If your business needs a physical location for employees and customers, you’ll need to know the ins and outs of buying commercial real estate. Here’s how.
Whether you are launching your startup, growing your existing brick and mortar business, or creating a physical storefront for your online company, you will need commercial real estate.
Buying the right property for your business might seem like a complex and time-consuming process, but it’s actually easier than most people think. Read on to find out the steps you need to follow when buying commercial real estate.
1. Consider Your Business Situation
The first step in buying commercial real estate is understanding your current business situation. If you are preparing to launch your startup, you will need a location to base your operations on. As your profits are not yet secured, you might need to look into small and basic commercial real estate options.
If you already operate a successful small business and looking to expand, you will either need to move to a more suitable location or a larger property to accommodate your growing business.
Similarly, if you already own an online retail business you might want to capture some of the local market as well. Then, you will need a physical property that will attract local customers.
There are many other parameters to consider. Moving to a new location is not a business decision you can make lightly. It involves risk and significant expenditures. If you examine the facts and decide you need to move in order to grow, then you have taken the first step.
2. Browse the Market
Having decided you need to move, it’s time to test the waters. You need to tour and examine numerous different properties to find the perfect one for your business.
Some commercial real estate properties will be too large, others located in remote areas that might make supplying problematic.
When browsing real estate properties, these are the major factors you should consider:
- Allowed uses
The most important factor is that the property should fit with your current situation. If you need more floor space for your equipment, the property should be large enough for this. If you’re looking to move to a busiest commercial district, the property’s location will be crucial.
3. Find the Perfect Date
A move to a new location will disrupt your business operations. That is why you need to carefully pick the best time that will cause you the least amount of trouble.
Consider your least busy season. Is it summertime? Then schedule the move for mid-July. Alternatively, if you rely on summer tourism, it would be a bad idea to move to a new location during your busiest months.
Scheduling the move in time will allow you to send out orders in advance to minimize losses and manage risk.
4. Make Sure You Can Afford the Move
Before you start packing your equipment, you have to make sure you can actually afford the business disruption and all costs associated with the move.
Most startups will need some kind of financing help before purchasing their first commercial real estate. If your budget is not enough, you should consider looking into loans, credit unions, or mortgages for your new property.
There are multiple ways to finance a commercial real estate purchase. Each option comes with different interest rates and repayment deadlines. Some of these options might perfectly match your business, making them more ideal for your situation.
5. Identify and Obtain Key Equipment in Time
If you seek to expand your operations after you purchase your new commercial site, you need to plan ahead. If your extra space all goes to waste, you will just be paying a mortgage for nothing.
For example, your new location might support a parking lot you can monetize. If that is the case, you need to obtain parking equipment before moving, so you can start leveraging this benefit from day one. If you are looking for reliable parking equipment and parking control systems, check out Parking BOXX.
6. Study Commercial Real Estate Vernacular
Before contacting sellers and moving forward with the purchase, you need to familiarize yourself with the jargon and acronyms that are most common in commercial real estate. As a business owner, you will need these again and again, so it pays to be prepared.
Terms like “cap rate”, “LTV”, “DSC”, “ad valorem” and many others might confuse the layperson, but you need to know what they mean.
Understanding the commercial real estate vernacular will allow you to buy the most suitable property for your business.
7. Manage Due Diligence
When it comes to closing the deal, sometimes things can be too good to be true. That is why you need to conduct your own due diligence on the property.
Due diligence will ensure you are not getting into a bad deal that will cost you time and money. It covers numerous factors and can be difficult to conduct unless you are an expert. Thankfully, we cover that step next.
8. Team Up with Experts
Buying commercial real estate is rarely straightforward. You will need to hire a range of experts to help you with the transaction. Specifically, you will probably one of the following experts:
- Lawyer with expertise in commercial real estate
- Real estate agent
- Mortgage broker
You might also need to hire engineers if you plan to modify the property extensively.
9. Ensure a Smooth Transition
Finally, it all comes down to execution. The last step is the actual move. This unique business process involves suspending operations, moving all equipment, reinstalling everything and resuming operations at the new site.
Your commercial real estate agent can help you transition smoothly and give you the technical know-how to avoid the most common pitfalls.
From Buying Commercial Real Estate to Succeeding in Business
Buying commercial real estate for your startup is the first step towards living the entrepreneur lifestyle. Being a business owner is a thrilling and fast-paced lifestyle where you either swim or sink. If you seek to maximize your life along with your profits, check out The Phat Startup.
Blogging and operating his startup from a tiny New York City Apartment, Mike McOwen shares his insights on the entrepreneur lifestyle and gives you actionable tips to realize your entrepreneurial dreams. Come on in and check The Phat Startup today!