If you want to be a successful commercial real estate owner you can’t be satisfied with amateur knowledge. This is one area of real estate where you require a fair amount of expertise and adequate know-how. Apart from knowing all about the right capital to buy a particular property, you must also have sound knowledge of the market conditions to make a good investment.
To make things easier for all the beginners out there, here are 8 steps to owning a commercial real estate.
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The very first step before you purchase a commercial real estate is to know what your situation is like and what exactly you are looking for. To analyze the situation, it is important to ask yourself the following questions:
Answer these questions honestly before you decide to invest in commercial real estate. They will help you chart out a roadmap to progress further.
Tax liabilities on the huge profits that you make in a given year can be offset by claiming property depreciation. However, you gain from asset appreciation over time when owning commercial property so your company’s equity grows.
A major risk involved in buying commercial real estate is that the value of location may go down because of the changing trends. A location that is considered hot in a given year may lose its charm the very next year and this may considerably reduce the value of the property. Besides, your liquidity is at stake since it is hard to sell a commercial property in tough economic situations.
If you are planning to rent out your commercial property you need to make adjustments for vacancies, late payments and payment defaults.
Like in any other business with a niche audience, even real estate has lots of vocabulary that you will have to keep handy. This will help you look and feel like a real estate savvy.
Here are some frequently used terms:
It is important to visit and consider different properties instead of focusing on the first property you visit. Each time you visit a different property, analyze which one would work the best according to your plans. Some of the most important things to consider include price, condition, location and the allowed uses.
Make sure you also measure the value of each property by finding out:
Finding and buying commercial real estate is a complex process, which will make it quintessential to need the knowledge of an expert. Look for an accountant, a commercial real estate lawyer, mortgage broker and a commercial realtor.
A more complicated real estate will need tax experts, lawyers, accountants, appraisers, notaries and/or engineers.
You will need to find out what kind of banks, mortgage companies or credit unions you will need to use. Some other things to consider are:
You will need a lawyer to sign the letter of intent (LOI) about the property and all the contracts involved. Ensure the LOI is not binding. This will save you a lot of headache if you decide to let the deal fall through. Also, gather details of the written agreements so that you know all the rights and obligations.
It is imperative you partner with a lawyer who has considerable experience in commercial real estate dealings.
Below are the last steps to be taken for the completion of the transaction:
Now that you know the steps involved in owning commercial real estate, go right ahead and be a proud owner.
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