The Do’s and Don’ts of Buying Commercial Property for Sale
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.
Especially for newcomers to the scene, buying commercial property for sale can be as risky as it is rewarding. And when you make an investment as sizeable as one for commercial property, there’s a lot on the line.
Luckily, you can follow certain dos and don’ts that are almost certain to protect you and your investments.
Let’s take a closer look at these dos and don’ts of buying commercial property for sale so you can decide for yourself how to best go about your investing journey.
#1 – Do Be Aware of the Tax Implications
Buying commercial property for sale can have much in the way of tax implications, and you need to be aware of these. Such implications can include capital gains taxes and depreciation.
Before you buy commercial real estate, talk to a financial professional to discuss your options. They can help you understand these tax implications and make informed decisions based on that information.
#2 – Do Check the Covenants, Restrictions, and Zoning
Most neighborhoods have covenants, restrictions, and zoning laws that you should check before you invest in commercial property. These determine the type of businesses you can operate and how the property is used.
If you buy commercial property for sale and violate these restrictions, you could be forced to sell the property at a loss. If you know what these restrictions are ahead of time, you can avoid making this mistake.
#3 – Do Take Advantage of Tools That Can Help You Research Properties for Sale
It goes without saying, but before you buy commercial real estate, you should do your research. There are a lot of different websites and tools available that can help you find properties for sale.
These tools can give you a better snapshot of the market with accurate market intelligence, customized property type alerts, and comp software. They can also help you avoid overpaying for a property and give you more options when it comes to buying commercial real estate.
Before you start looking for properties for sale, create a checklist of the things you want in a property, including location, the amount of money you are willing to spend, and how quickly you want to close the deal. This can help you organize your search and make sure you aren’t missing anything.
If making this checklist overwhelms you or you don’t know where to start, consider working with a commercial real estate broker who can help you.
#4 – Do Check Out the Neighbourhood Before You Sign
Just because a property is in the right price range and has the right features doesn’t mean that you should buy it. Before you sign on the dotted line, take a look at the neighborhood and any surrounding influences to make sure it’s truly right for your investment goals.
If the area is unsafe, renting out your commercial property could be difficult, and your tenants may not feel safe. You’ll bankrupt yourself on marketing expenses as a result, and a commercial rental that just sits there and doesn’t collect tenants will cost you more money in the long run than you’ll make.
Make sure the right environmental factors are in play before you sign.
#5 – Don’t Assume It’s a Good Investment Just Because It’s Commercial Real Estate
Despite their likelihood to have more reliable tenants and wider profit margins, not all commercial real estate investments are good ones.
A potential land purchase may have hidden environmental hazards, or a rental property you’re looking at may be staged well but lack compliance with local codes and ordinances.
The best investments are those that will align with your long-term investment goals, whether that’s to create passive income, to improve and sell, or simply to buy and hold.
This is where working with a broker and a real estate attorney will come in handy.
Both a broker and an attorney will guide you along your investment path, pointing out negatives and highlighting positives so you can make the most informed and effective investment decision possible.
#6 – Don’t Assume That Everything Is as Advertised
Before you make any purchases at all, make sure everything is as advertised. If the seller says that they have been running a successful business on the property, make some calls and find out if that’s true.
Hire appraisers, inspectors, and other commercial real estate professionals to take a look at the property for you. It’s okay not to know everything; in commercial real estate especially, mistakes will be costly.
Any upfront investments into proper property inspection will increase your return on investment in the long run.
#7 – Don’t Be Afraid to Walk Away From a Deal
At the end of the day, you are buying commercial real estate to protect your financial future. You shouldn’t buy the property if you don’t feel like you are making a good investment. Real estate can be a good investment, but you need to make sure that it’s the right investment for you.
Buying commercial property for sale can be lengthy, but it is important to take your time to get it right. A checklist is a great way to ensure you check every important detail before agreeing to a purchase. In the end, preventing simple mistakes is the best way to protect your investments and avoid losing money in a bad deal.
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