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6 tips for buying commercial real estate

On Behalf of | Oct 22, 2021 | Commercial Real Estate

Commercial real estate can be an excellent investment opportunity. Most notably, it can involve tenants that sign long-term contracts for spaces much larger than the average residential unit. However, there are certain risks, such as tenants going out of business, long gaps between occupancies and large swings in market demand. Every commercial real estate expert has their ideas and experiences, but it all breaks down to making well-informed business decisions. A reliable real estate agent is an excellent first step, but it is also wise to work with an experienced real estate attorney when contemplating a large purchase. These legal professionals’ due diligence can help avoid costly mistakes and provide a variety of other services.

Issues to consider

Different properties will have different issues, which may mean the buyer will wish to rearrange the order or adapt on the fly:

  • Identify a desired type of property: Commercial real estate can be industrial, retail, residential, mixed-use, or office. Weigh your interests but look at the market to determine what offers the best chance for success.
  • Assess the laws and requirements of owning the property: Each type of property will have specific regulations. Different states have different priorities, so it’s best to do research that includes environmental assessment.
  • Hire a structural engineer: This can help to ensure the safety and longevity of properties, buildings and structures. The engineer will review the health of the infrastructure such as climate control, roof, plumbing, electrical, fire systems, and even landscaping.
  • Weigh financial risks: Review the financial health of the potential purchase, including a profit and loss statement, real estate tax obligations, utilities, and maintenance. This all factors into a clear-eyed analysis of the property’s value.
  • Stay on top of paperwork: An attorney can order a title search, which will determine if there are any existing defects, liens or issues that will impact the transaction. Each municipality also has its ordinances for permits and processes, which can take weeks or months. Due diligence regarding these is an essential part of the process.
  • Determine financing: The buyer should have their finances in order. Not only can this help identify a realistic budget for spending, but it can also enable an organized buyer to act before competitors to secure more desirable pieces of property. Legal counsel can also help clients weigh options.

Attorneys can provide support

Real estate attorneys often work with clients throughout this entire transaction process, helping the client troubleshoot roadblocks as they appear. After the transaction, they can continue to be an asset by drafting up binding contracts, handling litigation, addressing zoning or environmental matters as well as negotiating other vital deals.