purchasing commercial property

Tips for Purchasing Commercial Property

March 3, 2022

Investing in commercial property results in higher returns compared to a residential property. Commercial properties come with longer lease tenures that increase by 4 to 5 percent annually. Plus, if you rent out a commercial property to a business then they’ll maintain, clean, and renovate it.

While purchasing commercial property can offer you a slew of benefits, it does have risks. Therefore, you need to make sure you analyze certain factors before you invest.

In this article, we’ll discuss some pro tips for purchasing a commercial property.

Tips for Purchasing Commercial Property

Improve Your Knowledge of Local Real Estate

If you’re purchasing a commercial property then being familiar with the real estate market is crucial. First things first, you have to know what makes an investment worthwhile. Oftentimes your success is dependent on current market trends and the desirability of an area.

If you’re a beginner, it’s best to seek advice from a local realtor who’s familiar with the area and understands the current market. They can inform you of any hidden costs that exist or local regulations that can affect your success. Also, they’re likely aware of any future development plans in the area that could possibly impact your property’s business.

Be in a Good Place Financially

Before purchasing a commercial property, make sure your finances are in order. More than likely, you’ll need to apply for a loan to purchase the property. However, before the bank gives you a loan they’ll want to make sure you’re capable of paying them back.

A lender will check this by:

  • Ensuring your credit score is in good standing
  • Evaluating your income and assets
  • Looking into how much debt you already have
  • Considering the size of your down payment

If you have a business partner then that could be beneficial in the pursuit of a loan. The more people involved, the more money you’ll be able to put down for the property’s down payment. However, if you decide to go this route then apply for a non-recourse loan.

Location, Location, Location

One of the most important things to consider when purchasing a commercial property is the location. A location can ultimately make or break your business. You want to be located in an area that’s desirable and has high foot traffic. Oftentimes areas like these will have people with a higher spending potential.

Lastly, you’ll want to consider the property’s parking situation. If there’s a lack of parking spaces available then customers may be discouraged from going inside.

Summing Up

There’s no doubt that investing in a commercial property is a fantastic opportunity to build a passive income stream, diversify your portfolio, and reach your goals. The given tips can help you navigate the process of commercial property investment more seamlessly.