There are a lot of factors to consider when buying commercial real estate. If you’re in the market to buy an investment property or a location for your business, you’ll want to find the best property deal available.
Here are a few pieces of advice to help you make your commercial real estate purchasing goals a reality:
— Shop for real estate like a pro: Remember that the value of commercial property is linked to its usable space, and therefore it is valued differently than residential real estate. Also, approach lenders with at least a 30 percent downpayment on hand if you want to be taken seriously.
— Make a plan: Set your requirements and parameters for your purchase. Then, use a mortgage calculator to create an estimate for how much downpayment you’ll need, what your monthly mortgage obligations will be and estimate how much income you’ll need to generate from the property in order to stay in budget.
— Look for deal-breakers and cost-saving advantages: Check the property for damage that you can repair easily and cost-effectively to increase the value of the property. Also look for serious problems that would render the property a bad investment opportunity.
— Determine the net operating income (NOI): The NOI of a property is first-year income minus its operational expenses for that year. Make sure that the NOI is a positive number.
There is a great deal more to consider before buying a commercial property. Ultimately, you may not want to go into this process without professional assistance from an experienced commercial real estate lawyer. A lawyer can help you identify potential obstacles and “deal breakers” before they surprise you and cost you a great deal of time and money.
Source: Investopedia, “7 Steps to a Hot Commercial Real Estate Deal,” Brian O’Connell, accessed April 27, 2017