How to Research Your Commercial Property Acquisition

How to Research Your Commercial Property Acquisition

The more you can learn about property types and options, mortgages, financing, zoning and remodeling; the better position you'll be in to make wise decisions concerning the acquisition of a commercial property.
However, you don't have to know everything. That's where putting together a powerful team of professionals proficient in their areas of expertise may be your most important step. Building a team of advisors - people you can trust to steer you in the right direction is critical to your success.

Still, there is a lot of research you can do on your own to make sure you are considering the right locations and the best financial options available.

Understand Current Market Conditions Keep your eyes open for news articles pertaining to the commercial real estate market. Is it "hot" right now? Is it a buyers' or sellers' market? What kinds of interest rates are available?

However, one word of caution: Make sure you hear both sides of the story. The more information you have, the better decision you can make. In other words, for every self-proclaimed expert that shouts it's a buyers or sellers market, there will be another one proclaiming the opposite. The trick is to educate yourself and find a specialist such as a commercial lender that you trust to guide you to make the right choices for you.

The Internet is a great place to start. Conducting a Google search for "commercial real estate market," for instance, will give you results that include news and resources for national trends, analytics and market research. In fact, a Google search we conducted for the words "commercial real estate market" resulted in a host of informative sites including:

* Commercial Real Estate Directory * Commercial Real Estate Performance Information and Analysis * Commercial Real Estate Market Research

In addition, many realtors, lenders and lawyers across the country offer free and timely articles on their websites that shed light on current commercial real estate trends nationwide. Again, make sure you listen to both sides of the story.

Tap Expert Resources National market research companies can give you specific information about the area where you're preparing to locate your business. You can also find information on demographics including the median age, household income, breakdown of ethnicities, and more from censuses available from the U.S. Census Bureau.

This will give you an idea of whether the location you're considering is a fit for your particular service. If not, move on. Don't be tempted to buy property that is a good price if your customer base is not likely to live nearby. Obviously if you are looking for a warehouse to run your factory in, the demographics of the surrounding area may not matter much to you.

Also contact commercial lenders or Realtors for additional resources. In looking for help, it's usually better to talk to a lender or realtor with nationwide experience and up-to-date information than a small-time operation that might not have recent data for you. If the lender/Realtor hasn't gotten updated demographics since 1996, you've essentially wasted your time. Also, a lender or Realtor that specializes in the type of property you're looking for will be more likely to have the specific information you need, which will save you time in research.

Study the Current Vacancy Rate Research what the vacancy rate has been over the past few years for the area you're taking into consideration. If there seem to be high levels of vacancies, try to find why. Is it a bad neighborhood? Talk to store owners in the immediate area and find out how long they've been doing business there. Ask if they have any concerns that you as a potential property owner should know about the area.

In fact, take a drive around the neighborhood. Does it have the right atmosphere? Obviously atmosphere is more important if you're opening a restaurant or retail space. For instance, if you want to buy a space for your café located in a historic area filled with shops, walking around will only reinforce the fact that this may indeed be the place to catch customers out on a leisurely afternoon.

On the other hand, if you turn the corner from your prospective location and find an abandoned building with suspicious looking individuals milling about, this may turn off your potential customers. Likewise, if a train roars by every ten minutes, you will probably want to keep looking for another property. These are all things your Commercial Realtor can help you with, but the more you know what to look for, the better prepared you'll be to make wise choices.

Research Commercial Realtors It's important to research commercial Realtors that specialize in the type of space you're looking for. Grill the realtor you are considering selecting on the entire purchase process so you know what to expect. Ask how long the process usually takes so that there are no surprises. Check their references and their track record.

Examine Experienced Commercial Lenders Choosing a lender and financing program is just as important as choosing the property. Again, find out the entire process of financing, as well as your different options. Don't assume that just because you've had a relationship with your bank for years that using their financing is the best choice. Banks don't always offer the lowest rate for commercial loans, and sometimes have a far longer turnaround than non-bank lenders. Some banks require that you transfer your accounts to them in order to qualify for a loan. Be aware of any stipulations when seeking a bank for a commercial property mortgage.

In addition, make sure you are comfortable working with the financing company. After all, the company is working for you, so don't be afraid to ask questions along the way.

Examine Your Goals Above all, be sure that buying commercial real estate is the right decision for you. While paying less for your mortgage each month than the cost of rent might seem appealing, question your real reasons for wanting to buy. Is your business truly doing so well you can anticipate being in business five years down the road? Do you anticipate any major growth spurts (or shrinkage) that could affect your purchasing decision? Weigh the advantages and disadvantages of owning property before making such a large decision.

As they say, knowledge is power. If you give yourself a crash course in commercial real estate, you will have the power to make an informed decision about buying a space and choosing financing when the time is right.