A Buyer’s Guide to Commercial Real Estate
Purchasing real estate for your company to occupy, as an investment, or for other commercial venture, can be complex process. From finding the right property, in the right location, to understanding the different financial, regulatory, and administrative components of the purchase; it can sometimes be a daunting task.
Of course, each commercial real estate deal is going to be different, dependent on varying criteria, no two sales ever going to be the same. Nevertheless, there are certain aspects to any purchase that you need to consider and take care of. In this article I’ll present an overview of the key elements you should be aware of when making your commercial real estate purchase.
It’s the obvious start off point, but before you begin seeking a property to purchase, you need to have a clear understanding of why you are in the market in the first place. What’s the purpose of the purchase? Is it an investment for rental income? New premises, offices, or factory for your business? Understanding exactly what the property needs to deliver for your business is crucial in finding the right piece of real estate.
Where the real estate is located is another crucial consideration in your purchase. Where you’re going to be situated matters to future success in all commercial investments. For instance, that factory unit that ticks all the boxes in terms of facilities may not be a viable option if the distribution links are poor. Similarly, the retail establishment you’re setting up really needs to fit in with the overall demographics of the location you’ll be based, to give you the best chance at adequate trade and custom.
Understand your financial situation from the outset. Know what you can afford, what’s in the budget and where appropriate get as accurate an assessment as possible on any potential returns.
Offers, Negotiation & Legal Matters
You need to make an offer on the property, and be prepared to enter a stage of negotiation – again, this is better achieved when you have a firm understanding of your finances and budget. Once accepted you can enter the contractual stage; in which case you’ll want representation from a commercial realtor to make sure all matters are adequately dealt with to your satisfaction.
This phase is to ensure that the property, and all related elements of the property, are in satisfactory order. Typically this will include legal searches, building surveys, inspections on facilities, any outstanding lease arrangements (if there are tenants involved) that need resolution.
Once due diligence has been satisfactorily passed, you can begin to prepare the property for readiness after the purchase. This might include speaking with architects and designers, understanding and making appropriate arrangements for the equipment, and other facilities and amenities required.
Closing the Deal
Naturally, you won’t close the deal until you are perfectly satisfied that all necessary requirements have been met, that the due diligence has been passed. However, once all this has been taken care of, and the finances are fully in place, then you can get the deal done. The closing and completion process will typically take around a month, during which time you can make the necessary arrangements for moving in, or taking ownership.
As I mentioned, no two deals are the same, and will vary according to the location, property type, involved parties, and a raft of other matters that tend to crop up. And yes, invariably there will be hitches along the way; be it over issues raised on due diligence inspections, legal matters, or price negotiation. However, working with trusted advisers and commercial real estate experts, as well as having a clear understanding of your own objectives, can ensure that the purchase can go through as smoothly as allowable, and that you receive the right property, at the right value, in the right location for your business venture.
Feel free to reach out to me, Craig Byers, at 319-360-7017 with any commercial real estate questions or needs that you may have.