Tips for Choosing a Commercial Property

If you are a business owner or prospective real estate investor, you may be searching for a commercial property. Whether you need retail, office or warehousing space, if you have never purchased a commercial property, the process can be challenging. You want to get the right property, but it also needs to be in the right location and cost no more than you can afford. These are a few tips to help you find the commercial real estate that will work for you.

Determine Your Needs

Your first step is to determine your needs. You need to write down the type of space you want and what you will use it for. You should also discuss your desired location. Research the types of businesses in the area, including their longevity and how often the property has turned over.

Next, review your financials to determine whether you need to lease the property. If you can afford to buy, look at your cash reserves to ensure you can afford the down payment. You also need to identify your tolerance for risk and determine whether you are willing to take on a business partner or a partner in the property purchase.

Next, are you willing to renovate or update the property? Do you have any knowledge or skills in this area? What about key real estate or contracting contacts? Will you need a property manager, or do you have the skills to be a landlord?

Tour Many Properties

Before you choose a property, take time to tour as many as you can. Look at their features, locations and uses. Also, consider their prices and identify why they are priced the way they are. Spend time in each location to determine both auto and foot traffic, parking and safety.

Do Your Financial Due Diligence

Analyze each property for its financial viability. Calculate the profitability by subtracting the principal, interest, taxes and insurance from your expected annual revenue. You should also calculate your return on investment and payback period. Find out what the property is actually valued at and compare that to the asking price. Look for properties with built-in equity.

Next, get an inspection. Learn about any repairs or replacements that are necessary now and in the near future. Learn why the owner is willing to sell. Identify any changes in the area, such as increasing crime rates, new builds or other factors that could affect your property value.

You have done the initial research on the property. Now, your team will help you find commercial real estate that will serve your needs and make you money.