A Guide to Buying Commercial Real Estate

Buying Commercial Real Estate Can Be A Critical Decision

 

Buying commercial real estate is one of the most important decisions you’ll ever make as a business owner, and potentially one of the most profitable, too. 

 

Ownership of your building not only gives you greater freedom to shape and control your business but lets you build equity as well.

 

 however without the proper planning advice and preparation buying a commercial property can come with major risks. 

 

Purchasing Commercial Real estate will make sense if some of the following are true. 

    1.Location is Important

If you find a location that helps you grow your business sales through foot Traffic and ease of Transportation, reduced cost through proximity to key suppliers or attract and retain employees you may consider purchasing it. 

 

    2. You want to build your personal wealth 

Commercial real estate has been a great investment for many businesses in recent years. Ownership can help build wealth and Equity apart from the profits that you’re operating business is generating actively.

 

    3. Your current lease is getting costly

It often makes sense to buy a property if you’re investing heavily in the leasing costs.

 

    4. You want to be free of a landlord

 If running your business without potential limits, restrictions and rent increases is important to you then buying might be the right option. 

 

Assessing Your Needs Before you Buy

 

  • Location

It’s essential to find a location that allows you to serve your customers easily. And you need to be accessible to your employees whether that be close to the highway or public transit.

 

  • Space

How much space are you going to need as your company grows? You want to plan for the future if your purchasing commercial real estate instead of renting or leasing commercial real estate. 

 

  • Configuration

What kind of configuration will be the best for your business needs? Now is the best time to plan for future upgrades. 

 

  • Parking

Make sure you have enough parking spaces for customers and other visitors, as well as your employees. It’s always better to have more parking and not enough especially if you’re buying and you’re going to be there for the long run.

 

  • Power, Water, and Heating and Air Conditioning

 your business may need more electricity, water, or heating and air conditioning than is currently available in a building that you’re considering purchasing. It’s very important to make sure that everything is there for your future operations and growth. 

 

  • Machinery & Equipment

A move is the best time to add or upgrade machinery as your already moving everything it’s easier because your operations will already be affected.

 

Shopping for your commercial property

The commercial building you choose will have a huge impact on your business. Ideally, its size, layout and location should enhance your current business operations while respecting local zoning and environmental regulations.

 commercial buildings come in a wide variety of shapes locations and even prices, so you have to know what your needs are and how much you’re willing to pay.

 an independent commercial real estate agent can help you set criteria for choosing the right building.  this agent should be familiar with the area the zoning regulations and any potential issues concerning the building its location or its potential uses. 

 

Is the location well adapted to my needs? 

Businesses need a property that can be easily found by existing and new customers. Manufacturers on the other hand should think about easy access to highways and other modes of transportation as that can have a huge effect on their bottom line. Think you also want to think about how far your employees will need to travel to reach the new location. I’m building in a central, easily accessible location can give you a strategic advantage over your competitors. 

 

Does it require modification?  

If you found a suitable building in a good location, consider what it will take to make it just right for your business. Use an accredited inspection company to evaluate the building for defects and get the entire building checked for environmental contamination. Defects can be strong points for negotiation with the seller or signs of future headaches that you might want to avoid all together. 

 

What are local taxes and infrastructure? 

Taxes vary among cities, with some cities offering preferred rates in the hopes of attracting new businesses. Your commercial real estate agent should know what the taxes will be as well as the infrastructure and utilities that are available at the site you are considering buying. It’s very important to have a qualified real estate agent to make sure you know of any potential headaches or downfalls. 

 

Does it allow for future growth? 

It’s awesome to have room to expand. However paying for that extra space that may come in handy in the future might not be the best use of your working capital as of right now. Before investing in the extra space you should be reasonably sure you’ll need it within a relatively short period. 

 

Am I separating my needs and wants? 

It’s super easy to become overwhelmed. Once you’ve looked around and seeing what’s available, make a must-have list of the things your business really needs. Then make a wish list of features it would be nice to have in your new commercial building. Buildings that lack all the must have criteria should be struck off your list immediately, so keep the must-have list short if it’s too long, no building will ever qualify for your needs. 

 

4 Ways to maximize the value of your investment

 

  • Look for multi-use zoning to increase value

When looking for commercial space it’s wise to look for a building with a multi-use zoning, so that when it comes to selling your commercial real estate, you have an edge about the competition.  As a rule of thumb The Wider the allowable use of a building, the higher the market resale value. So before you purchase commercial real estate it’s always good to check with your real estate agent about building zoning restrictions.  this is why you want an experienced real estate agent in your local area of purchase. 

 

  • Buy the amount of commercial space that reflects market demand

Buying too much commercial real estate is a common Temptation among entrepreneurs. However, doing so can affect the future marketability of the property when you go to sell.  most Canadian businesses are small Enterprises, and they’re not looking for humongous spaces to meet their needs. You can assume that the larger the building you’re purchasing the smaller the pool of potential buyers will be when you go to sell.

 

  • Place the commercial real estate into a separate holding company

It’s often an amazing idea to place your commercial real estate into a holding company separate from the operating business. This can make it easier to sell your business, because many buyers will want to acquire only the operating company.  It also makes it easier for you to hold on to the real estate and use it as a source of retirement income and facilitates the succession of the business in the meantime. 

 

  • Work with an experienced commercial real estate broker

many entrepreneurs do too much speculation and not enough research before making decisions about what sort of space they need. A broker will be able to evaluate the space that fits your specific business needs, but will also help ensure you’re optimizing every dollar spent. Brokers will assess the commercial real estate market and see what type of properties are in demand and calculate the space you need to accommodate future growth. It’s super important again to have an amazing commercial real estate broker that knows local zoning and regulations. 

 

6 Tips for a successful move

Follow these 6 guidelines for a smooth transition from your current location, with limited disruption to your operating business. 

 

  • Be Proactive

Many business owners wait too long to move. You need to check thinking about it before tight space starts disrupting your business operations. Its employees are tripping over each other and can’t find a quiet meeting place, you waited too long already. At that point it will be hard to manage a problem free transition to a new space therefore it’s important to be proactive and plan ahead.

 

  • Create a timeline

 work with your employees to come up with a timeline for the transition. The timeline may include time for doing renovations, moving assets, setting up phones and the internet, buying new furniture or equipment, making signs, and marketing your new address. Also decide who will be responsible for each task, it can help to put someone in charge of the overall transition as well.

 

  • Build up inventory

It’s generally a good idea to build up inventory before the move in order to have enough stock on hand to ensure an uninterrupted Supply for your production and client needs. 

 

  • Consider a staggered move

 you may also consider maintaining both spaces, the current and the new one  for a short period of time. moving machines and inventory on a staggered schedule will allow to minimize impact on your businesses day-to-day workflow. 

 

  • Give yourself extra time

Transitions often take longer than originally expected. Businesses typically underestimate production downtime during the move, and Renovations commonly cost more than budgeted. it’s helpful to give yourself a little bit of extra time as it makes everything less stressful for you to deal with. 

 

  • Communicate

This one can’t be emphasized enough, throughout the transition good communication with employees, customers and suppliers is crucial. Talk to them early about the move so you can head off any issues before they just drop your business. Be sure to Share Plans often and be as clear as possible about when everyone can expect along the way this way less surprises which will result in less issues for your business.

 

In Conclusion, An important investment

 

Ownership of a commercial building can carry risks, but if you follow the right steps when buying the property you can reduce those risks, profit from the multiple revenue streams and grow your business exponentially. Be proactive when you’re thinking about commercial real estate, even in the distant future. Take the necessary time to make a great decision and surround yourself with an experienced team of advisors to help you navigate the complexities and risks involved with purchasing commercial real estate. It may be challenging to find the right space, and many entrepreneurs can make costly mistakes that can affect their investment and saddle them with unforeseen expenses in the future. However proper planning can help make sure this important investment is a successful one for your business just make sure you have an amazing commercial real estate agent that has a thorough understanding of the local zoning and environmental regulations. 

 

Best of luck on your business endeavours!