Thinking About Investing in Commercial Real Estate? Think Like a Coach!
According to a Forbes article, commercial real estate offers an attractive middle option that efficiently balances risk and return while providing cash-flow to a portfolio.
But where should you start? Start by imagining that a commercial real estate investment is like building a sports team. In this scenario, you’re the coach, and it’s your job to develop a game plan, find the players who can put that game plan into action, then enlist specialists who’ll help you get the best outcome.
Sure, your goal is always to recruit the next MVP (in your case, it’s the Most Valuable Property). But the best way to make that happen is to work with someone, like an experienced title agent, who knows the industry, the players and the process. This professional can act like your assistant coach, guiding you through the process toward a successful close. Together, you can develop your game plan with these milestones in mind:
1. Define Your Acquisition Strategy
Start by asking yourself a few critical questions:
- Why are you investing in commercial real estate? What are your goals?
- What type of property are you looking for (office space, vacant parcel, storage, etc.)?
- Do you want to own the business, lease it, rent it out, build equity or something else entirely?
2. Zero in on a Candidate
You wouldn’t bid on a commercial property just because it’s for sale. You want to find one that meshes with your requirements. Once you’ve established your goals and what you’ll bring to the table, narrow down your choices by considering each property’s attributes, such as:
Location. Location. Location. This is at the top of the priority list for almost every real estate transaction. You want to tap into a convenient location – one that’s close to clients, your employees and suppliers. Depending on the type of business, access to logistic systems (highways, railways, etc.) may also be important factors.
What is its physical condition? How was the property used? Will it require updating?
How will you use the property? Whether you need commercial office space or industrial space, make sure the zoning laws will allow you to do what you need to.
Will it require structural or cosmetic changes? There may be limits to changes or alterations you can make to the property, especially if it’s in a historic area. Check zoning regulations before you call an architect.
What about access and parking? Does the property offer enough parking for your employees and your clients, not just now, but as your company grows? Also, ensure that both your parking area and your business access are compliant with laws such as the Americans with Disabilities Act.
Is there room for expansion or leasing? If your business grows (and we hope it does), will the space offer room for expansion? On the flipside, if your business doesn’t grow as much as expected, can you lease out the extra space?
Other critical factors include:
- What is the property currently used for?
- What can or can’t it be used for?
- What kind of income does the property currently generate per year?
- What kinds of taxes are there on the property?
- What things will need to be replaced or repaired soon?
- Why is the owner selling?
- How is the area around the property? Are there any major upcoming changes?
3. Assemble Your Team
Commercial real estate transactions can be complex. At the very least, you’ll need to connect with an accountant, inspector, commercial real estate agent, mortgage broker and title specialist. This is where it pays to have an experienced commercial real estate partner like Amrock Commercial on your team. We can be a single source for managing transactions, bringing together all the pieces and professionals you need for the deal, while keeping all its moving parts on track.
4. Find the Right Title Partner
Save time and avoid frustration by collaborating with a title company that works with multiple underwriters and can connect you with the one that best fits your needs.
5. Dive Into the Details
Your offer’s been accepted. Great! But before you draft a final contract, you’ll have to dot a few I’s and cross a few T’s.
You might need to order a survey. A survey provides valuable information such as boundary lines, location of the main building (if there is one) including improvements, location of secondary buildings and the identification of easements (access rights for service companies such as water, gas, telephone, railways and other utilities). You and the seller will also need to connect with a title company that will act as a neutral third party overseeing the transaction.
You’re given a due-diligence period with which to make sure all the documentation about the property is correct. You and your purchase team should verify property details using information from service contracts, surveys, environmental reports, covenants and restrictions, etc. When you’re ready to sign the contract, add this property to your “win” column and become a commercial real estate owner.
Wrapping It All Up
Putting together the right team to help you navigate commercial real estate transactions can be key to a winning investment season. If you have questions or need more details about the commercial real estate process, contact Amrock Commercial. Our team of experienced professionals will not only provide you with the information, we’ll work with you to develop an efficient, effective strategy for your transactions, and then guide it through the entire process, so you can get back to doing what you do best.