Buying commercial real estate is a complex process. It is important to know your situation and what will work for you. If you are looking for top commercial real estate, here are some tips to help you find the perfect property for your needs.
What is true for residential property applies to commercial as well. Convenience is important for workers, customers and suppliers. Also consider whether or not you need to be close to bus lines and trains.
In evaluating the condition of the building, take into account how it was previously used. Make sure there is no asbestos risk or lead paint. Check the condition and amount of parking to make sure it fits your needs and make sure it is up to code for people with disabilities.
Limitations on Use and Alterations
Make sure you would be compliant with zoning or covenants for that area. Find out what, if any, changes to the building are allowed.
It may help to be familiar with some of the commercial real estate acronyms. Here are a few:
- LTV – Loan to Value is a ratio between loan amount and value of the property
- Ad Valorem – property tax
- DSC – Debt Service Coverage ratio compares income from the business to the amount of debt owed annually
- Cap Rate – This is calculated by dividing the income by the value of the property
- Cash on Cash – Yearly income over amount of investment