3 important factors when buying commercial real estate
Investing in a commercial property can be a great business decision. If you already run a successful company, you could eliminate rent as an operational cost while assuming more control over how you use your facilities at the same time. Your business will benefit from accruing equity in the property and from strengthening your ties to the local community.
Still, owning property comes with risks and costs, some of which could make a particular property a bad investment for your company. There are numerous considerations that a business owner must factor into their final decision when purchasing commercial real estate.
Local zoning and environmental regulations
Not every facility will work for your needs even if the location seems convenient and the price is competitive. Zoning restrictions could limit your business operations. Buying a property with the assumption that you can change the zoning might mean tying up a lot of your company’s resources in a purchase that ultimately may not benefit the business.
Environmental regulations are cause for concern as well, especially for those who operate manufacturing businesses. Especially if you consider a commercial property close to residential neighborhoods, it may be subject to more restrictions than other, more rural locations.
The actual value of the property
People selling commercial real estate often seek to make as much profit as possible from the transaction. Some owners will ask truly unreasonable prices for a property just because they assume that a corporation can afford it.
You need to carefully scrutinize a commercial property for liabilities when deciding how much to offer to purchase the property. In some cases, a commercial facility simply may not be worth anything near the asking price. Bringing in your own professionals to inspect and appraise the facility could help you avoid overpaying.
Your five and 10-year plans for the business
Companies frequently change how they operate or even move into different areas of an industry. They may need to expand or reduce their scale of operations due to changes in demand or materials available. You need to look at not just your intentions for the company but economic and industry projections for years in the future before making a big commitment like buying real estate.
When you do make an offer after doing your due diligence, carefully review all the documentation before committing your business to a major transaction. Thinking ahead will help you protect your company when you consider buying a commercial property.