How to Invest in Commercial Property & How to Buy Commercial Property

Property is a precious commodity and calls for a lot of capital - more so with commercial property that is always more expensive than either residential or agricultural property.

Property is a precious commodity and calls for a lot of capital – more so with commercial property that is always more expensive than either residential or agricultural property.

The Legalities

The first and most important aspect to check when investing in commercial property is the “Legality” of the investment. Look into all the applicable local laws. Like most legalese, it may be difficult to understand, therefore it may be worthwhile to hire the services of a lawyer who specializes in commercial property matters. Ensure that you get a lawyer who is familiar with the local laws in the place where you plan to invest in property, as often the fine print of laws differs from one state to another.

Laws also change from time to time, and so your legal counsel should have up-to-date knowledge. When examining the legal aspect, look at it from three angles – the legality of you investing in commercial property and the legality of the property itself (i.e. its commercial status, the legality of the current ownership of the property – i.e. is the current owner the legal owner with full rights to sell the property and receive payment from you). Spend a lot of time on this aspect of the case. You want to look not twice but four times before you leap, so that you are sure of the security of your investment.

Prospects Of Generating Income

The second aspect of your investment is its income generating prospects. You want your investment to work for you. Based on current trends as well as future projections, you need to be sure that the value of the property will appreciate in future so that if you need to sell it at any time, you will get more than you paid for it.

Another income generating proposition from commercial property is what income generating prospects you will have from the business you set up on the property. Again, legality comes into play. Different areas have ruled and regulations regarding the specific purpose that the land can be used for. When buying commercial land for your business, ensure that you will actually be able to legally use the land for the intended purpose.

Capital Required

Financing is a crucial part of any investment. It is rare that you will have all the capital necessary to invest in commercial property. Therefore, you are likely to require a commercial property loan. To get this loan, you are going to need a lot of documentation on your business operations, your financial status and earning potential and the property title deed, to convince the lender that their money will be safe.

You will need the services of property appraisers and realtors to determine the value of the property for you before you put any money down. You want to be sure that you are paying a fair price. If the asking price is too high, you stand to lose a lot. If the asking price is too low, this should immediately trigger alarm bells to examine the property very carefully. The amount of investment required for commercial property is considerable, and therefore an unwise investment could ruin you financially.

Shop around a bit before settling on a piece of property. The first parcel of property you find is not necessarily the best property – and you don’t want to find that you have made a bad decision after you have put your money down and signed all the paperwork.

When calculating cash required for a particular property, factor in costs such as fees payable to any professionals you may have hired as consultants to close the deal, any registration or other legal expenses to be paid. These expenses tend to amount to quite a bit, and therefore should be budgeted when calculating the feasibility of a property.

Investing in commercial property is an attractive way to grow your money, but not everyone has been (or can be) successful at this. Therefore, take all the necessary precautions before you put your money down, as a fool is soon parted from his money.

Like this? Share it with your network:

I need help with:

Got a Question?

Get personalized expert answers to your business questions – free.

Affiliate Disclosure: This post may contain affiliate links, meaning we get a commission if you decide to purchase something using one of our links at no extra cost to you.