Buying commercial real estate is probably the biggest investment you will make, with long-term financial ramifications. It calls for many informed decisions and for good advice from a real estate professional. When buying commercial real estate, you can learn from the knowledge and skill of a Commercial Real Estate Agent.
Sellers won't call you with an offer to buy a maintenance-free building with a wonderful mortgage. You have to find the gems yourself! Only by reading available materials, talking to friends and experts, and spending time looking at different properties, areas and layouts, will you find the right building for your investment objectives.
Every important decision needs to be clearly thought out. Developing an investment plan can help you focus on the important factors and organize the entire process. Loan pre-qualifying helps you determine the property price you can afford and presents you as a genuine prospect to the seller. Lenders often have different criteria for lending on different proeprty types. Your agent can assist you in finding the right lender for the property you are looking to acquire. Planning your actions and getting pre-qualified will keep you out of the panic mode and allow you to take advantage of opportunities. A thorough plan will save both time and money!
The days of 10-30% annual appreciation have passed. Nowadays, you're looking at slow growth while guarding against the possibilities of falling prices, skyrocketing interest rates and changes to the ecomony that can dramatically affect your real estate values. The classic rule of buying the worst building in the best area still applies. If you buy with an eye towards improvement, you can customize the building to fit your needs. The saying, "make money buying real estate, not selling it," should keep you focused on the long-term importance of the purchasing price.
When shopping for a building, list the features (parking, warehouse space, access to highways, etc.) that are most important to you in deciding on which building to buy. Establishing "your criteria" early on will save time shopping for inappropriate properties and may keep you from buying a building on a whim. As detailed in Tip #3, your top reason for buying a building should be the value you are getting. Some of your top 10 amenities should logically be sacrificed if an incredible value is available.
Whichever loan you choose; make sure that you scrutinize all the closing costs. If you are required to have a mortgage with a balloon payment, understand what the costs are in refinancing the loan. Also, make sure there are no prepayment penalties so that you are not surprised in case you wish to sell.
Make sure that the contract you put on a property allows you to arrange financing, inspect the building and negotiate any problems that you uncover. Ensure that the contract you sign will minimize potential legal battles.
You are about to make one of the most important decisions that will affect both your life and the life of the seller. If you take time to understand the reasons the seller bought the building, their reasons for selling, and the improvements they have or have not made, you'll be in a better position to evaluate the property and negotiate a better deal. In the end, the commercial real estate buying process excludes the professionals and comes down to the individuals buying and selling the building. A closer look at the seller may help you in deciding whether and for how much to buy a particular investment.
One of the biggest decisions to make before putting a contract on a building is how to finance the purchase. There are many lenders competing for your mortgage business. The days of simply walking into the community bank and negotiating with the loan department manager are over. Today, you can apply for a loan over the Internet or even use a mortgage broker to shop for your loan with hundreds of lenders. When choosing a lender, you want to avoid apples to oranges. Create a chart that lists different types of loans, fees, and at least five mortgage providers (including a mortgage broker).
Although it is hard to believe, more people pay for inspections before buying used cars than when making the biggest investment of their lives - their real estate. Paying for a qualified property inspection before you buy a building isn't just spending "a little extra" for peace of mind; it's absolutely essential for anyone who doesn't want to spend thousands of dollars for repairs.
While commercial lending is generally available, there is times that circumstances exist that make the loan process difficult. In these cases, there can be a possibility of seller financing. There are actually a two different ways in the State of Michigan to arrange such financing and your Commercial Agent will be able to guide you as to how they differ and what might be the best option in your case.