The decision to buy commercial real estate is an exciting venture and often more lucrative than investing in a residential property. Whether you've invested or purchased property before, buying commercial real estate is wildly different than residential. It's essential to understand each step of the way before you begin the process, as one hiccup or mistake can potentially be detrimental to purchasing a property.
To help you move from your decision to taking possession of the commercial property, we've put together a guide on how to buy commercial real estate. If you're going to invest the time and money to buy buildings, it's better to do it right the first time around.
Know Why You're Buying Commercial Property
Before you start on the road to buying commercial property, it's good to understand your motivations as they will inform many of the choices you'll have to make later on. Is your goal to have a property that has the potential to appreciate and build equity over time? Are you looking to take advantage of tax benefits or scale your portfolio? Perhaps you want an apartment or office property that can be rented out or used for your own business?
There is no correct answer here, but it will help you buy properties that get you to your goal and have the kind of investment that'll benefit you.
What Type of Commercial Real Estate Do You Need to Buy?
Now that you know what your goals for investing in commercial real estate are, you can choose the type of commercial property that will best serve it. There are many kinds of commercial real estate to choose from, such as:
Retail buildings
Multifamily apartments
Malls
Warehouses
Mixed-Use building
Apartment buildings
Office buildings
Industrial buildings
Shopping centers
To better help you narrow down the list, what are your needs for the property? Will you be running your own business out of it or having tenants only? Answering that question will cut that list down considerably as you have only one other question to ask yourself after that: what kind of tenant do I want or what kind of business do I have?
Look at the Commercial Real Estate Market
The commercial real estate market, like all markets, can fluctuate and so, it's important to pay attention to it far in advance before buying a building. You'll want to consider how it goes up and down, ebbs and flows, and set yourself up for the opportunity to take advantage of prices in a down market.
This step boils down to investing smartly and knowing the arena you're about to step into.
Secure Financing
Before starting your hunt for a commercial real estate property, you'll want to line up the financing options available to you in advance. You could think of this as the firm step-one in how to buy commercial real estate since it's the first concrete move towards owning a building.
First, you'll want to check your credit, and then, depending on your lender and the type of loan you'll be applying for, your business credit scores and reports as well. Yes, both personal and business credit reports are important to check as several lenders will want to see both.
If your credit is good, make sure that the information is accurate and take an honest look at the type of financing you qualify for. There are several financing options but account for the type of property and other factors to ensure the best option for you. You'll want to compare interest rates, fees, repayment terms, and other points in your search for financing as well.
Partner with the Right Commercial Real Estate Team
While there are steps you can do when buying commercial real estate before this one, if you're new to the world of commercial properties, then you'll want to partner with an experienced commercial real estate team. There are a lot of moving parts, and it quickly becomes a complicated process. Even experienced investors get a team to help them make the best decisions for their goals. Not only would you want a commercial realtor, but you'd also want a tax attorney, accountant, and perhaps a broker as well as a commercial lender.
As one of the largest commercial real estate developers, property managers, and a leading firm, we understand all aspects of buying commercial real estate properties. Since 1937 we've handled a variety of real estate and currently over 6.25 million square feet of commercial property. Rather than trying to navigate the tricky waters of buying commercial real estate or partnering with those who have less experience, discover how it is to work with experienced experts in buying commercial properties. Explore a smooth route to investing in a commercial building by following the link below.
