A First Time Buyers Guide To Commercial Real Estate

Commercial real estate differs from residential real estate in that the properties being purchased are either buildings or land. They are intended to earn the purchaser income. This form of real estate is usually divided into four categories; retail, office, industrial, and multifamily. Multi-family falls into not only residential real estate but commercial as well because the owner will be earning a profit from rents paid by tenants.

Retail real estate includes the purchase of medical centers, mall, hotels/motels, and shopping centers. Office real estate is the purchase of office buildings, usually multi-unit. Industrial real estate refers to the purchase of warehouses, garages, and land use for industrial purposes. Multifamily refers to buildings that house multiple families, different from single family residences. Apartments, condominiums, and duplexes all fall into this category.

Learning about zoning is an important part of purchasing commercial property. Zoning designates purposes and acceptable uses, deemed so by the city, for a piece of land. It is important to take note of a listings zoning and make sure it meets the needs of the purchaser.

Most novice commercial purchasers are unaware of the difference between a commercial and residential real estate agent. For the most part, their jobs are not very different. Both handle listing and showing properties. They also both must work alongside all other agents participating in the transaction.

Take, for example, listing a property. It differentiates from residential in how the value is calculated. Many commercial properties are sold with machinery and fixtures that transfer with the property. The broker is responsible to determining their worth and factoring in their value to the total listing price. Future buyers can also request to see all pertinent business records and the agent will need to make sure copies are available.

Marketing a property is a common aspect of a listing. Brokers may choose to simply put a sign in a storefront or they can add virtual tours to their websites, advertise in newspapers, to name just a few. Advertising is done for any type of listing but the target demographic may be the only real variable.

All sales, no matter what type of listing, are handled through an escrow company. They act as a third party mediary that handles the collection and distribution of funds. An escrow office also gets together all pertinent paperwork, loan payoffs, and documentation necessary to transfer title successfully. Closings usually take place in the escrow office and all parties will sign their paperwork under the guidance of the title officer.

While making a large financial investment can be intimidating, a few key questions can help put a purchasers mind at ease and make for a smoother transaction. Asking a broker how long a property has been listed is one of the most important. It can help give a buyer leverage in negotiating a lower price. Also, a broker will know if there have any been any issues in closing. A sale falling through during escrow could be due the properties inability to pass inspection. As with any major purchase, ask about the condition the property is in. A lower sale price does not necessarily mean a bargain. It most likely indicates that much work is needed and more investment will be needed down the line. Commercial real estate is a major financial risk and decision, but when researched and inspected thoroughly, the retribution can be well worth it.

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