Commercial real estate refers to buildings or land intended to generate a profit, either from capital gain or rental income. Commercial real estate includes office buildings, strip malls, restaurants, and any other real estate in which people conduct business.
Investing in commercial real estate just like any other business decision has its risks and benefits. There is a need for expertise and careful strategizing before a well-informed decision can be reached.
So what are these factors to consider?
- Analyze the risk and benefits of purchasing commercial real estate.
When making the decision to purchase a commercial property, it is important to take into consideration the potential risk and benefits that a purchase may hold for your business.
Some of the risks/benefits involved in investing in commercial real estate are as follows:
- Buying into commercial real estate may be more beneficial than leasing if you are buying to maximize return on investment. Owning your commercial property adds to your asset appreciation over time, which means that your company’s equity grows.
- It is critical to buy commercial properties in the right location. The right location ensures that your business is at the heart of a select target audience and is easily accessible by your clients, key suppliers, and associated businesses. The right location also conveys a certain kind of impression to your target audience which in turn benefits your business. It is also important to note that the locations that are “hot” today might not be so tomorrow and vice versa.
- Seek advice from a team of experts. When considering the option of buying commercial real estate, you need knowledge and experienced advice before you go ahead with the purchase to enable you to make the right decision. Your team should be properly selected based on their track records and working styles. The team should consist of a real estate professional who specializes in commercial real estate to help select suitable properties in a preferred location within the budget and also facilitate negotiations between buyers and sellers; an Attorney to conduct due diligence on the property, prepare formal offers, reviewing all documents, and ensure contracts are sufficiently detailed and structured to your maximum advantage; an Accountant to help figure out what your business can afford and analyze the tax and operating budget benefits; an Insurance Agent to ensure your assets; a Business Advisor to provide solid perspective and advice in the financial process; and/or a Mortgage Broker/Lender to provide finance if required.
- Identify the property you want to purchase wisely. Some of the things to take into consideration when choosing the right commercial property for your business include location, accessibility, sale/lease price, size and layout of space, type of building, construction, available facilities including administrative support and meeting areas, car parking, security, opportunities for expansion, and lots more. Once you have shortlisted the commercial property that best suits your requirements, work with the owner at the right price.
- Secure financing for the purchase of the property. Make sure before you apply for any mortgage (if needed) you already have the down payment covered, as well as proof of income to cover the monthly payments. Commercial properties generally attract a higher down payment than residential properties. At this point, you need to have your lawyer explain every detail of the sales purchase agreement (SPA)so that you know exactly what your rights and obligations are. Commercial real estate like residential properties is also affected by the law of demand and supply.
There is no one-size-fits-all strategy for purchasing commercial real estate. That decision must be weighed by individual businesses and their specific requirements and goals. Investing in commercial real estate is a long-term affair and it is important you get it right from the start.
At PMC Estates we are a property management company with a tradition of trust. Our priority lies in your investment. Call us on 0791 909090 and we will walk with you as you make a solid long-term investment in commercial real estate. We have an array of commercial real estate listings available for sale and lease. Nufaika Na PMC Estates.