Commercial real estate is an attractive investment for both business owners and private investors. Property owners enjoy appreciation, equity and total control over their real estate. In this post, we will outline the steps to buy commercial property.
First time property owners and seasoned real estate investors alike can benefit from the expertise of a commercial real estate broker. These individuals will assist with your property search and the negotiation process to ensure you find a space that fits your needs.
Many business owners will require financing to purchase commercial real estate. Be sure to choose a reputable lender who has experience with the type of loan for which you are applying. Lenders will request tax returns, credit reports and other financial information before you are approved. The seller will need proof that you have financing in place before proceeding with the transaction.
Your next step is to begin your search for a property that fits your business objectives. Evaluate potential properties on criteria such as the following:
Once you’ve decided on a property, you will submit a Letter of Intent to signify your interest in the space. A Letter of Intent is a non-binding document that outlines proposed deals terms such as purchase price, earnest money deposit and due diligence period.
Both parties will go back and forth until they have reached an agreement on all major deal points. These elements will then go into a Purchase and Sale Agreement.
A signed Purchase and Sale Agreement signifies that both parties are ready to enter escrow. As the buyer, you will submit an earnest money deposit, indicating your sincere intention to buy the property.
You will then have a set time (often 30 days) to conduct due diligence on the property. During this time, the seller must provide you with building plans, owners association information, tax records and other pertinent property information.
You’ll also want to schedule a thorough property inspection and have your attorney review all purchase documents.
The transaction will close when both parties sign the final agreement. The earnest money will be released, and you will receive the deed to your new asset.