Owning property is an exciting proposition, and purchasing commercial property is just as exciting. While the property purchase philosophy is the same, there are a few differences when taking the plunge into the commercial property market, as well as a few different considerations.
Let’s discuss four tips to consider when purchasing commercial property.
Type of Property
It is important to think about and decide the type of commercial property desired. Will the property be used for your own use or will it be rental or lease property. Will you be the primary caretaker of the property or will a property manager be involved. Other concerns and questions to ask yourself are are you ready to take on such a risk and does such a purchase fall within your risk level. If your skill and expertise level falls short, would you be willing to perhaps establish a partnership with someone who will bring the necessary skills and expertise to the table. Is your foray into commercial property subject to a team of investors who will help carry the financial burden?
Financing your Commercial Dream
Purchasing commercial property is, in a lot of cases, more costly than purchasing a home. It is essential to have the necessary financing in place rather than taking a fly by the seat of your pants approach. It is important to know what financing institutions will mortgage commercial properties. It is necessary to know what your credit rating needs to be, as well as the amount of down payment that is required for such a purchase.
Hiring the Experts
There will usually be a few experts that you will be required to hire on during the transaction and after the deal is complete. You will most likely need to hire a commercial real estate attorney, an accountant, a mortgage broker and commercial real estate broker. After the deal is complete, you may need a property manager and a leasing or rental agent. Hiring experts to help you out will help you to protect your interest in the venture and keep you from getting in over your head. Having everyone on board as soon as possible will make sure everyone is on the same page and everyone has sufficient time to undertake any prep work that may be required. It will also be important to have a maintenance chief on board as early as possible. An important part of the team will be an appraiser who will determine the current market value of the property of interest.
4 Making an Offer
Unless you are a real estate and financial wizard, it is important to have someone on your team, such as a real estate attorney, who is. Before signing a Letter of Intent (LOI) make sure your legal eagle reviews the contract first. The LOI will outline the terms of the transaction. It is essential there is a clause or two in the agreement that lets you opt-out of the deal in the event if something goes wrong with the deal. It is essential to understand all aspects of the contract, especially all your rights and obligations of the agreement. When it comes time to make an offer, you will have an appraisal that defines the value of the property. The appraisal will take into account the economic climate, as well as the value of similar properties in the area. It is not necessary to offer what value of the evaluation, nor is necessary to meet the seller’s price. The attorney, when performing their due diligence on the property may be able to determine what the seller may accept for a price.
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ZOI OUZAS Sales Representative RE/MAX Garden City Realty Inc., Brokerage 64 Main Street West, Grimsby ON L3M 1R6 Office: (905)-945-0660 Office: (905)-563-8527 CONTACT ME
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