Whether you are just starting your small business or looking to expand it, commercial property is a significant consideration. Many choose to rent a property for their businesses; however, purchasing property can be a worthwhile investment if done smartly.
Buying commercial properties is a risky venture, even more so than residential real estate. Though there is no universal strategy for purchasing commercial property as every business has different needs, there are various aspects to help navigate the decision more effectively.
What is Commercial Real Estate?
Commercial real estate is a property with the potential to generate profit via rental income or capital gain–specifically used for income-generating purposes.
Types of Commercial Property
Commercial properties in Denver, CO., come in different forms. Below is a highlight of the types of commercial properties featured by Unique Properties, Inc.
- Multifamily: This type encompasses residential properties with one to four units, like assisted living centers or garden apartments.
- Retail: These properties are reserved for businesses selling commodities to consumers. They are often located in accessible places like strip shopping destinations.
- Hospitality: This establishment caters to travelers for accommodation, entertainment, or meals.
- Office space: These are specially designed apartments used for professional services like medical consultation, law firm services, or other commercial purposes.
- Industrial: These establishments are reserved for harboring industrial operations like light assembly services or manufacturing programs.
Buying Commercial Property vs. Residential Property
Buying commercial property guarantees you high and qualified tenants with the ability to maintain the standards of your apartment. In addition, you will be able to increase the value of your property under the commercial property cadre with longer lease terms.
On the contrary, buying a residential property requires fewer funds but exhibits low tenant turnover. Moreover, the low costs expose residential properties to a larger buyer and renter pool, making them perform better during the economic crisis than commercial property.
How to Get into Commercial Real Estate
Getting into commercial estate is a complex process that requires the assistance of an expert like Unique Properties, Inc. to guide you on how to buy commercial real estate. With the help of an expert, you will obtain favorable deals and a viable investment opportunity.
Define your motivation, secure a stable funding source, and hire a trusted expert to get started when venturing into commercial real estate. Next, work with your expert to get the right and future value of the property you intend to purchase. Next, ensure you are accustomed to the laws of real estate property ownership in Denver. Finally, conduct due diligence and enter the negotiation table with the potential client.
Assess Benefits and Risks
Before anything else, ask yourself why you are looking to invest in property, what you stand to gain from it and what the potential risks are. Commercial properties can range from office buildings and storefronts to warehouses, shipping centers, and beyond. Zoning laws also vary between different types of commercial property, determining what can be done with the land. Therefore, choose the property based on your goals, not vice versa.
Unlike renting, owning your commercial property means fixed monthly rates that are not subject to market fluctuations, and potential tax breaks that can further save you capital. Owning property also provides the freedom to use and tailor the property to your needs, allowing your business to stand out, and function more effectively. However, owning ties up liquid assets in a form that may be difficult to sell again if need be, especially when trends shift and the market recedes. Extensive, careful research is necessary before purchasing as the decision is not easily reversed.
Consult the Experts
Small business owners can not be expected to know everything regarding commercial real estate. However, enlisting a team of experts in the field can equip you with the knowledge, experience, and judgment needed to navigate the buying process.
Experts to contact include:
- An accountant: An accountant can help you plan financially for the purchase, assessing what your business can afford, and explaining the tax benefits to create a budget.
- A commercial real estate broker: This agent helps you find and identify potential properties, taking into account what your business is seeking and what you can afford.
- A mortgage broker: Mortgage brokers assist you in making the transaction by identifying relevant financing options. These can include bank loans specifically for real estate or government loans through the U.S. Small Business Association.
- A lawyer: An attorney specializing in commercial real estate can represent your case and negotiate with the seller and lender to complete the transaction.
- Unique Properties has a broad assembly of brokers and representatives able to take your case, with specialized teams for particular types of property. Find a team with experience that matches what kind of property you seek, and navigating the rest will be considerably easier.
Identifying the Right Property
As always, real estate starts with location. Accessibility for customers, workers, and suppliers are critical. Storefronts should be visible and easy to reach, with shipping and storage centers close to useful rail, highway, or sea lane routes. Also important is accessibility in the other sense, namely that customers have a place to park, and that the property complies with access needs for those with disabilities.
The physical condition of the property is vital, too. Research how the property was previously used to determine the state of wear to be expected. Keep an eye out for any health or safety violations that could become liability issues; this is also relevant if a seller seems too keen to get rid of a property. In addition, the size of a property and the capacity to expand, or to rent any extra space, is worth noting.
Lastly, check up on local zoning laws and building codes so you know what you can and cannot do with the site. You may, for instance, not be permitted to change the exterior of a building in a historic district.
When you have identified the property you want and go to contract, take the time to reassess everything. Look at the goals you have set out at the start of the endeavor and decide if the property can help you fulfill them. Verify the terms of the agreement and make sure your financing options are secure. During this time, take full advantage of the resources that your team of experts provides; they can contact third parties to verify the condition of the property or if there are any outstanding legal issues or potential developments in the area that may affect your business. This period is your final opportunity to renegotiate or even, if necessary, walk away.
Buying Commercial Real Estate FAQ
Why is the owner selling in the first place?
The owner is selling the property to raise funds to buy shares in the stock exchange market.
What are the different types of commercial real estate, and why should I care?
The types of real estate properties include multifamily, retail, office, hospitality, and industrial properties. Again, it will help if you care so that you buy a property that suits the purpose of purchasing it.
What is property syndication?
Property syndication is a situation whereby many investors come together to finance a real estate investment.
Why should I invest in commercial real estate over single-family homes?
Commercial real estate has higher annual returns on investment (6%-12%) compared to single-family homes, which post 4% to 1% returns. Therefore, an investor buying commercial real estate today knows he will earn better returns than another person who purchases a single-family apartment.
Purchase commercial property
With diligence, research, and the right experts backing you up, buying a commercial property can give you the perfect foundation for your small business to grow and thrive. If you are seeking commercial property for sale, a team of brokers to help close the deal, or other resources in managing ownership in the Denver area, Unique Properties is here for you.
Commercial properties are a worthwhile investment. Contact Unique Properties to learn how to buy a commercial property with the experts backing you up! We are available at firstname.lastname@example.org or by telephone number 303.321.5888.