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Tips in Purchasing Commercial Real Estate

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By : Sonia Smith    99 or more times read
If you plan to buy a commercial real estate, make sure to contact a real estate agent who specializes in commercial properties.

Purchasing a commercial property is a wonderful investment that ensures you of returns for many years. If you want to invest your money to day into a worthy investment, then a commercial real estate is for you.

Here are several tips in helping you buy a commercial real estate:

  • After finding the perfect commercial property for you, make sure to have a valuation prepared for it and get a land information memorandum or LIM from the local council. These important documents help you acquire more information in assessing the value of the property and its potentials.

  • Getting pre-approved is a wonderful way to save time by finding out the type of commercial real estate you can afford to buy. You would only be wasting time looking at $2 million buildings while you can afford only $300,000.

  • Take into consideration a low down payment and longer-term loan to be able to preserve your capital, put it to better use, and keep your cash flow high. Furthermore, it lets you redeploy the capital savings to other profit-earning business undertaking.

  • Ensure that you know the market you are buying in. Hire a well-informed realtor to find a new commercial property for you. A trustworthy and capable agent helps you save time, update you on demographics, comparable sales, growth plans and new development in the area.

  • Buy commercial real estate for the right reasons and find out if you can profit and benefit from buying it instead of just renting it.

  • It is also preferable to buy a commercial property that has more square footage than what you need because you can always make an expansion later. Furthermore, it can give you more rental earnings later on.

  • Make a decision on what kind of entity you should use to purchase the commercial property. Your options include buying as individual, through a trust fund and through a company. Your lawyer or accountant can help you decide on the best vehicle to use.

  • Partner with another entrepreneur in your EPC if it is difficult to come up with the down payment. Bear in mind that the operating business of your new partner will also be examined to commit to your loan. Use good judgment always when looking fro a business partner. Ensure that you stipulate clearly a buy-out provision in your agreement and other documents in advance.

The foundation of a successful commercial property purchase is the returns that you will get; therefore, the value of the lease is paramount. Check the current term of the lease and the financial strength of the tenant.

If the tenant is a company, determine if a company representative has provided a personal guarantee. Find out more about commercial real estate from your realtor or from a professional who can help you choose the right commercial real estate to purchase.
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