Commercial property refers to any real estate which owners use specifically for business purposes. It can be in the form of a shopping mall, retail store, office building, or industrial land containing factories. The primary function of the property is to generate revenue in the form of profits or rental income. Owners might want to declare a particular building they purchase or in their possession as a commercial property. In doing so, they affect its income-generating potential and tax treatment. Moreover, the property falls under specific building laws which the owners need to abide by.
Mack Prioleau is a commercial real estate expert from Dallas, Texas, with several years of valuable experience under his belt. He is an Economics and Corporate Strategy graduate from Vanderbilt University. He specializes in the development of vacant land, building, and factories in prime industrial estates. He currently works in prominent commercial real estate companies in the state, holding an assistant’s post. He is an ardent traveler in his spare time and has visited over 19 countries in the world. He is also a sports enthusiast and passionate surfer.
Tips for first time investors
He says first-time investors consider buying and owning prime commercial properties to be a lucrative section of their portfolio. They can increase their existing wealth by acquiring properties at the right time. However, they need to have a clear understanding of the intricacies of commercial real estate buying. Only then should they consider, evaluate and invest in profitable property deals. In doing so, they can educate themselves with the following key steps to buying lucrative commercial properties:
- Understand their motive for investing, whether it is to build wealth or generate income,
- Carefully scrutinize their investment options, which could be office apartments, retail stores, shopping malls, or industrial buildings,
- Assess what source of finances are available for them to pay for the lucrative commercial properties deals,
- Review their personal and business credit scores to ensure the data it contains is correct,
- Select, hire and work with the right team of experts like realtors, brokers, attorneys, and tax consultants,
- Conduct research on why the owners want to sell the commercial properties which interest them, and
- Gather information of the factors affecting the properties’ sale price like locality, repairs income-generating potential, and outstanding taxes.
Real estate investors can then make offers to owners of commercial properties that they show interest in buying. However, they should first conduct thorough due diligence as per the American Land Title Association survey. It should contain a contingency clause to nullify the commercial property deal under certain specific conditions. These include disagreements over the price consideration or when properties do not meet certain technical specifications.
Mack Prioleau sums up by saying real estate investors need to take certain steps when finalizing commercial property deals. These include opening an escrow account, checking the title deed of the properties, and getting the pre-approval mortgage. Only then can they expect to mitigate most of their financial risks. Above all, they instruct their attorney to check whether the relevant paperwork throughout the process is for them to proceed in their transactions.