What Do I Need to Know Before Buying Commercial Property?

Jamell Tousant

July 22, 2022

Jamell Tousant

If you’re considering investing in a commercial property, there are a few things that you should know before you start. This article will cover some of the basics – getting financing, due diligence, zoning, and finding a professional. Hopefully, this information will help you with your decision! But in the meantime, keep reading for more information! We’ve compiled the following list of tips that will help you make an informed decision and avoid foolish mistakes.

Due diligence

Before you purchase a commercial property, you should do your due diligence and check any pending building permits. A building permit may limit the amount of parking and traffic, as well as determine the rights and responsibilities of tenants. Another important area of due diligence is an environmental investigation, which can reveal state and federal protections from environmental liabilities. The physical assessment team will also confirm lapsed permits and price new development possibilities. 

Many buyers overlook the land use and zoning requirements. Reviewing local zoning ordinances and prior zoning approvals is extremely important. The extent of this investigation will depend on the amount of raw, undeveloped land. You’ll likely need the assistance of a site engineer or a planner to get a clear picture of what’s on the property. The time to investigate is limited even if you’re confident that you’ve spotted any issues.

Finding a professional

Buying a commercial property involves many professionals. You may need a banker, accountant, realtor, or broker, depending on the property type. A commercial real estate professional may help you with the purchase details and make sure that it makes sense financially. A property manager will be able to point out any potential problems or potential tenants. Commercial lenders will have specific underwriter criteria and consult to determine if the deal is viable.

Some brokers can detect amateur investors. Unfortunately, this means you may end up paying higher than market rates and incurring upfront costs. Professional help you navigate the process is essential to avoid buying a bad deal or being ripped off. While you may be tempted to buy a commercial property yourself and then discover that it is not suitable for you, it is important to find a professional who can advise you before making the purchase.

Getting financing

Financing before you begin the process is essential when you are looking to purchase a commercial property. Banks offer commercial loans in varying amounts, depending on the type of asset and the strength of your guarantors. Bank loans typically cover 60% to 80% of the cost of the property. Depending on the property type and its resale potential, you can receive up to 100% financing. This route to debt funding involves establishing strong relationships with local banks.

Many lenders will require environmental reports before approving financing for commercial properties. These reports can add considerable time and expense to the process. If you can, have the property inspected before making an offer. A pre-approval from a bank can help you avoid any unforeseen costs later. If you’re unsure how much financing is appropriate, seek the advice of an accountant. They can help you determine a reasonable purchase price for a property of this type.

Understanding zoning

Before buying a commercial property, you should understand the zoning laws in your area. Regulate land use and can regulate everything from density and height to the number of parking spots available. Zoning laws also affect the property’s aesthetics, including its proximity to other structures and the number of street lights available. It is important to understand your city’s zoning laws before deciding.

Zoning regulations determine what properties are allowe and prohibite on a given land. Different zones have different permits and regulations, and breaking the rules can be costly and time-consuming. Local officials usually enforce zoning laws that divide the land into different districts. In addition to regulating how property may be used, they can also regulate aesthetics, size and color, landscaping, building design, noise level, air quality, and health and safety. Whether you plan to build a new building or renovate your existing one, knowing the zoning laws will help you avoid misunderstanding.