Things To Know Before You Purchase Commercial Property

Buying commercial real estate can be an exciting thing. Expanding your portfolio and bringing on a property with a lot of potential to bring in more revenue is definitely something to look forward to. Before you get too ahead of yourself though, it’s important to consider a few things before pulling the trigger on the purchase.

Here are some of the most important things to know before making a commercial real estate purchase.

  1. Make Sure To Get An Appraisal

When you’re trying to decide the market value of any property, getting an appraisal can be invaluable. Not only does it help you to know the monetary value of the commercial real estate, but it also will tell you the amount a bank would be willing to lend in order for you to purchase it.

The factors that determine value in a commercial property are slightly different than residential, however. More weight is placed on the size, accessibility and location of the property in relation to the type of commercial property it is (i.e. retail, hospitality, industrial, office, multi-family, etc.).

  1. Do Your Numbers Homework

When looking to invest in commercial property, it’s important to understand your goals with the property. Are you looking to quickly fix and flip it? Are you looking to lease out the space for multiple years and make money in the long run?

Once you know this, you can better figure out the numbers that will need to make sense for your loan. You should consider the down payment, fees, any repair costs, etc. Make sure you’ll be able to make the mortgage payments for the duration of the loan.

  1. Work On Your Credit

To make a large commercial real estate purchase using financing, you’ll need good credit. While good credit is also important when buying residential, because commercial properties tend to cost more overall, many institutions will hold you to a higher credit standard.

Make sure you check your credit history and score and know the areas you can bring up and the reasons for any dips. Also make sure you have comprehensive documentation that proves your income, your assets and the collateral you have. You’ll also want to show them the proof of profitability from your venture.

Make sure you consult with professionals on what properties to buy and how to finance them. Once you have all of the information, you can then make the best financial choice for your situation.