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For Beginners: Guide to Buying Industrial Real Estate for Small Businesses

Published: 06-23-22 Category: Buying

Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.

Buying industrial property for sale is challenging, but with the right knowledge and resources, it doesn’t have to be intimidating.

Industrial properties offer great rental potential and are stable and often underutilized assets.

As with any investment property, there are risks involved in purchasing industrial property for sale.

Understanding those risks and how to mitigate them is key to making confident real estate decisions.

With careful planning and research, buying industrial property for sale can be a profitable venture for any investor. Read on to learn more.

Determine Your Goals and Objectives First Before Buying

Before deciding on an industrial property for sale, it’s important to know what your business needs are.

Are you simply looking for inventory storage or flex warehouse space? Do you plan to lease any extra spaces out to other businesses?

Your goal should be to find a building whose property’s attributes align with the needs and objectives of your business.

Figure out location accessibility, required amenities, public transportation access, road access, and trucking routes.

The Different Types of Industrial Real Estate

There are different types of industrial real estate that your small business can invest in.

These include the following.

Warehouses

Warehouse space is a great, multi-purpose option for many businesses in need of storage or operating space because the prices and sizes of these properties are relatively affordable and manageable.

In most cases, there’s a warehouse building available with a tight footprint. This type of real estate is perfect for small companies that have very little existing storage space and need to keep their costs down.

Distribution Centers

Distribution centers focus on product distribution, or the inflows and outflows of merchandise.

These warehouses are often not meant for storing goods long-term; instead, they ship items that they store from various suppliers to their retailers and consumers.

Some of these distribution centers are meant to service multiple businesses simultaneously; others may serve just one.

Storage Units

A storage unit stores goods for a short period of time. Think of it as a temporary holding space for business equipment while, say, your business transitions between physical locations.

Items are stored in these storage units for a limited amount of time. Businesses can store order fulfillments temporarily in storage units as well as their own business equipment.

But it’s important to remember that storage units are generally used temporarily as a holding space. Depending on the market, you may see more businesses leasing storage unit space rather than purchasing storage units outright.

Lining Up the Right Type of Financing

Buying retail business property for sale doesn’t always have to be done with cash.

There are many different types of financing that you can use when buying industrial properties.

Some common types of financing for industrial commercial real estate purchases are:

Secured loans that require collateral from the borrower, such as deeds to property or even stocks.
Unsecured loans that are based on repayment ability rather than collateral and have a lower risk for lenders.

The type of financing you choose should be dependent on what type of industrial property you plan to buy.

Take a Good, Hard Look at Property Location

The location of the industrial property for sale you plan to buy is important because it will help you determine your rental income and expenses.

Location will help shape your financial goals and should be considered when deciding on a property.

To determine the location, use common sense and do some research.

If you want to make as much money as possible from your investment, then consider the traffic patterns of the area and also whether or not there are any major businesses or other business retail spaces for sale in close proximity.

Research shows that an increase in the number of major businesses in an area leads to more demand for industrial properties.

As a result, these properties will rent at a higher price, resulting in bidding wars.

Examine (In Person) the Physical Conditions of the Properties You’re Looking to Buy

The condition of the industrial property for sale you’re looking to buy should be checked.

You may find that there are some upgrades that need to be made to ensure your new building is up to local codes.

If you don’t identify these early, smaller property issues that you miss at first might turn into larger ones down the road.

Physically visiting the business retail space for sale you plan to buy will not only help you put yourself in your customers’ shoes, but it will also give you a solid idea of the building improvement work that still has yet to be done on the property if any.

Examine Other Property Amenities

Just as important as the industrial property for sale itself are the other amenities offered by that building.

You need to consider public amenities, such as bathrooms, water, and electricity. You should also consider the other needs of your business, such as having enough parking spaces for employees or if wheelchair accessibility is something it requires.

Spend time identifying any limitations the property location and building itself may pose to your business. You want to be able to identify potential issues in advance before you enter a legally binding purchase agreement.

Assembling the Right Team of CRE Pros

It’s important to team up with other CRE professionals when making retail business property for sale purchases.

Some of the reasons why include:

Improving your chances of finding the perfect industrial property;
Negotiating the best purchase deal possible;
Getting the most out of your industrial property purchase with the help of their expertise.

Once you’ve narrowed down your selection to just a couple of business retail spaces for sale, then make sure that you’re comfortable with all of your options before deciding which one makes the most sense for your business needs.

Working With a CRE Attorney

It’s also important to work with a CRE attorney when you’re purchasing an industrial property.

A CRE attorney can help you put together the legal documents that are needed when purchasing a business retail space for sale.

In addition, a CRE attorney can help you obtain a loan and manage all of the legal paperwork needed for the purchase.

Because of their expertise, a CRE attorney could significantly reduce your chances of encountering any problems during your purchase or locking yourself into a bad deal.

Using a Broker

A broker can help you turn your business’s vision for an industrial property into a reality.

Many brokers have extensive knowledge of local real estate markets and can help you with all of the steps that are necessary to successfully expand your business.

When looking for a broker, make sure that you ask them about their experience in industrial real estate.

The best brokers have vast experience and have worked with various types of companies to find the best business retail space for sale for their clients.