Top 10 Questions Asked When Buying Commercial Real Estate

Purchasing commercial real estate can be a lucrative investment, but it can also be a complex process. It involves a significant amount of time, money, and resources. Before committing to a commercial property, it’s essential to do your due diligence and ask the right questions. In this blog post, we’ll discuss the top 10 questions you should ask when buying commercial property.

1. What is the property's zoning?

Zoning laws regulate land use in specific areas, such as residential, commercial, or industrial. It’s important to understand the zoning of the property you’re buying to determine what kind of development is allowed.

2. What is the condition of the property?

Before purchasing, make sure you commission a thorough inspection to assess the condition of the property. This will help you identify any underlying issues, such as structural problems or environmental hazards, that could affect the property's value.

3. What are the financials?

Review financial statements, including income and expenses, to ensure that this investment is feasible. You need to know how much revenue the property generates, what the expenses are, and what kind of cash flow you can expect. This will help you determine the potential return on investment (ROI).

4. What are the tenant lease agreements?

If the property is occupied, be sure to review all tenant lease agreements. This includes the lease terms, rent amount, and expiration dates. If you're taking over existing tenants, you'll need to determine how to handle the transition.

5. What are the property’s operating costs?

Operating costs can include property taxes, insurance, maintenance, and utilities. Review these expenses carefully to determine how much it will cost to maintain the property and ensure that you have a realistic understanding of these costs.

6. What are the market and economic conditions?

Be sure to research the local real estate market and economic conditions. This includes vacancy rates, supply and demand, and current rental rates. This will help you to determine the property’s viability as an investment.

7. What is the property’s history?

Review the property’s history, including purchase price, sales history, previous owners, and any legal issues. This will help you to uncover any issues or concerns with the property that could affect your investment.

8. What are the development plans for the area?

Research any proposed or upcoming development plans for the area to understand how they might affect the property's value and desirability. This can include new roads, infrastructure, or zoning changes.

9. What are the property’s environmental risks?

An environmental assessment of the property is essential to ensure that there are no environmental risks or issues that could affect its value. This can include soil contamination, water pollution, or hazardous waste.

10. What are the closing costs?

Finally, you must understand the closing costs associated with purchasing commercial real estate. These can include legal fees, transfer taxes, appraisal fees, and title fees. Make sure you have a clear understanding of these costs to ensure that they fit within your budget.

Purchasing commercial real estate requires careful consideration, research, and due diligence. By asking the right questions, you can ensure that you are making an informed decision that aligns with your investment goals. These ten questions are a great starting point, but you should also consult with real estate professionals, attorneys, and financial advisors to ensure that you have a comprehensive understanding of the property and its potential risks and opportunities.

Contact Shawn Wilmoth REALTOR® today for help finding exactly what you're looking for.

www.shawnwilmoth.com