How to Ensure Success When Buying Commercial Real Estate

There are many excellent opportunities for business owners or investors to acquire commercial property, and people like Larry Polhill have been able to build very successful careers by using their smarts in this industry.  This high-stakes approach to building wealth isn’t for everyone, but if you are considering commercial real estate as a career or as stepping stone to something else, here are some things to keep in mind.

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Know the Market

To avoid missteps, it is vital that you have a solid first-hand knowledge about the market that you are considering entering. You could rely on the intel that others provide for you, but this will not be a substitute for your own understanding and instincts. Make sure, in addition to having a sense of the neighborhood, that you also investigate any environmental issues, transportation and demographic trends, and plans that the neighbors might have to redevelop their properties.

Get Your Finances in Order

If you will need financing, you will need to make a thorough evaluation of your finances and your budget.  Be sure that you don’t tie up all your financial resources in the property – unexpected expenses, market changes, interest rate fluctuations, and slow rates of appreciation can all put pressure on your liquidity.

Conduct due Diligence

Be sure you conduct due diligence on the property. The costs of hiring a team of professionals to help you make a wise decision will be well worth it if previously unknown problems are revealed! Get professional engineering, electrical, environmental and architectural evaluations so that you know that the property is sound, safe and suitable for any future renovation or repurposing plans you may have. Find out if there are any municipal plans for new infrastructure, re-zoning or other things that could impact your property or plans.

Have a Plan

It is very important that you have a detailed plan that goes as least a few years out before you make any commercial real estate purchase. You should be sure to have the ideal plan, but also back up plans that cover a range of reasonable possibilities – what will you do if you cannot sell the property on schedule?  What will you do if the proposed adverse environmental bylaws come into effect?  The fact is that the unexpected should never really be completely unexpected, so spend some time planning for the worst case scenario and make sure you can weather whatever challenges you face. Due diligence will have revealed many potential issues, and your careful forecasting about anything and everything that could go wrong or right should be accounted for in your plans not only for the property itself but for your business or personal investment plans.

As you can see, the purchase of commercial property is not something to be taken lightly and requires a considerable amount of careful research and planning.  However, if you resist the temptation to rush in and allow yourself to be guided by your plan and all of your backups, you may find yourself on your way up the commercial property ladder.