Buying commercial real estate is a big investment, and it’s important to do your research before making an offer. Here are 25 questions to ask when buying commercial real estate:
Questions to Ask:
1. Why is this commercial property being sold?
There are many reasons why a commercial property might be sold. The owner might be retiring, downsizing, or simply looking to cash out. It’s important to understand the reason for the sale so that you can get a sense of the property’s history and potential.
For example, if the property is being sold because the owner is retiring, it may be a good opportunity to buy a property that is already in good condition and has a stable income stream. If the property is being sold because the owner is downsizing, it may be a good opportunity to buy a property that is in need of renovations or updates.
2. Who are the current tenants of this property?
If the property has tenants, it’s important to know who they are and their lease terms. This will give you an idea of the income potential of the property and the stability of your investment.
For example, if the property has a long-term lease with a major corporation, it may be a good investment because the income stream is likely to be stable. If the property has a short-term lease with a small business, it may be a good investment because you may be able to raise the rent when the lease expires.
3. Can I get a pro forma?
A pro forma is a financial projection that shows the estimated income and expenses for a property. This information will help you determine if the property is a good investment for you.
For example, if the pro forma shows that the property has a positive cash flow, it may be a good investment because you will be able to earn a return on your investment. If the pro forma shows that the property has a negative cash flow, it may not be a good investment because you will be losing money on your investment.
4. What is the development plan for this area?
If you’re buying commercial real estate in an area that is undergoing development, it’s important to know what the plans are for the area. This will help you determine if the property is in a good location and if there is potential for future growth.
For example, if the area is being developed into a new commercial district, it may be a good investment because the value of the property is likely to increase as the area becomes more developed. If the area is being developed into a new residential district, it may not be a good investment because the value of the property is likely to decrease as the area becomes more crowded.
5. What are the zoning ordinances in place?
It’s important to know what the zoning ordinances are for the property you’re buying. This will help you determine what you can and can’t do with the property.
For example, if the property is zoned for commercial use, you may be able to build a new office building or retail store. If the property is zoned for residential use, you may not be able to build a commercial building on the property.
6. What are the terms of the sale?
The terms of the sale will affect the price you pay for the property and the amount of money you will need to put down.
7. What is the seller’s motivation?
Is the seller motivated to sell? If so, you may be able to negotiate a lower price.
8. What is the condition of the property?
Will the property need any repairs or renovations? If so, you will need to factor those costs into your investment.
9. What are the taxes and insurance costs?
You will need to pay property taxes and insurance on the property. These costs will vary depending on the location and size of the property.
10. What is the property management cost?
If you plan to rent out the property, you will need to pay a property manager to manage it. This cost will also vary depending on the location and size of the property.
11. What is the return on investment?
You will need to calculate the return on investment for the property. This will help you determine if the property is a good investment for you.
12. Is the property a good fit for your investment goals?
You need to make sure that the property is a good fit for your investment goals. If you are looking for a long-term investment, you may want to buy a property that is in a good location and has a stable tenant base. If you are looking for a short-term investment, you may want to buy a property that is in need of renovations or updates.
13. Do you have the financial resources to buy the property?
You will need to have the financial resources to buy the property. This includes the down payment, closing costs, and any repairs or renovations that are needed.
14. Do you have the time and energy to manage the property?
If you plan to rent out the property, you will need to manage it. This includes finding tenants, collecting rent, and dealing with maintenance issues.
15. Are you willing to take on the risk of owning commercial real estate?
Commercial real estate is a risky investment. There is always the possibility that the property will not generate enough income to cover the costs. There is also the possibility that the property will depreciate in value.
16. Are you willing to be a landlord?
If you plan to rent out the property, you will be a landlord. This means that you will be responsible for finding tenants, collecting rent, and dealing with maintenance issues.
17. Are you willing to be a property owner?
Ownership of commercial real estate comes with a lot of responsibility. You will be responsible for the maintenance and upkeep of the property. You will also be responsible for paying property taxes and insurance.
18. Are you willing to be a real estate investor?
Investing in commercial real estate is a big decision. It is important to do your research and understand the risks involved before you make an offer.
In addition to these questions, there are a few other things you should consider when buying commercial real estate:
- The condition of the property
- The cost of repairs and renovations
- The property taxes
- The insurance costs
- The property management costs
By taking all of these factors into account, you can make sure that you’re making a wise investment when you buy commercial real estate.
Real World Examples:
Here are some real world examples of how these questions might be applied:
Example 1:
A company is looking to expand its operations and is considering buying a new office building. The company would want to know why the current owner is selling the property, who the current tenants are, and what the pro forma looks like. The company would also want to know if the area is undergoing any development and what the zoning ordinances are in place.
Example 2:
A real estate investor is looking to buy a rental property. The investor would want to know why the current owner is selling the property, who the current tenants are, and what the pro forma looks like. The investor would also want to know if the area is undergoing any development and what the zoning ordinances are in place.
Example 3:
A developer is looking to buy a piece of land to build a new shopping mall. The developer would want to know why the current owner is selling the property, what the zoning ordinances are in place, and if the area is undergoing any development. The developer would also want to know if there are any environmental concerns with the property.
