Commercial Real Estate

Things to think about before buying commercial real estate

Things to think about before buying commercial real estate

Things to think about before buying commercial real estate

When it comes to buying commercial real estate there are many things to consider before and commercial real estateduring the transaction process. Commercial real estate investment costs are typically high, but they also offer the potential for high returns. The process of buying commercial real estate is similar to the process in residential real estate, but there are some differences, and the investment is typically on a much larger scale.

 

Understanding commercial real estate

In simple terms, commercial real estate is any property used for business purposes. It can be in the form of buildings that house businesses, land that has a primary purpose of generating profit or residential retail properties. More specifically, commercial real estate can include shopping malls, apartment buildings, office buildings, retail stores and build-for-rent communities.

When purchasing commercial property there are specific financing requirements, taxes, and laws that must be considered. Working with a commercial broker and professional title and escrow company such as Landmark Title will help you navigate the various rules and regulations.

 

Why are you looking to buy?

There are many different reasons for purchasing commercial real estate. Before making a significant investment, it is important to understand the goals and objectives you are looking to achieve. Here are a few reasons and some of the strategies for buying commercial real estate:

  • Buying land to develop in the future
  • Buying land to develop more immediately
  • Buying an existing building or buildings to renovate and sell or lease
  • Buying a building to utilize for your own business operations

 

An investment in commercial real estate can offer an opportunity to build wealth when the timing and strategy align. Before purchasing property, it is important to understand what the investment will entail, the costs involved and when you can expect a return.

 

What type of property fits your needs?

When considering the decision to buy a commercial property, it is valuable to evaluate the options to help decide the best property fit for you. Factors to consider can include the type of property, how it will be utilized, the price, location, and other expenses. There are five categories for commercial properties:

  • Office
  • Industrial
  • Retail
  • Hospitality
  • Multifamily

 

Office space can be broken down into three more categories with class A representing the higher-end properties in the market, which are typically higher priced and can command higher rents. Class B properties may need some renovations, can be in less desirable areas and command a lower rent. Class C buildings are generally older buildings, requiring almost immediate maintenance or renovation. Industrial properties consist of manufacturing facilities and warehouses. Where retail is solely used for the selling of products and services, including small shops, restaurants, local shopping centers and malls. Hospitality spaces include hotels, motels, and some types of short-term rentals. Multifamily commercial real estate is residential properties with 5 or more dwelling units. These include apartment buildings and build-to-rent communities.

 

Commercial real estate professionals

A commercial real estate transaction is significantly more expensive than a residential purchase and typically more complex. To ensure the transaction is handled correctly, it is important to work with professionals that can advise and guide you through the process. It is also important to secure financing as early as possible. It is beneficial to have financing figured out before starting the search for a property, to know how much you have available to invest. Working with a commercial real estate agent or broker that is familiar with the area and has experience and knowledge in these types of transactions is valuable. You may also want to consult with an attorney that is knowledgeable in commercial real estate contracts, and a certified personal accountant (CPA) to understand the tax ramifications. Creating relationships with professionals will help ensure the deal goes smoothly.

The Landmark Title team has extensive experience in commercial real estate transactions and understands the different nuances that can occur during the closing process. If you are investing in commercial real estate and have any questions regarding escrow and title contact us. We are here to help.

 

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