The process of acquiring a residential property is usually pretty straightforward, however, when it comes to buying or leasing a commercial property for investment purposes or to house your business, there are certain key pointers to look into prior to making a decision.
There are some parts in acquiring commercial property ownership that is similar to typical residential property, however, there are some areas that differ and need in-depth research that you may not have prior considered thus, it is always to best to find out about the situation and conditions in place before sealing the deal.
Take a look at some of the important considerations that you would need to look into prior to deciding on the right commercial property for your unique business!
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1. Deal Fundamentals and Financing
When looking for your first commercial asset regardless of the purpose, it is vital that one takes the financing into consideration by carrying out due diligence and familiarising with the unique fundamentals thoroughly.
For example, when applying for a housing loan, commonly one would be able to take a loan of 90% of the property purchase price, however, when a commercial property is purchased, one will only be able to take up to 85% loan of the property purchase price unless stated otherwise.
Even if one is able to fully finance the property without the assistance of a loan, making an offer would usually require the assistance of lawyers to help with documentation and to ensure that all terms and conditions are clearly communicated and met accordingly; to ensure the rights of both the purchaser and property seller are met.
An important point to take note is to ensure that all documentation with regard to the property acquisition is first reviewed by a lawyer prior to signing. Thereafter a letter of intent may be signed with conditions and terms attached clearly with purchase documentation.
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2. Hire a Commercial Property Lawyer
Commercial property deals can be confusing to the average individual thus, it is important to hire a real estate lawyer that would be familiar with the processes that take place throughout a transaction to ensure legality, as well as validity, are met and to protect buyers and sellers.
This should be done so that buyers or sellers are not stuck in purchase agreements that they are unaware of and regret later. All dealings involved in the period of acquisition should be printed on paper and copy should be kept with the real estate lawyer hired, in case problems arise in the future.
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3. Insurance
During the selection process of commercial properties, you should make arrangements with an insurance broker to gauge approximately how much it would cost to insure your purchase. The fee to cover such buildings usually cost a lot more as compared to standard residential insurance.
The cost and type of insurance needed may also vary based on the type of business that you plan to house within the property.
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4. Strata Titles
In some cases, if a building holds a strata title the owners that share the building may need to take the onus on different responsibilities. All owners would form an entity which would make decisions together in the form of meetings to make decisions of the property as a whole.
At times individuals that acquire commercial property are unaware that in such cases collective owners would need to pay corporate body levies. These fees would usually cover maintenance of common areas in the building, administration fees as well as insurance.
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5. Building Regulations
Just Imagine you get excited looking for an ideal commercial property for your business and you have assured that everything needed is in place, except for the building regulations that could demand an extended period of time to clear for your business to be successfully housed.
What you can do to avoid such a situation from taking place is to ask as many questions as possible when selecting a desired commercial property, conducting detailed research of a building before considering to make any internal or external changes to the building or even if the unit of choice is even open to customers!
Conclusion
Finding an ideal property to house your business could be a painstaking process and may require a lot of patience and time to ensure that you are not faced with hiccups upon successfully setting up an establishment.
Now that the fundamentals are cleared all you would have to do is sit back, relax and enjoy the returns that you would reap from your planned business. All the best!
(By Viknesh Ashley Clarence, 1 August 2019)
