It’s now 2021, and you’ve made the decision that you’ve always dreamed of. You’re going to open up your very own office – or retail or medical — space.
It’s a big accomplishment that has certainly taken some time to materialize, and while your dream may finally be realized adding to the total of 32.5 million businesses in the U.S., it’s going to take some work to make it become a full-fledged reality. One of the biggest decisions you’ll have to make about your new business early on is the type of building you’ll need, and whether you want to rent or buy at first. While renting early does have some advantages, there is nothing like purchasing your own commercial property, with the added caveat that renting doesn’t have — you own the property.
If you decide to go the buying route, there are things that you need to consider and work out before you move your business right on in. So with that in mind, here are some helpful tips and things to consider when you’re buying your first commercial property.
This is probably one of the more important tips that you’ll read because it plays a huge part in the future success of your business.
Having a great location will drive traffic to your business, but one of the major issues with getting prime commercial property real estate is that those plots of land are usually the more expensive ones. Take, for example, you’re looking to open a dentist office, and you find the perfect commercial property on one of your market’s main thoroughfares. Well, you should be in for a price shock as that property will carry a steeply high price tag, one that you may not be so ready to pay for at this moment.
This is why instead of looking at a prime roadway, look for particular areas where commercial property could be less expensive and you still are in an area that can pull in clientele, which is one of the pillars to success. When thinking about location, you should realize that not every area may fit a certain type of business. For example, businesses such as a running company or a pool service company will want to look for a commercial property that’s more urban in nature, since that’s where the majority of their business will be.
However, medical offices such as dentist offices don’t really have to be in an urban area. You can look in suburban and semi-rural areas that may carry cheaper prices on commercial real estate. In short, the location of your new business will all depend on your customer base and the type of customers you want to draw. Make sure you take your time picking out a good location for your new business, as it will make all the difference to your success.
Choose The Type Of Property That You Need
Now you may read this and think why this wasn’t covered under location since we did dabble in this subject a little bit above. However, trust us as this is a tip that definitely deserves its own section, and will be a critical component to deciding which type of commercial property you want to purchase.
There are five different types of commercial properties that you can look into buying: Multifamily, office, retail, industrial, and hospitality. Some company owners just starting out may think that a commercial building is a commercial building, but that type of thinking will get you closed up as soon as you open due to the wrong type of building and the location it’s in. Depending on the type of business you plan on opening up, you should be very wise and careful as to which commercial property you want to open. Let’s go through the different types of commercial buildings right quick.
A “multifamily” commercial property is a property that can have multiple units spread out over a large area. As you can tell from the term, this type of property should only be considered if you’re going into real estate management, such as buying an apartment complex. An “office” property is pretty self-explanatory, but this type of commercial building has a tremendous amount of variety. You can purchase a small office building or a skyscraper, the latter of which will definitely cost you more money.
“Retail” can fall under the same diversity category as office buildings, as these types of commercial properties can also have a small-to-massive range, and just like its office brethren, has multiple locations as to where you can set up shop, from a small storefront to one in a large shopping center or mall. “Industrial” commercial buildings are properties zoned for industrial use, which in today’s case, primarily consist of warehouses and distribution centers, which the light manufacturing building threw in. Finally, there’s “hospitality,” which are commercial properties geared toward the leisure economy. Think hotels and short-term rentals.
Depending on what type of business you’re planning to open, it’s very important to know which type of commercial property you’re going to need. All commercial property are not made equally, so do your homework and pick out the best one for your starter business
Pick A Real Estate Agent
Now that you’ve picked out the type of commercial property you need, it’s now time to go shopping, and to help guide you, you should pick a great real estate agent.
Sure, real estate agents are looking out for their bottom lines as well (and commercial property carries a bigger payday), but picking the right agent will allow you to pick the commercial property and location that you need to be successful. After you’ve picked your agent, you should also think about retaining a real estate attorney who can help look over the contracts to make sure it’s sound for you. Yes, picking out real estate can be a stressful venture, but it’s a major part of the process of opening up your own business, and you don’t want to pick out the wrong building in the wrong location or have a contact that you may not understand and may sell you short.
This is why real estate agents and real estate attorneys are very important in the purchasing of a commercial building, and it would be wise to hire them both.
Consider The Age of The Property
There are many commercial buildings that have been recently built that has all of the shiny bells and whistles of modern-day technology and design. Then, there are the buildings that are showing their age within their design and infrastructure.
When shopping for a commercial property that will play home to your new business, you must consider the age of when that property was built. The reason for this is that as a building ages on, there will be some problems that will present themselves, some subtle and others not too subtle. Take a building’s water heater for example. In newer buildings, water heaters are outfitted with the latest HVAC technology that makes them more efficient. Not so in older buildings, and if you take on one, you should think about replacing your water heater so that it will run more efficiently, especially if you’re market s in a cold climate.
Plumbing is another issue that has to be taken care of in older commercial properties. As with the building itself, the plumbing will spring up problems as time goes on due to constant usage. If you’re planning on buying an older commercial property, you should contact specialists in plumbing services to come in and inspect and repair the building’s plumbing. There’s another issue that you should also consider, but one that doesn’t immediately present itself right away — insurance coverage issues.
As we mentioned earlier, while an older commercial building may be cheaper in your wallet, it will be a bit more expensive in the repairs needed to bring it up to a modern code, and most of that will have to be paid through commercial insurance. Some commercial insurers may be reluctant to insure an older property that carries problems, which is where that real estate attorney comes in quite handy. Convince your insurance company that the repairs will be made and the building will be brought up to code so that future problems won’t crop up.
Consider The Market Value
It doesn’t need to be mentioned, but we’ll mention it anyway. Commercial properties can be expensive.
However, most commercial property prices are driven by the market they’re in. Most businesses purchase a commercial property with the intent of selling that property later on. However, with commercial buildings increasingly tied to market value, you may not see the increase that you expect, so don’t walk into a real estate deal with the thinking that you will sell your property at a top rate. Now, there is a chance that you could — or get somewhere close to it — but you should always think about the market when deciding on whether or not you want to purchase that commercial property.
That means, have a market analysis done on the area you’re thinking about buying in before you put your name on the dotted line. Yes, market value can also be location-specific. Remember, earlier when we said that commercial properties are more expensive on major roads and areas? That’s because, with so many customers ina clientele frequenting that area, it drives the market value of a commercial property up. However, the reverse can be made for properties in non-desirable areas, a place where crime may be a bit higher or the income level of an area may not be as high.
That can have an out large effect on market values of commercial property as well, but those may be better buys for the long run as the property will be a bit cheaper, and your business could spur the development of other businesses in that area, which will drive up the market value. In any case, get a market analysis of your market before pulling the trigger on the purchase of a commercial real estate deal.
Consider The Internet Service In The Area
One may think that internet services are consistent throughout a market, and if you subscribe to this type of thinking, you may be in for quite a rude awakening.
In some parts of a market, internet access is stronger than others, and that can greatly affect the value of commercial real estate as all businesses this day-and-age rely on the internet to conduct their daily business. Commerical internet usage requires the software to be fast and reliable, so that should factor in greatly when considering purchasing a commercial property. Good internet speeds and access will allow you to grow and expand your business, which will greatly help the cloud-based solution that your business relies on a daily basis. So make sure that, when purchasing a commercial property, it has sound internet service.
In conclusion, it can be a bit stressful to find the right commercial property to buy for your business. There can be a lot of moving variables that play the part in an important decision and making the wrong choice can hamper the success of your business. That’s why you should follow these handy steps while shopping for your dream building.
First, consider the location of a building. It doesn’t always have to be in a high-traffic area, but it does need to be in an area that can draw customers. While securing a location, thinking about the type of property you need. Commercial real estate comes in different genres, so make sure you’re picking out the right building that fits your needs. Consider the age of the property, as the older a building is, the harder it is to insure and the more problems you’ll have to repair in order to get the building up to code.
This is where having an awesome real estate agent and real estate attorney will be a great help to you. Lastly, make sure that the internet in the area you’re buying in is solid and matches your needs. By following these steps, you’ll be able to purchase the office building of your dreams.