Buying a commercial property is a complicated process involving a lot of money; it can’t be rushed since many moving parts are involved. It’s not the kind of business decision one makes without doing due diligence. Start by drafting a plan to act as a guide throughout the process. Having a checklist helps you save money and ensures you don’t miss critical steps.
Although the real estate market is highly competitive, most businesses prefer to buy a property rather than rent it. The process of buying a property depends on the state you live in and the type of property you intend to purchase. However, there’s a general process to follow during a commercial purchase.
1. Establish Your Motivation
Why do you want to buy the commercial property? Do you want to expand your business operations, hence the need for a bigger space? Or are you considering investing in the property to rent out spaces to tenants? Whatever your motivation to buy is, clear this up from the get-go
Among the reasons why you may be looking to purchase a commercial property include wholesaling, fix and flip, owner-occupied, land banking, or passive investing. First, determine what you want to accomplish and then search for an investment to help realize your goals. There’s a wide range of commercial properties to choose from; you’ll get one that fits your criteria.
2. Secure Financing
Buying a commercial property requires digging deep into their pockets, which may not be deep enough. Find a lender willing to finance you if you plan to go into business independently. If you have partners, pool funds to purchase the commercial property jointly.
According to Paul Brunswick, the failure rate among business partnerships is 70%. Carefully pick your partners, who should be like-minded people with a common drive to succeed. If the money from your pool is still insufficient, consider approaching a lender for financing. Scout the market for the most flexible rates.
3. Consult an Accountant
Consulting with an accountant is important in purchasing a commercial property. They’ll help you draft a budget, including hidden costs such as taxes and insurance. They’ll also help you forecast your operating costs. According to the Federal Deposits Insurance Corporation, all FDIC-insured institutions must provide extensive financial information in quarterly reports known as Call Reports.
4. Choose the Right Builders
Depending on the state of the building and the type of business you wish to engage in, you may need to contract builders to transform the commercial building for the intended purpose. Getting the right builder for your commercial property can be overwhelming. The solution is to adopt the design-build strategy. Design-build firms have one team of professionals for an entire project, according to meadowlarkbuilders.com.
Working with a design-build firm puts your project at the heart of the process. Instead of working with different experts separately, you benefit from an entire team focused on your project. Getting the right contractor can make or break your project. If a contractor isn’t qualified and experienced, they may end up delaying the completion date, which halts all other operations.
5. Make an Offer
You’ve seen the property and done your due diligence to ensure everything is okay. The next step is to make an offer. Work with a local agent who understands the market to make an appropriate offer. If necessary, they’ll advise you on how much you’ll need to pay as a down payment.
Buying a commercial property is complicated, and since you may not understand all the legal requirements, work with an attorney who can review your offer before you present it to the seller. It’s also wise to inspect a commercial property before closing on it.
To get the best deal and save money, don’t be in a hurry to buy a commercial property. Do your due diligence first and only commit once you have the best deal your money can buy. Hurrying the process may result in missed steps that could cost you in the long run.