Commercial Real Estate: The In's and Out's
Commercial real estate is anything other than a single-family home. Generally, commercial real estate references office buildings, multiple-family units, retail properties and manufacturing facilities. Most people engage with the commercial real estate market because: they have a specific business that needs space, the want some extra rental income or they want to build equity.
If your objective is to purchase for specific use:
Buying versus leasing a space is a debate of give and take. If you buy, you build yourself equity and are able to do whatever you want with the space without restrictions from the property owner. With renting, you are protected a little more from the unseen risk factors of potentially buying in a bad location or the loss of liquidity by tying all your funds up with one big real estate purchase.
If your objective is to supplement your income with rental money:
Risk factors are alive and well in the rental word from the landlord's side as well. Renting a property can take a large amount of cash flow to maintain. Building repairs, diligence to make sure your tenant's business is faring well enough for them to pay the rent and legal fees if they don't.
If your objective is to build equity:
By building equity in your CRE (commercial real estate), its value may increase because of inﬂation, and because the principal balance of the loan is decreasing and you’ll enjoy the tax beneﬁts of depreciation that oﬀ-sets income.
So, still interested in buying commercial real estate? Here is a good outline to set you started.
- Find a
goodgreat Realtor to represent you. Find someone who specializes in commercial real estate so they can lend advice, insight and experience to the search. READ MORE
- Build a legal team around you. You be involved with a buyer's attorney, lender's attorney and seller's attorney. The buyer's attorney will prepare any formal offers including the good faith deposit. The lender's attorney will draft the loan documents and check for any liens against the building. The seller's attorney develops the final Purchase and Sales agreement and creates the Bill of Sale to be signed at closing.
- Hire and CPA, Business Advisor and Insurance Broker all of which will make your business flourish post commercial purchase. READ MORE