7 Steps: Owning Your First Commercial Property
Owning commercial real estate is one of the most reliable ways to invest money. Over the years, many people have increased their net worth substantially with this method.
It can be intimidating when you are trying to get started. Here are 7 important steps to follow to own your first commercial real estate property.
#1. Ask Questions
You have to be clear about what your goals are before you even look at a property. Are you building equity, renting it out, using it for your own company? What is your tolerance for risk?
Figure out if you want to go into partnership with someone and how much money you can afford. Some people like investments that are ready to go, others like the challenge of fixers.
#2. Invest the Time to Learn
Like any business, you need to learn commercial real estate terms and exactly what they mean in different circumstances. Ignorance means losing money. Take the time to master the learning curve.
#3. Look at Many Properties
It’s a simple fact: the more properties you look at, the more you learn. Research each one. With each property, you will develop expertise and valuable skills that will ensure future success.
#4. Get Experts on Your Team
Build a team of experts. You need a lawyer who is familiar with commercial real estate. You also need an experienced commercial realtor and a mortgage broker.
#5. Explore Financing Methods
How are you financing the property? There are traditional bank loans, which also can come through a credit union or home mortgage company. How is your credit? Are you open to more creative methods of funding? These can include owner financing, carry backs, second mortgages and lease-to-buy.
#6. Make Your First Offer
Do your research and confer with your team, especially your lawyer. Then make your first offer! This involves a letter of intent and contracts. Make sure you read everything and understand the details before signing anything.
#7. Perform Due Diligence
Due diligence is essential. Talk to your realtor, commercial real estate lawyer and broker. They will explain about surveys and escrow. The final closing is complex, involving the quitclaim deed, bill of sale, warranties, assignment of contracts and other types of paperwork.