If you are considering diversifying your property types and are thinking about purchasing commercial property, there are many different aspects to consider. If you have always been interested in residential properties, but now want to make the change, or if you’ve never even considered investing in property at all, this simple guide will help you to get started and give your some considerations to make before your first purchase.
Consider the Pros and Cons of Purchasing the Property
Depending on your specific industry, purchasing commercial real estate has its pros and cons. Pros of owning your own commercial property include the ability to begin to build equity. Additionally, it might make your business projections more reliable and consistent because you will know that your payment cannot fluctuate like a rent payment might from lease to lease.
Some cons may be that you are completely responsible for all maintenance and repairs to the commercial property, which can get quite costly at times. Also, because you have money tied up in the commercial property, purchasing the commercial property could reduce your liquidity and lessen the amount of money you have to spend on other projects and expenditures.
Consider the Costs You Will Incur
In purchasing commercial property, consider the costs that are associated with the purchase to get an accurate representation of how it will affect your financial health. Start by evaluating the real estate market that you are looking to purchase in. This will help to give you a baseline about how much you should expect to spend. Make sure to include the costs that you will incur such as taxes and debt servicing. But, make sure to also factor in the tax advantages purchasing the property may afford you.
Secure Your Source of Financing
Once you are sure that purchasing commercial property is the right decision for you, you must find a financing option that works well for you. Many banks offer commercial real estate loans, but you will have to do your due diligence in this respect and shop around a little to see where you can get the best interest rate and other perks. A bank expert that works with commercial real estate every day will be able to inform you about commercial real estate loan products that might work well for you.
Do Your Due Diligence Prior to Closing
After consulting with your team of commercial real estate experts and you have settled on a property, it is important to do your due diligence with regard to that property. A number of issues could materialize with any property that can end up costing you a lot of money. However, if you catch them early (before you close on the property), then you can avoid having to shell out money for these unnecessary expenditures during your due diligence. Some examples of problems that due diligence can identify are environmental contamination, structural defects, or other lien issues on the property.
If you are looking to purchase commercial property and need a little bit more guidance, please don’t hesitate to contact me at 361-449-2051. I’m always a phone call away and look forward to helping you find your next commercial real estate property.
