The location of your retail business has a huge impact on its performance. Factors like availability of access routes, the appearance of the area, visibility and zoning regulations are vital aspects to consider when buying commercial property for your retail business. Regardless of whether you are setting up a new retail venture or an additional branch for your existing venture, choosing the right physical setting for it is essential.
Though the process is complex, commercial properties have a more straightforward approach to pricing compared to residential properties. However, there are also some crucial risks involved. Here are some things you need to know before investing in commercial properties.
How to Begin the Journey of Purchasing Your Commercial Real Estate:
Consider the Nature of Your Retail Business
The type and nature of your retail business is the first thing to consider when looking for commercial property. For instance, if you plan to open a coffee shop, gaming studio or book store for youngsters, then a building located near a school or university would be ideal. This will help you capture the attention of your target audience and boost your visibility.
Determine Your Spending Capacity:
Have a good estimate of the amount of money you can invest in your property. Take everything into consideration including the initial down payment, closing costs, and renovation costs. Renovations may be necessary to attract customers to your retail business. A badly designed retail space can also negatively impact the productivity levels of your employees. However, if you have to deal with exponential renovation costs, then it may not make sense to buy the specific property.
Financing Your Commercial Real Estate Purchase
This is a no-brainer. No real estate transaction can be carried out without capital. But it doesn’t have to be from your own pocket. Financing commercial property is not as complicated as many beginners make it out to be. So, try to secure financing and get pre-approved even before you start searching for your retail property.
The financing option you’re able to secure will depend on your personal and business credit scores, the type of property you’re buying and the type of loan that’s best for you. Your business may also be eligible for an SBA 7(a) loan to purchase commercial property.
Perform Due Diligence
Once you have selected a commercial property, start doing your homework. Inspect the property thoroughly and look out for discrepancies. Review any lease agreements, title documentation and surveys related to the property. Also, check if the layout and structure of the building are good for your retail business.
Remember, no matter how much information you gather pre-purchase, it’s never too much! Therefore, it is always advisable to hire professionals for this since you may miss out on important details. Moreover, most lenders prefer valid inspection documents that have been prepared by reliable sources.
Find the Right Experts to Partner With
Buying commercial real estate involves lots of complicated rules. Thus, in addition to a lender you need to have the right team of experts to help you process the deal smoothly. These professionals can help you secure financing and warn you about potential problems from the beginning.
Here are some professionals you will surely need to collaborate with to purchase commercial real estate properties:
- Commercial Realtor
- Commercial real estate attorney
- Commercial real estate broker
- Tax attorney
In fact, it’s better to have your team ready before you start searching for potential properties. This process of hiring professionals may not be cheap, but it could save you from costly mistakes and unnecessary complications in the long run.
Start Searching the Real Estate Market
Once the budget, desired property type and other necessary requirements are confirmed, it is time to search for available commercial properties. Look specifically for properties that will match your commercial requirements. Searching online is a good option, and it’s recommended you seek help from an agent who can shortlist commercial properties based on your requirements.
Alternatively, you could also opt for help from experienced professionals of REIT – Real Estate Investment Trust.
Check Terms, Make an Offer and Close the Deal
Once you find the perfect property and make an offer, make sure the deed contains an inspection contingency clause. An inspection contingency clause will allow you to opt out if the commercial property doesn’t pass the inspection.
A professional commercial real estate agent will help you write up the purchase offer. However, it’s always best to get it reviewed thoroughly by your attorney before you sign and submit it. Make sure that the offer includes a due diligence period so that all documents can be reviewed properly.
There’s a lot that goes into a commercial real estate transaction, so make sure you take your time and follow all procedures step-by-step. As mentioned earlier, it is crucial to work with a reliable team of experts in advance. These professionals can guide you through the many complex steps involved in this process.
Apart from investing in commercial property for your retail business, you can also be prepared for other investment strategies if the need ever arises and prepare documents accordingly. These strategies can also give you good returns and profits.
All real estate, whether commercial or investment properties, come with risks. Thus, it’s vital to ensure you cover all the bases when you enter a commercial real estate transaction.