Buying commercial property can be quite the process. It requires extensive research and plenty of due diligence. After all, this is a major investment you’re making and if it is your first time purchasing a commercial property, there are a few things you need to know.
Determine Your Property Plans First
Before you
purchase land, you need to know what type of business or development you intend to have. This will determine the suitability of the property and can be necessary if you want to ensure the property is a good investment. After all, a hotel may do well in a downtown location, but a business that caters to people looking for peace and quiet may do better in a more remote locale.
Having a plan in mind will also allow you to determine how much space you need. As you view properties, you can determine if they are suitable for your needs, based on the amount of space they provide. Unless you know what you want to do, it’s difficult to assess the property clearly.
This also allows you to come up with your buying criteria, which you can then measure every property against. It should be relatively simple to determine if a property is the right one or not when you have a list of what you need.
Determine Your Budget
It doesn’t matter if the land is perfect or if the premises are exactly what you need if it’s beyond your budget. This is why it’s best to not only research the prices in the area but also determine what you can afford.
If you’re planning to take out a loan or mortgage from the bank, you’ll want to talk to them first to find out how much you can get. This will help you narrow down your search and may require choosing another location. While not as ideal, it’s also not a good idea to throw yourself into a business investment where you will be in deep debt
Another thing to consider when planning your budget is what the ROI or return on investment is. It needs to be profitable to invest in the property, or it isn’t worth it. This may sound like a lot of maths, but it’s necessary if you want to have the ability to make money in the long term.
Remember to stay realistic as you make your budget. Use numbers from other businesses in the area or similar businesses to see what you could actually get back.
Is the Property Flexible for Business?
Some properties will have limits due to zoning and bylaws. They may limit what type of business you can have in the building and this will restrict not only what you can do there, but how you can sell it. Other buyers may not be interested if they can’t manage their business.
This also goes for the land you wish to develop. Before you purchase, make certain you have examined the potential issues that may come up. You’ll need to reduce the problems or adjust your expectations if things are not as you thought.
Get a Structural Survey Done
Ideally, you’ll have a
professional commercial building surveyor examine the property. They will look for possible problems that could affect your investment, including structural defects, poor building materials and techniques, as well as problems with insects, termites, or mould and condensation. They can easily spot water damage and indications that the property is not as pristine or perfect as it is portrayed.
Once the survey is complete, you’ll receive a list of everything that was found. This can either be your signal to walk away from the property or you may be able to use the information to reduce the price.
It’s always a good idea to know what you’re getting into, so a structural survey is your best option for ensuring the property is a good one.
Common Property Survey Issues
What does a property survey show? That depends on the property, but there are specific things that the surveyor will be watching for.
Water Damage or Damp
It’s not uncommon to find damp in a building that has had water run through it or has not been properly protected. This means water may work its way up from the foundation and create problems on the way up the walls. However, it is also possible to find water damage at the top of the building, as well, where the rain gets through the roof. It may also make its way in through gaps around windows and doors and even cracks in doors.
In some cases, a pipe has broken in the past and the water has damaged areas of the property. Since commercial properties undergo more renovations than other types of properties, it’s very possible that there are some unaddressed problems regarding water damage and dampness.
Drainage Problems
If the building has drainage problems, you could also be looking at a large amount of work. This may become apparent when you notice the water damage throughout the building.
Drainage comes in the form of drain pipes, as well as the drainage around the building. Sometimes the issue is as simple as replacing the old gutters, but if there is a collapsed drainage pipe, you will need to do some much more invasive work. All of this will cost more money and you may decide that it’s just not worth the price.
In addition, poor drainage systems may cause sewage to back up into the building, which can cause hazardous conditions at worst and unpleasant odours at best. You definitely need to consider this decision carefully if you find that there are problems with the drains.
Unsafe Wiring
How well done is the electrical wiring throughout the building? This is something that can be difficult to check, so a professional is useful to ensure the electric system is in good condition. Check that the system meets all the necessary standards. If it doesn’t, you may need to rewire the entire building and this can be quite expensive.
Any electrical problems that come up should be double-checked with an electrician who can give you a quote on the entire property. This will also help you determine what the budget for renovating will be.
Roof Problems
Another issue is the roof. Many roofs are not in great condition and it’s important to have a building surveyor inspect the one you are considering purchasing. In some cases, the problem is minor and may just be a cracked tile or a few missing shingles from a storm. In other cases, it could be much more severe, with leaks that could result in major damage to the building.
Poor Insulation
Insulation is key to preventing high energy bills. You will want to check how much electricity the building uses during the winter, as well as the summer. If you notice that the heat and cold result in massive spikes in energy use, it’s possible the insulation needs to be replaced.
The building surveyor will look at this and determine if there is a problem with the insulation. This can also indicate if there are pests in the building, as rats and mice often make nests in the insulation. While this is something you can certainly change out, it is another thing to consider when planning your commercial building purchase.
It’s always a good idea to carry out a property survey and Simon Levy is here to help. We offer full property surveys to help you determine what a site may require in the future. This can help you decide whether or not you want to buy.
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