Commercial property refers to any type of real estate that’s meant to generate profit, either from capital income or rental income, such as retail buildings, office space, warehouses, industrial buildings, apartment complexes, or mixed-use.
If you’re thinking about purchasing commercial property, here are three important things you need to consider.
1. You need a team of professionals
Purchasing commercial space is a big undertaking with a lot of moving parts. In order to get through the process successfully, you’ll need a solid team of professionals to help and guide you. This includes:
- An experienced commercial real estate broker to help locate and acquire the desired property
- A real estate attorney to navigate the contract process and closing
- A skilled CPA to evaluate the financials and advise you on investment potential
2. The transaction is different from residential purchases
Buying a home can be a relatively quick process when all affairs are in order. Commercial transactions, however, can take much longer to complete. The due diligence requirements for a commercial property are usually much more involved.
When purchasing commercial property you should expect to obtain a survey, an inspection of the improvements, and an environmental inspection (potentially a Phase I and Phase II). You’ll also want to explore the zoning restrictions, the property’s income potential and maintenance requirements.
Commercial contracts may also include terms related to trade fixtures, equipment, personal property and inventory. If there are any concerns about future tax liability, a Purchaser should obtain a Certificate of Compliance or Certificate of Good Standing from the State Department of Revenue.
3. There are certain risks and responsibilities to consider
Due to their nature, commercial properties tend create more risk. With more foot traffic, public visitors, and employees, there’s always the potential for injury or loss. To the extent possible, these concerns should be addressed in the contract and planned for prior to a closing.
The attorneys at Stanko, Senter & Mitchell routinely advise clients in commercial transactions. If you’re thinking about purchasing commercial property, give us a call today.