If you’re starting a business, the likelihood is you’ll need an office or some form of property. Here’s a step by step guide on how to buy a business property.
You’ve got the website, the product, and you’re prepared to do the work. Now, all you need is a place to house your new business.
With 7.4% of American jobseekers in 2016 deciding to run their own business instead, there’s plenty of competition. A headquarters or office is what you need to stand out.
If you don’t know how to buy a business property, don’t worry. Here’s a breakdown of what you need to know:
What is Commercial Real Estate?
Before you look into purchasing a commercial property, it’s important to know what commercial real estate is. Commercial property is defined as real estate that’s bought for business purposes. The commercial property that you’re looking for can be supermarkets, malls, offices, warehouses and more.
In other words, commercial property can be anything from an office inside of a skyscraper, to a small store.
Hire Specialists to Help
You might not know all the real estate and legal jargon that’s tossed around when buying a small business. Hiring specialists can make purchasing your property much easier, as they can give you advice on location, and the right times to buy. Consulting with these experts can help immensely:
- Lawyer: A lawyer can assist you with finishing the deal, and will make arrangements with the lender and seller for you.
- Accountant: Adding an accountant to your team can help you effectively plan out your business’ finances, while also giving guidance on anything from a capital allowance claim to budgeting.
- Mortgage Broker: Mortgage brokers can make suggestions regarding financing with loans.
- Commercial Broker: Commercial brokers find property for you that’s in your price range.
If things start getting complicated, you may end up needing to hire engineers, environmental experts, or notaries.
Find the Perfect Location
Knowing how to buy property starts with location. If you’re looking to own a store, establishing your business in a remote location is not ideal. You need to be in an easily accessible, high-traffic area to succeed.
As you’re searching for your property, you’ll find that they’re sorted into certain classes. These classes can help you determine whether a property is in a good location:
- Class A: Class A buildings are newer or renovated, and are typically found in great locations.
- Class B: Class B buildings are a little older, but they can be remodeled for more profit.
- Class C: Class C buildings are old buildings that need a ton of work, and aren’t located in a good area. Avoid purchasing a class C property if you can. Use common sense, and stick with building in a popular spot.
Tour the Property
It’s important to look at many locations before you end up buying a commercial property. Visiting multiple properties can help you make a logical decision.
Don’t get stuck with a run-down building that’ll need a lot of work. In any older buildings, check for issues like asbestos or lead paint. Updated buildings may be a little more expensive, but they’re usually worth it in the long run.
You also have to consider if there’s enough room for parking at the location. It’s important to find out whether the property has modern entrances for people with disabilities as well.
Consider Zoning Laws and Limitations
When you start looking at commercial properties, you should always see if there are any local zoning laws or limitations for each location. Whether you want to establish an industrial warehouse or an office, you have to make sure that this type of business is allowed in that specific location.
Zoning laws and building codes can also impact what you do to the inside and outside of your property. For example, buying a building in a historic location can prevent you from making renovations.
Determine your Financing Plan
You’ll likely need some extra cash to purchase the property, especially if this is your first time developing a brand and a business. Now’s the time to figure out how you want to finance your property.
Consider which credit unions, banks, or mortgage companies you could get a loan from, and find out what interest rate they can offer you. If you’d rather not go through financial institutions, you might want to try asking the seller for financing. Seller carryback, leasing, and second mortgages are other options.
Make Your Decision
Once you’ve picked out the perfect property for your business, it’s time to make an offer. Remember to never sign any type of contracts without consulting your lawyer.
You’ll have to sign a letter of intent (LOI) that’s put together by your lawyer. The LOI pertains to the contracts, property, along with the conditions of the purchase. Typically, your lawyer will make the contract non-binding to save you if an issue comes up in the future.
When the contracts are over and done with, it’s time to exchange money. But before you do that, you have to make sure you know absolutely everything about the property. This means that you’ll have to inspect the property and even have it surveyed.
By getting the property surveyed, you’ll be able to figure out boundary lines, access rights, and building locations if you plan to have more than one. You’ll usually be granted an amount of time for due diligence. During this time, you must ensure that the contracts are correct, and confirm what the seller says to be true.
You should also think about hiring an escrow agent. They’re a neutral party responsible for monitoring the proceedings while protecting you and the seller.
Don’t panic if you find something wrong with the property during the inspection. Let your escrow officer know, and they’ll cancel the transaction.
Learn More About How to Buy a Business
Learning how to buy a business property can be complicated, but it’s worth it. You’ll finally have your very own space to work, and you’ll be able to start hiring more employees. Finding a location for your business is the first step in success.
Are you an entrepreneur who wants to learn more about starting and running a business? Join the discussion on our small business forum.