7 Tips for Purchasing Commercial Real Estate for Your Business

So, you’re looking to expand your business operations and secure a building that you can call your own. 

As liberating as it is to call the shots of property under your name, let’s clear up one thing: it’s not going to be easy. There are many nuances you should be aware of before securing a commercial property, whether it’s your first or tenth.

From conducting a proper land survey to choosing the right founder structure for legal protection purposes, there are many steps you have to undertake to ensure your purchase goes smoothly.

This article will highlight some tips to help make commercial property purchasing a breeze. Let’s get straight into things!

1. Choose The Right Property Type

The first thing you should do when buying property is to know what type of property you want to get. If you have a decent-sized budget, you’ll have a wealth of commercial property options to choose from. 

If your corporation has multiple owners, discuss your preferred property type with your partners to help you choose the best property fit to improve business continuity and outcomes as much as possible.

That said, most commercial property seekers have a limited budget, so you’re not always guaranteed to have a fully-decked-out property straight from the get-go. And that’s okay—you can always renovate, upgrade facilities, and expand later on. 

To help you narrow down your options, try to prepare a list of must-haves when buying a property. For most people, a good location and a sizeable square area are two of the most important factors. 

However, massive or central office space is not an absolute necessity for everyone, as there are potent tools like this NDIS software for providers that allow you to easily set up online appointments remotely. Still, having an office space is a big plus.

Another point to consider is building type. Do you want a property with a storefront? A 50-person office space? A warehouse? A clinic?

Be specific about your requirements and choose a property that fits your business, rather than trying to adapt your business to fit the property’s structure and size. This makes it easier for you to immediately start and capitalise on your new property at an earlier schedule. 

1. Identify Your Ideal Budget 

One step that goes hand-in-hand with choosing the best property type for your business is developing a reasonable budget. 

And, frankly, the money you’re willing to spend on a potential office property matters a lot. In every case, your budget determines the success of the entire property purchasing process.

Closely look into your company’s finances and determine whether your cash flow and capital can cover the initial downpayment of the building you’re eyeing. 

If you have a history of delaying payments or are knee-deep in debt, it may be best to hold off on making any major asset purchase, like buying a building property.

Conversely, if your finances are healthy and are continuously growing, then go ahead and proceed with the purchase. A property purchase can be the thing to scale your business up to the next level.

Most payment schemes require you to cover a 20% (give or take) downpayment, then monthly repayments for a succeeding term. But these terms can differ, with some being looser or tighter than others. 

Ensure that your chosen property’s agent or seller has a term that you can fulfil on your end, and get it done. 

1. Assess The Building’s Condition

Found a commercial property with a price that seems too good to be true? Before you sign any contracts on impulse, visit the lot for a thorough inspection.

Visit each room and identify potential structural issues and their severity. 

Is the room good as is, needs some minor fixes, or is it in dire need of an overhaul? Are there potential hazards, like hairline cracks or open wires flailing about? Is the HVAC system and the electricity power board fully operational? 

Bringing a home inspector with you can help you properly assess a property’s underlying condition.

You should also call in a land surveyor to assess the property’s boundaries. Know exactly what you’re buying on an officially-recognised document. You definitely do not want to realise later on that you’re encroaching on someone else’s property.

While an assessment process can be costly, it’s absolutely essential to ensure that you don’t encroach on someone’s lot or put you and your staff in danger. See it as a necessary investment for your business—you’ll be staying in that building for years to come, after all.

1. Choose The Best Ownership Structure

Your real estate property, just like other asset acquisitions, is subject to tax liabilities. The degree of this taxation, however, hinges on your ownership structure.

If you buy a property under a personal name, you won’t be subject to additional corporate taxes per se, but you’ll be ineligible for corporate tax benefits such as capital gains tax discounts, franked dividends, and the ability to retain income. 

Plus, you’ll be personally tied to the asset, which can cause you to lose your building if your business debt exceeds your ability to pay off the loan.

Certain business structures, like corporations, are subject to high corporate and individual-level taxes. This can be complex to file and organise, but they’re expected if you operate under that model, so ensure that you have a tax specialist who can help you navigate this and stay on top of your tax liabilities.

The route many people opt for is a limited liability corporation (LLC) business structure. This offers a good middle ground of legal protection and lower tax payments. So if you have the liberty to choose your legal structure, we’d say this is the best option.

1. Familiarise Yourself With Market Prices

Conducting local research is essential if you want to get the best deal for your upcoming property purchase. Simply exploring the next page of an online real estate marketplace can make a significant difference, potentially saving you thousands of dollars.

For starters, get a good idea of current property values in your area. This is a good way to form a benchmark on current market prices and improve your intuition in finding the best deals. 

You can also get in contact with local real estate agents and review market reports to develop even deeper insights into the current market. If you intend to make renovations, you should also look into labour and material costs for a clearer picture of your overall expenditures.

A comprehensive deep dive into this matter can help you make the best decision when choosing a commercial property, helping you get the best bang for your buck (or at least a rough price estimation) for your next acquisition.

1. Find Financing Options

It’s natural for most prospecting property buyers to secure a loan or financing option of some sort to help pay off the commercial lot. There are many viable funding sources you can consider, from traditional bank loans to local or state-wide government grants.

Be sure to do your research and vet potential loan options to find the best choice given your financial circumstances. Factors to consider include loan term length, repayment options, and the interest rate fee you’ll pay monthly. 

Refrain from overreaching your cash flow to take out a loan. This can cause financial instability in may lead you to make delayed payments and incur late fees, which can impact your ability to access loans in the future. Be strategic but remain realistic with your resources to make the most out of your investment. 

1. Gather a Team of Experts

You don’t have to work alone in navigating the complex world of commercial real estate. In fact, it’s highly urged that you partner up with key experts—especially if it’s your first time in this rodeo.

For starters, hire a real estate attorney to ensure that you’re signing contracts that align with your interests and comply with local regulations. Secondly, get in contact with a financial and tax expert to ensure that you’re utilising your budget the most effectively.

Furthermore, get real estate property specialists to help you undergo a renovation project, if necessary. 

A real estate agent, an inspector, and a land surveyor also help gather information about your property. An architect, a foreman, and an engineer can also help give you the right advice and make the best decisions for your property purchase. 

By getting these professionals on deck, you can have peace of mind knowing that you’ve secured your property without any hidden problems potentially weighing you back.

All the best in buying your commercial property!