7-Point Checklist to Follow Before Buying Your New Building

Purchasing a building is a thrilling, even life-changing experience.

 

Simplify the process by following The Cohen DeBuiser Team’s Seven-point checklist.

One of the biggest determinants in purchasing a commercial building is figuring out what is economically viable for your circumstances. This will include the assistance you will need from investors, banks, and other financial institutions. Several calculators are available online to help you initiate this stage of the process, but your best bet is to consult with a commercial real estate broker (which we will dive into shortly), who will take various details into consideration–from your monthly loan rate and your proposed income from the building to property taxes and insurance. Your request to banks and investors will have to cover several facets, including your goal and purpose for the building, financials, the team that will be involved, the risks, and the investment’s terms.

Receiving a loan from a bank or a hard money lender or financial assistance from an investor will require a meticulous ability to convey your ability to earn an income on the building. Investors in commercial real estate need to have high credit and a well-established business entity with operational experience that proves they will be able to pull in a profit and cover their expenses. With the assistance of your commercial estate broker, you will also be able to decide on the equity you will have to put up for the acquisition. This takes us to our next point…

Enlisting the services of a well-qualified, determined, and experienced commercial real estate broker is a wholly imperative element in the buying process, particularly if they have investment opportunities and can direct you to equity sources. The right realtor will likely have several buildings in mind shortly after–or during–your initial consultation, as they are extensively trained in pairing people with the most appropriate and desirable properties both on and off-market. Additionally, they will manage negotiations and oversee results from inspections and appraisals to ensure the price is justifiable and realistic by running comparisons on buildings in the region.

 

Further, you will want to bring an accountant on board to determine and monitor your budget and a lawyer who is well-versed in the legalities of purchasing commercial real estate. Your commercial real estate broker should also be able to connect you with property managers and general contractors, and professionals in the fields of architecture, engineering, and surveying.

Purchasing a building is an immense investment, and you need to be sure you are entering the transaction with as much knowledge as possible–yes, even when you do have the assistance of a commercial real estate broker. Arm yourself with the language and definition of terms used in commercial transactions, from Capitalization Rate (Cap Rate) to Loan-to-Value. This will give you a leg up when it is time to negotiate–and uplevel your confidence in general.

Commercial buildings can vary widely. The age of the building, its condition, the number of renovations it has seen, and, perhaps most importantly, its location all play a part in your ultimate success as the owner. As you research locations and properties, ensure you understand its vacancy rate, what will set the building apart from its competitors, and what you would have to charge in rent to make the deal feasible. While visiting buildings that align with your financial strategy, you will be able to decide on the overall scope of the investment, including the key renovations you may need to attract tenants and improve tenant retention.

Conducting your due diligence is a large part of a real estate transaction of this magnitude. This will include enlisting professionals to examine the building in terms of its ecological, environmental, and physical condition. It also includes examinations of the building’s structure and mechanical systems and assures the status of the building’s permits, adherence to zoning regulations, and a review of hazardous materials.

 

Other matters of due diligence include–but are not limited to–inspections of the building’s walls and septic system, a termite inspection, a survey of non-hazardous materials, and an appraisal of the building’s fair market value. It is advised to conduct these due diligence inspections prior to proceeding with the purchase, in which case your realtor will have to request what is known as an “early access” agreement to grant you access. Ensure that all of your paperwork–which will be substantial–is organized.

Once you have completed your due diligence and are ready to move forward with a purchase offer, compile your offer and terms with your realtor and attorney. While commercial real estate deals vary, you may have to compose a letter of intent to accompany your offer and contingencies. Mentally prepare yourself to listen attentively during negotiations.

Closing the deal on your commercial property entails several–in fact, many–documents, which your commercial real estate broker and an attorney will compile and finalize. To give you an idea of what will be required during the closing, you will have to provide proof of execution of title documents, zoning regulations, formed entities, insurance, and appraisal.

 

For your commercial real estate needs in California–from lots for sale in Ventura CA to land for sale in San Fernando Valley CA–look no further than The Cohen DeBuiser Team. Specializing in commercial real estate throughout Santa Barbara, Ventura, and Los Angeles Counties, they bring prodigious experience and exceptionalism to all of their transactions and will guide you through every step of the process.