How to Purchase Commercial Real Estate
by Christopher Levarek
“Don't say, I can't afford it. Ask yourself, How can I afford it?”
- Robert Kiyosaki, author of “Rich Dad Poor Dad”
Usually, when I speak with newer investors, the idea of buying a mall, an apartment complex, or an warehouse sounds like a completely out-of-this-world idea. Many think this is just not possible for someone like them. I’m here to tell you that, just like anything else, it IS possible, but you simply need to know the process.
Once you see the steps for a commercial acquisition, you can learn them and build your team to support your efforts to do the same. Remember, real estate is a team sport.
With careful planning and assistance from experienced specialists, a profitable investment in commercial real estate is entirely feasible.
Here is a step-by-step guide to buying commercial real estate in 2023:
How to Purchase Commercial Real Estate
Define your investment objectives and approach.
Before you start looking for commercial real estate, you need to first determine your investment goals and plan. This includes identifying what sort of property you want, the location, and the return on investment. You should also think about things like your investing schedule, risk tolerance, and funding choices.
Perform research and due diligence
Once you've determined your investment objectives and approach, it's time to start looking for properties that fit your requirements. To identify possible properties, you can use web listings, real estate brokers, and industry periodicals.
Once you've found a property that piques your interest, it's critical to conduct extensive due diligence to assess the property's physical condition, financial performance, and any legal difficulties. Hiring a property inspector, appraiser, and attorney to analyze the property and prepare the necessary paperwork is going to be key.
Determine your financial alternatives.
Purchasing commercial real estate frequently necessitates a substantial investment. As a result, before making an offer, you should consider your financing options and acquire financing.
Working with a lender to get a commercial real estate loan or researching alternative financing options such as private equity or crowdfunding may be involved. It is critical to analyze the financing arrangements, such as interest rates, repayment schedules, and collateral requirements.
Work with the lender or broker to leverage their expertise in providing options and deciding on potential purchase prices. Use your team.
Make a bid and discuss the terms.
It's time to make an offer on the property after you've completed your due diligence and determined your financing choices. Your offer should include the purchase price, agreement terms, and any contingencies, such as financing or inspections.
The vendor may accept, reject, or counteroffer your offer. To achieve a successful investment, the conditions of the agreement must be carefully negotiated. Again, use your team.
Complete the transaction
When all contingencies have been met, it is time to close the deal. This includes signing legal documents, transferring payments, and obtaining property titles. To ensure a smooth and profitable transaction, collaborate with skilled specialists such as a real estate attorney and accountant.
This can be a back-and-forth process as all documents are finalized and t’s are crossed.
In charge of the property
After purchasing the property, it is critical to develop a strategy for managing and preserving it. This includes locating tenants, dealing with maintenance difficulties, and adhering to local laws and regulations. It's also critical to keep an eye on the property's financial performance and make adjustments as needed to meet your investment objectives.
Now that the work really begins, be sure to leverage your property management team’s experience. Work together and hold weekly check-ins to ensure the business plan is on target.
IN FINAL
To summarize, purchasing commercial real estate involves careful planning, due diligence, and expert advice. You can make a successful investment in commercial real estate in 2023 by identifying your investment goals and plan, completing thorough research and due diligence, acquiring finance, negotiating terms, and efficiently managing the property.
These steps are really a high level approach to showing how the process works. If you want to dive deeper, I suggest exploring books or podcasts on buying commercial real estate and talking with brokers, agents, and others who work in or invest in the space. Happy Investing!