Buying commercial property is very different from buying residential.
How do commercial transactions work in real estate? It depends on what kind of building you are looking for.
Certainly, there are different situations where you might want to lease space, but if you are looking to buy a property, the first step is to get partnered with a lender. We have several preferred lenders who are good to work with for commercial real estate.
The next step is to do your due diligence, including inspections and phase one environmental site assessments. This is to ensure that the grounds, and any areas around the property, are free of contaminants. After that, you need to have an appraisal done, and this can be a little different than the appraisals you may be used to. Lenders usually have an approved list of appraisers, and costs are generally higher, as with all things commercial.
Also, timelines can vary with commercial real estate. Any issues that you might have could cause delays. Typically, however, with a smooth transaction, the process can take around 60 days on the short side. Still, each deal will be unique, with many factors going into the purchase process and timeline.
Down payments can also be a little different. Usually, lenders are looking for a minimum of 25% down for a commercial transaction. The loans will also have slightly different terms, with higher interest rates and shorter periods. All this considered, you need solid capitalization and good overall numbers if you want to move into commercial properties.
There are a lot of opportunities in commercial real estate, particularly as we come out of the pandemic. If you have any questions about this stuff or if you are looking to buy or sell, please don’t hesitate to reach out. Give us a call, we would be delighted to help you.