specialists can help you achieve whatever financial and purchasing goals you may have.
Beyond those things, what are some other items a person might consider when purchasing commercial real estate?