6 Things to Think About Before Purchasing Commercial Real Estate

So you’re getting ready to purchase some commercial real estate for your business…congratulations! This is a big step forward towards growing your business and achieving your goals. But of course, purchasing commercial real estate is an overwhelming and time-consuming process that requires lots of thought and patience. At the Wilson Law Group, we have decades of experience in dealing with commercial real estate transactions so we know just how many things you need to think about before signing on the dotted line. Below we list some of the main questions and considerations that should be on your mind.

  1.       What is the type of commercial real estate you’re looking to buy?

Commercial real estate isn’t just office space and retail stores. Instead, “commercial real estate” actually means any property this is used for business purposes, including business run out of homes and undeveloped land that can be developed later on. So, depending on the kind of business you have, you’ll need to consider what type of space your business requires.

The main examples include:

  • Retail: Properties leased to commercial tenants, like malls and other types of shopping centers.
  • Residential: This is just what you would think it is. Think anything that someone would consider a home—houses, high rise apartments, duplexes, etc.
  • Hotels: Any type of hotel or motel.
  • Office: Any type of work space for a business.
  • Industrial: Manufacturing spaces, think factories and warehouses.
  • Land: this can be either developed or undeveloped.
  1.       Can your desired piece of real estate be used for what you want?

So you’ve found the type of real estate you want AND you know where you want it, but is the location available for what you want to do? Zoning regulations are set in place by cities that dictate what land can and can’t be used for. So, in addition to finding the right location, your property must be zoned for the type of business that you want to do. For example, if an area is zoned for residential use, then there are likely lots of limitations on the type of businesses that are allowed in the area. It might even mean that no business can be operated in that particular zone.

When evaluating a property for use you should think about the following:

  • What is the property currently used for?
  • Zoning allowances and exclusions for the property
  • What kinds of taxes are associated with the property?
  • Does anything need to be replaced or repaired?
  • Why is the owner selling?
  1.       Establish Financing

Because of the significant cost associated with purchasing commercial property, most buyers have investors and usually need to secure a loan from a lender as well. The lender will help you get financing in place to secure the purchase of your property. It’s wise to look look for lenders that are experienced in commercial real estate.

Consider using a lender with whom you have an established relationship, which may help you to more easily secure the loan. But if not, then at least look for a lender who is experienced in commercial transactions so that they can direct you to a variety of funding opportunities and knowledgeable in any necessary paperwork and regulations.

  1.       Find an experienced commercial real estate broker.

There are several experts that you’ll need to talk with prior to your purchase and commercial real estate brokers are at the top of that list. Brokers are your point of contact with the people who are selling or leasing it. They will help you find the right space for your needs and can help you with due diligence and the inspections process.

  1.       What types of insurance will my real estate need?

Before finalizing the purchase, you should speak with an insurance agent about what types of coverage you will need for the property. You will need to make that your coverage is established and goes into effect on the date that you become the property owner to make sure your investment is properly protected.

  1.       Consult with The Wilson Law Group today!

We advise clients to always consider buying the real estate where their businesses will be located using a separate entity owned by the principals of the business. The reason is that every month when your operating business pays its rent, that rent payment pays the mortgage and becomes a deposit in your retirement account.  Commercial mortgages are usually 15-20 years long.  After that mortgage is paid off, you will have an asset that is free and clear.  If you sell the operating business, the new owners will become your tenants and pay you rent which supports you in retirement. Or, you can sell the building and deposit the proceeds into your retirement account. It is a great way to add retirement savings conveniently into your regular operations doing something as simple as paying rent.   

At the Wilson Law Group, we regularly handle commercial real estate transactions and know what to look for to make sure that all of your bases are covered. We have over 25 years of experience getting people ready to purchase commercial real estate from the initial phases until closing. Jim Wilson will personally work with you and make sure you understand each and every step along the way.

If you are looking to purchase a piece of commercial real estate, don’t hesitate to contact the Wilson Law Group today!

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Wilson Law Group

Jim Wilson is the founder and principal attorney of the Wilson Law Group. For the past 25 years he has been combining legal dexterity with an entrepreneurial mindset to help aspiring and established business owners start, finance, buy, sell, and run their companies.

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