8 Questions to Ask Before Buying that Profitable Commercial Property

8 Questions to Ask Before Buying that Profitable Commercial Property

As investors and business owner, there are so many places that you can choose to invest with. However, you should know the reason for is popularity and attraction. If you find the right commercial property for your investment needs, find everything you need to know about the property to help minimizing business risks.

Below are the questions you should ask and seek answers so you would know if the commercial property is a sound and right investment for you:

Is the property location good?

Everything else follows in this article. A good location is a major component in any real estate investment including the commercial properties. Thorough research and the full report should be conducted to know why a certain location can attract high occupancy and with high probability. Moreover, it is also vital to make sure that the position of development within the location is attractive – with many factors impact different sectors.

Is the property title clear and transparent?

As a future investor, the current owner of the property should provide an Ownership and Encumbrance report, which contains the following: the last recorded owner of a property, legal description of the property, and openly recorded liens that affect the title including mortgages, judgments, commercial insurance, lis pendens, and more.

It will help to disclose everything about the property. It is preferred that you have a lawyer reading the report so you would have a clear understanding of everything. This report is provided before writing an offer to buy the property.

Does the property fit the investment goals?

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As a future owner of the real estate property, your investment goals should be your guiding light. Two questions should be raised and answered:

  1. How well will this particular property suit your business needs?
  2. Which place will it take to the portfolio?

Yes, diversity should exist in commercial property but it should fit with the other properties you own.

Is the property zoning code fit the property?

A real estate agent can help to verify with the city or county office whether the current zoning codes allow the current property use. For new owners, they can opt for rezoning but not all properties are eligible. So, it’s important to know right away whether the property suits your business needs.

8 Questions to Ask Before Buying that Profitable Commercial Property

Do the guarantees really make reasonable sense?

The first thing you should consider before buying the commercial property is the guaranteed income period and if it makes sense. As a future owner, make a comparison with other real estate properties in the area based on rental demands. You should evaluate the demand for such property in a specific place.

Are there any major concerns or disputes with the building?

Problems in the building include electrical wiring, roof, plumbing issues, broken fire sprinklers, slow elevators, HVAC, and more. Before you decide to buy the commercial property, you must conduct inspections to evaluate any repairs that may be required. Ask the owners for the due diligence documents that contain the company’s assets, liabilities, contracts, benefits, and potential problems. These documents provide a summary of what the owner has taken care of or neglected.

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What are the various business risks?

Do you know what the major aspect of successful investment is? It’s mitigating risk. It is an overall approach to decrease the risk impact severity or probability of occurrence of a certain situation. In any commercial property, make sure that the contracts are tough and asset-backed. It’s always recommended to consider the worst possible scenario and its impact. It is also preferred that you have security measurement to protect the business from the scenario.

Is there financial audit and records pertaining to the property?

Having the financial document prior to your ownership will help to ensure the accuracy in accounting and creating income projections. This should be started with an independent appraisal of the commercial property. It should include property tax rates and operating costs. Among other things that should be reviewed are continuing services like deliveries, cleaning, and insurance coverage.

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