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Published On: Tue, Jan 17th, 2017

Welfont: Keys to Success When Buying Commercial Real Estate

There are many excellent opportunities for business owners or investors to acquire commercial property, especially if they are interested in the distressed property market.  There are some particular considerations that you should be aware of when purchasing any sort of commercial property, and the first key to success is to make sure that you have an expert team in place to help guide you through the process.  In Florida, be sure to check out Joseph Johnson Welfont for assistance.  In the meantime, here are some other keys to success in this important real estate sector.

Take the time to understand the local market

Ideally, you have assembled a crack team to help to find the best property for your needs, but that should never be a substitute for your own first-hand knowledge of the market in which you are planning to buy.  As a business person or investor, you will have developed your ability to trust your instincts, but without developing your understanding of the local market, your instincts will have nothing to go on.  Be sure that you do your homework with regards to local taxes, environmental issues, transportation options and demographics – including labor supply.  Drive around the area to get a feel for its character and potential.

photo TaxRebate.org.uk via Flickr

Taxes

You may already have experience with residential real estate, but don’t overlook the very real differences between residential and commercial real estate – one of the most significant of which is related to taxes.  Bes sure that you work with an expert on commercial tax issues in order to understand your tax obligations – present and future – so that you can better evaluate the deal.

Sort out your finances and financing

Chances are that you will need financing to make a significant commercial real estate acquisition.  This is not always the case – if you are looking at the distressed property market, prices are often low enough that a cash transaction is possible and maybe even preferred.  Either way, you need to have a careful evaluation of your finances and your budget range – tying up too much of your business or personal liquidity buying a property can be risky, especially if you run into unexpected costs associated with the property, or need to infuse cash into other areas of the business.

Conduct due diligence

Before you finalize any deal, take the time necessary to conduct due diligence on the property. Work with your broker or assemble a team of professionals to investigate and verify the current condition of the building.  Make the investment in engineering, electrical, environmental and architectural evaluations so that you know that the property is sound, safe and suitable for any future renovation or repurposing plans you may have.  You should also consider not only your own property, but surrounding properties as well.  An empty lot beside your acquisition could be developed in ways that enhance or lower the value of your own.  Find out if there are any municipal plans for new infrastructure, re-zoning or other things that could impact your property or plans.

Have a plan

Clearly, the purchase of commercial real estate isn’t something you do on a whim – you will have some sort of a plan.  But it is very important that you have a detailed plan for at least the next two years which not only addresses “blue sky” scenarios but also takes account of contingencies.  Contingencies should never be totally unexpected.  Due diligence will have revealed many potential issues, and your careful forecasting about anything and everything that could go wrong or right should be accounted for in your plans not only for the property itself but for your business or personal investment plans.

As you can see, the purchase of commercial property is not something to be taken lightly and requires a considerable amount of careful research and planning.  Be sure to seek expert advice as you move forward for the greatest success with this important purchase.

Author: Anwar Hossain

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