Purchasing commercial real estate can seem like a risky adventure because the market appears to suffer a crash or a severe downturn every few years. It can be a complex matter and even experienced professionals in the field find it a challenge to time their actions to maximize their profit. Those looking towards commercial real estate as a means of generating a second income will find it even more difficult. So why purchase commercial real estate at all? The rewards generated by a successful investment can be incredible and provide a life changing amount of money. Here are some basic tips for newcomers looking to buy commercial real estate.
Get an Attorney to Read the Lease
Most commercial real estate leases are verbose and filled with technical legal jargon that the layman will find impossible to understand. Failure to correctly scrutinize the lease could prove costly as you end up tied to a very unfavorable contract. Safe yourself future hassle by hiring an attorney experienced in real estate to read the contract.
Question Your Broker
Never hire a broker until you have gained a thorough understanding of how he conducts his business. Find out how much experience he has and the nature of his training. You need to find a broker with good ethics that constantly seeks out the best deals for his clients. Be sure to ask for a portfolio which shows his closed sales and details of deals that fell through.
Prepare to Invest Further
Even the most pristine properties will eventually need repairs so this needs to be accounted for in your budget. Potential bills include the cost of a new electrical system or a brand new roof. It is imperative that you have the commercial property checked out before you purchase it to ensure there is no hidden structural damage that will come back to haunt you.
There is a world of difference between home loans and the loan products offered by commercial lenders. Commercial real estate lending is often superior to a residential loan because banks offering such loans tend to allow you to borrow money from a business partner and you are protected from personal liability in the event that the deal goes sour. On the flipside, a commercial loan requires a much larger down payment than a residential loan.
It is vital for you to have the necessary financial statements for you and your business when looking for commercial real estate financing. Without these documents, you don’t have enough proof of your fiscal responsibility which means your application will be turned down.
With experience comes a greater knowledge of the commercial real estate market. Until that time comes however, you need to surround yourself with the most qualified team to make sure you get the right deal.
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