buy commercial property

A Guide to Buying Commercial Property

buying commercial property

Executive Summary about Buy Commercial Property by William King

Buying property is really a tricky decision to make. Buy commercial property becomes even trickier. Whenever you are buying it, you have different assumptions in mind. There are different indicators which contribute to the development of a commercial real estate. Either you pay the entire amount for the property lump sum or you just get it mortgaged. If the interest rates prevailing in the market at this time are higher, then it is better to pay in case.

It is then better to pay through mortgage. If you are already running a business then it is better to use the mortgage option. By applying the mortgage you can now further reduce your income resulting into again reduced income. Buying a property on mortgage is not advisable in certain situations. You must not buy a property through mortgage if the cash flows from your business or other earning sources are uncertain. If you are risking your money for longer then that, this would stretch the risk level too high.

You can either rent it out for residential purposes till the time comes that it has commercial value as well.

Key Criteria

Executive Summary about Buy Commercial Property by John Highman

Investigating the lease and the tenant should be the number one priority for investors. For the lease term is critical. Therefore, looking at the stability of the tenant stability is paramount.

Choice of Tenant

Investors spending $500,000 do not secure major corporates. The buyer of a commercial property, with a letting area of between 200-500 sqm, is more likely to have a small or medium sized business occupying it. Many investors are unaware that they are entitled to check out the tenant. The investor needs to find out whether the tenant owns a serious and profitable business. Replacing tenants can be a very difficult and costly exercise and this is the real risk of it, so astute analysis is needed here. A 3+3 year lease is a 3-year lease, not a 6 year lease.

Many buyers have the lease scrutinised by experts.

Zoning of the Property

Zoning refers to the property’s present and potential uses in its current location. Generally speaking, bulky goods’ warehouses have the higher value and the highest growth in value for future development.

Investors often overlook this.

Location

Similar to residential property – location is everything.

Construction and Design

The construction and design of buildings will impact on the investor’s ability to secure tenants. Building depreciation for commercial buildings is approximately 4% over its 25-year life. A well-designed building will suit a number of tenants and therefore will be easier to secure a new tenant should the current one leave. Aging properties tend to have higher vacancy rates due to poor amenities.

Just thought you may be interested in reading this guide: Sell Home Now and Homes For Sale By Owner