When it comes to buying commercial property, you are playing with big budgets, legal jargon and potential issues that can easily turn an exciting investment into a huge problem for your business.
Thorough research and due diligence is essential for successfully purchasing commercial property. For this to happen, you need to understand the language, what to issues look for and the purchase process to be able to make the right judgement calls.
Commercial property includes any building used for business purposes. This could be a shop, a warehouse, offices or even flats, amongst other types of business property. Leases usually come between six months and one year, unlike residential properties.
If you're new to this, these simple tips for buying your first commercial property will set you up for success:
Learn the jargon before you start
Getting to grips with all the specialist terms, abbreviations and technical terms, before you enter into the buying process, will save you time and give you a stronger footing in any negotiations to secure the property.
Set your budget
Every business has different commercial property needs, and you need to determine exactly what it is you want from a building. Alongside this, you need to establish the amount you want to invest. If you are investing to sell on you will also need to understand how much you are willing to lose in the worst-case scenario.
With this laid out, you can start planning what kind of property you can realistically acquire within your budget. There are risks involved in investing in property and the market can change because of factors such as location, building type and the economy. Get a good grasp on all of this.
To help set a budget you should research and find estimated costs for the following areas:
- SDLT (Stamp Land Duty Tax)
- Professional fees
- Construction costs
- Maintenance costs
- Experimental compliance costs
- Operating costs
Know the what and where of your new property
The type of property you want, and where you want it to be, will be a huge factor in the price you need to pay, and also any return on investment you might enjoy in the future. Supply and demand will also play a part.
That old property cliché “location, location, location” really does hold true when buying commercial property.
Research the property market
The property market is constantly changing, especially with the current changes in the economy and society. To ensure you make the most informed commercial property decisions, you should keep on top of what is going on in the property market. By examining the latest trends, property values and industry developments you will be able to determine the right time and place to purchase property.
Ask experts for advice
The reality is, that if this is your first commercial property purchase, it will seem a little daunting. For all the research and due diligence, you will do yourself, there is no guarantee you won't miss something.
Don’t shy away from asking professionals and experts with experience for their help and guidance, it could be invaluable and the difference between success and failure.
Be sure the property is right for your business
Once you have found a property that you are interested in, it is time, to be honest with yourself about your needs and goals. Is the property really what you need? Scrutinise every aspect of the property to see that it is right.
Look into the legalities of the property like planning laws, building regulations and energy efficiency. You don’t want to find that the property doesn’t work once you are in it or throw away hard-earned cash on a property that can’t be developed in the way you envisaged.
Get a full structural survey
One of the biggest issues with purchasing a property is finding lots of surprise repairs and maintenance, months later, that lead to stress and extra costs. It is worth holding off on completing until you have done a full structural survey. This will act as a precaution from poor property purchases and also prevent any issues from arising later on.
Do a site visit
You might think you know everything you need to know about the property - you’ve seen the images, you've spoken to the seller and you've read everything there is to read. But you need to make sure you visit the property in person to get a true understanding of what it is you are buying.
These simple tips are a good starting point for successfully buying your first commercial property.