One very profitable investment decision for a business to make is to purchase its own office property. If this is the first time a company has purchased commercial real estate, doing adequate preliminary research and not making a hasty decision are important steps in assuring a successful outcome to the process.

There are two forms of real estate investments: commercial and residential. Within these forms are four category types: retail, multi-family, industrial and office.

• Retail – Shopping centers, hotels, medical centers and malls.

• Multi-Family – Apartments, single-family residences, duplexes and condominiums.

• Industrial – Commercial garages, industrial use land and warehouses.

• Office – Multi-unit buildings or other buildings for office purposes.

While going through the buying process, listed below are factors that should be considered when buying commercial real estate:

Property Location

Choose a location carefully. Some additional money may need to be spent in order to invest in a desirable area. As an example, if the choice is to invest in rentable residential real estate, make sure that it is located near shops, parks, and schools. Shopping areas, parks and schools should be accessible so that potential renters want to live in the building.

Be sure that an inspection is performed and an appraisal is ordered to assist in the determination of fair market value. Make sure a title search is performed to avoid any potential property problems. It is imperative to ensure that the property is free from any outstanding liens.

Financial Goals and Requirements

Each company should have made a thorough assessment of their financial goals and requirements regarding investment purposes. Consider whether the purchase is for occupation, rental or re-sale intentions. If purchasing the real estate for income purposes, it is important to calculate the cost of the property. These costs may include having enough money in the bank to cover expenses for a few months in case of vacancies or renter defaults. If purchasing the real estate with the intention of selling it in a couple of years, purchase property at a low price that allows for necessary repairs. Then it can be rented for a while and later sold in a few years for a reasonable profit.

Partners and Connections

Hire an attorney to review any and all contracts before signing them. There are different laws that pertain to commercial real estate, particularly when it comes to reporting any income earned from the property.

Also, be sure to use contractors that are licensed, bonded and insured as this will ultimately save time and money. They can make necessary renovations and repairs so that the eventual sale of the property will be profitable.

Time

One of the most valuable assets of any company is time. Any profitable commercial real estate investment is going to require time to properly manage this asset. Consider being a resident landlord and living in the multi-unit real estate that has been purchased. This provides the advantage of responding to the tenants’ immediate needs and helps ensure a well-maintained property.

Conclusion

The fear of financial risks involved when investing in commercial real estate for the first time can sometimes be an overwhelming experience. As is true with any property purchase, it is always appropriate to seek the help of real estate brokers or other professionals about any questions that may arise. This may help lower stress levels when making decisions about this purchase. It is imperative to get any information available regarding the condition of the property and the price. Be prepared for unforeseen future expenses while staying within budget; this will help to avoid future financial difficulties for any company. Following the above advice will help all first-time commercial real estate buyers make the right decisions!