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Commercial Real Estate Virgins The Newbie’s Guide to Buying Commercial

| January 21, 2014
Real estate is real estate, right?  You bought a house, and that’s exactly like buying a commercial building, right?

Wrong.

Though there are certainly many similarities between the two processes, there are some things you should know if you’re taking your first dive into commercial real estate.

Commercial PropertyInvestment

Investing in commercial real estate has the potential to become a great source of income – if all goes well, you could be making beaucoup bucks on a property for years to come.  But, as with many situations that have a big payoff, a bigger risk is involved.

Properties for commercial use are usually much more expensive than residential properties.  The increased financial commitment means bigger loans and more legwork upfront.  So, it also usually means more waiting and more money lost on deals that fall through.

An inspection for a large commercial building will run you much more than an inspection on a 3-bedroom home – be prepared to spend that money and kiss it goodbye if you decide not to go through with the purchase.  That being said, you stand to gain a lot more from a commercial real estate.  If you can stomach the initial investment of money, time and red tape, you could very well end up with a very viable business in your back pocket.

Regulations

Zoning laws are no joke and could get in the way of your plans.  It may be your dream to open an English pub in that beautiful building down the street, but your city could put the kibosh on your fish & chips fantasies because of the elementary school on the corner.  Do your homework on any building you’re considering, just to make sure that regulations don’t rain on your parade.

Location!

In just about any real estate investment you make, location is a big deal.  It’s certainly a big consideration for most homebuyers, but location looms even more largely for commercial buyers. 
Main Street
When looking to purchase a home, your locale considerations may involve schools, public transport or access to shopping.  For commercial properties, on the other hand, location can make or break your investment all on its own.  Whether you or a tenant is running a business in the building, if the location isn’t a draw for potential customers, your investment could end up hurting you.

Before buying any commercial property, stalk the area a bit.  Talk to other business owners on the block and get their take.  Stop a shopper walking down the street and ask a few questions about how often they come to the area or how busy it usually is.  
You should even look at things like parking options and crime rates.  Make sure that any new business opening there will be easily accessible for potential customers.

Involvement

Being the landlord of a commercial building requires some personal involvement.  If you don’t intend to use the space yourself, you will have to find reliable tenants who have a solid business plan.  Not only will you be depending on their monthly rent check, but you’ll be banking on the success of their company.  Make sure you know what you’re getting into and how much of your personal time will be spent looking after your new investment.

Purchasing any kind of real estate can be challenging, stressful and risky – there are many “what ifs” and risks involved.  That’s why you want a team of experts on your side.  Hire a broker, accountant and attorney who all specialize in commercial real estate.  It’s their job to be your advocate and make sure you’re well-protected.  With a little determination and a lot of patience, you can reap all of the potential benefits of a tried and true investment.

 

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