1. Do Not Speculate- Every commercial real estate purchase should be carefully calculated, especially in these turbulent times. Know exactly what rental rate you can get for the space, and do not forget to include in that rate, leasing incentives, commissions, and tenant improvements. Purchase the property only if it can be rented out at a profit, even if you are going to occupy it with your business. Those expenses will make/kill a deal. If your business will occupy the space, make 100% sure that it is zoned properly.
2. Have Financing Nailed Down- Before you go out and shop around, make offers, tour buildings, make sure that you have a letter of approval from a bank or enough to pay 100% cash. Financing is VERY hard to find these days, expect to put 50% down on investment properties and 25% down on user properties. It is a complete waste of time to search for properties when you do not know what your budget is. If you do not have bank financing, search for owner financing properties, and be prepared to find sub-prime properties. Owners offer financing when their properties are hard to sell.
3. Location, Location, Location- This is so cliche, but have a specific location in mind when searching for property, and make sure it is a PERFECT location. Realize that a good location will demand a higher price, be prepared for that when shopping around. The perfect location is different for different people. Be specific, choose a submarket and search it thoroughly.
4. Ask For the Stars, Expect the Moon- When negotiating, I always say ask for everything you want and more. Everything is negotiable in commercial real estate. There are some standards or market norms, but never hesitate to ask for exactly what you want or need.
5. When Dealing With Distressed Properties- Have an understanding of the reason why the property is distressed. Was it in such a bad location that no business can do well in this property? Was is red-tagged by the city and deemed unacceptable? When does the current loan get foreclosed on officially and go back to the bank. What are the terms of the current loan? Will the bank allow a buyer to assume the current loan? If it is a short sale, will the bank be reasonable with buyers. How long will it take for the bank to reply to my offer? Will my offer be accepted or will someone else get the property? The short answer is, when dealing with distressed properties, paying with 100% cash is king, if you cannot do that, have a short escrow period (less than 30 days) and high amount of earnest money, (more than 10%).
For more information on real estate owned ("REO") properties in Phoenix or short sale commercial properties, feel free to drop an email to bkoplin@scraz.com or make a comment. I have lists, and lists of available foreclosure properties, short sales, distressed pre-foreclosures and standard non distressed real estate.
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5 Things To Know When Purchasing Commercial Real Estate
Posted by Brandon Koplin in 5 Things to Know When Purchasing Commercial Real Estate, Commercial Short Sales Phoenix, Distressed Property Phoenix, REO Properties for Sale Phoenix1. Do Not Speculate- Every commercial real estate purchase should be carefully calculated, especially in these turbulent times. Know exactly what rental rate you can get for the space, and do not forget to include in that rate, leasing incentives, commissions, and tenant improvements. Purchase the property only if it can be rented out at a profit, even if you are going to occupy it with your business. Those expenses will make/kill a deal. If your business will occupy the space, make 100% sure that it is zoned properly.
2. Have Financing Nailed Down- Before you go out and shop around, make offers, tour buildings, make sure that you have a letter of approval from a bank or enough to pay 100% cash. Financing is VERY hard to find these days, expect to put 50% down on investment properties and 25% down on user properties. It is a complete waste of time to search for properties when you do not know what your budget is. If you do not have bank financing, search for owner financing properties, and be prepared to find sub-prime properties. Owners offer financing when their properties are hard to sell.
3. Location, Location, Location- This is so cliche, but have a specific location in mind when searching for property, and make sure it is a PERFECT location. Realize that a good location will demand a higher price, be prepared for that when shopping around. The perfect location is different for different people. Be specific, choose a submarket and search it thoroughly.
4. Ask For the Stars, Expect the Moon- When negotiating, I always say ask for everything you want and more. Everything is negotiable in commercial real estate. There are some standards or market norms, but never hesitate to ask for exactly what you want or need.
5. When Dealing With Distressed Properties- Have an understanding of the reason why the property is distressed. Was it in such a bad location that no business can do well in this property? Was is red-tagged by the city and deemed unacceptable? When does the current loan get foreclosed on officially and go back to the bank. What are the terms of the current loan? Will the bank allow a buyer to assume the current loan? If it is a short sale, will the bank be reasonable with buyers. How long will it take for the bank to reply to my offer? Will my offer be accepted or will someone else get the property? The short answer is, when dealing with distressed properties, paying with 100% cash is king, if you cannot do that, have a short escrow period (less than 30 days) and high amount of earnest money, (more than 10%).
For more information on real estate owned ("REO") properties in Phoenix or short sale commercial properties, feel free to drop an email to bkoplin@scraz.com or make a comment. I have lists, and lists of available foreclosure properties, short sales, distressed pre-foreclosures and standard non distressed real estate.
