Purchasing Commercial Real Estate

[onewhippedpuppy]

I’m considering purchasing a piece of commercial real estate to provide some supplementary income. It will be a cash purchase, so I don’t need advice regarding the financing side. I’m just curious if the process is similar to buying residential property, in that you get your own realtor to help with the search, broker the sale, etc. I’m assuming that’s the case. Any other potential gotchas that might not be immediately obvious?

[look 171]

Depending on the type of business, around here, its hard to make it into auto repair shops. There might be some restrictions on the type of business allowable by the city.

[RANDY P]

make sure you see all the financials for the last few years, talk to realtors about the property itself and consider an attorney to review and handle the closing.

it isn't the same as a residential property.

[look 171]

Sorry, I was thinking of an empty building

[berettafan]

You don't necessarily need a realtor but you will want an atty to look for 'gotchas' such as use restrictions (look mentioned this), contamination issues (auto related businesses) etc.

IMO the good stuff never gets to realtors.

[onewhippedpuppy]

I assume a good real estate broker can fill the same role as an attorney, correct?

I have spoken with our local planning and code enforcement offices, so I've gotten a crash course on zoning and business approvals. This is primarily self storage with a small amount of light commercial/industrial.

[nota]

Originally Posted by onewhippedpuppy

I assume a good real estate broker can fill the same role as an attorney, correct?

I have spoken with our local planning and code enforcement offices, so I've gotten a crash course on zoning and business approvals. This is primarily self storage with a small amount of light commercial/industrial.

this can be one case where a lawyer is cheaper then a broker
as a good lawyer can do it in a few billable hours
while the broker wants a BIG % of the sale price
[ aptly named brokers make you broker ]

anyway check the zoning rules and other limits to use

[porsche4life]

I assume a good real estate broker can fill the same role as an attorney, correct?



I have spoken with our local planning and code enforcement offices, so I've gotten a crash course on zoning and business approvals. This is primarily self storage with a small amount of light commercial/industrial.

No knowledge on the question, but it sounds like a great opportunity Matt! Good luck to you!

[notfarnow]

A lawyer will help protect you in due diligence, and button up a tight deal... but I'd want to be dealing with an established commercial realtor who is NOT the listing agent.

A local commercial realtor should know the local "players" and the ebbs & tides of local businesses. You want someone who knows what might be coming down the pipes, what other businesses could affect yours, what municipal bylaws or restrictions (existing or pending) could affect the profitability of the business.

I do 95% residential, but occasionally I have someone buying or selling commercial, and in those cases I ALWAYS get help from an established commercial agent. Their advice and experience can save you THOUSANDS before you start paying a lawyer by the hour.

[RANDY P]

you gotta know what's going on with the property, if anything funny is coming down the pipe. What if the city is trying to get rid of the business and put something there? Knowing the street is important.

I'd feel better about an attorney to look over the paperwork, (if you are buying a business) a RE agent likely isn't going to have that ability to evaluate everything- at least a residental agent, also there's bias.

rjp

[rsNINESOOPER]

Originally Posted by RANDY P

you gotta know what's going on with the property, if anything funny is coming down the pipe. What if the city is trying to get rid of the business and put something there? Knowing the street is important.

I'd feel better about an attorney to look over the paperwork, (if you are buying a business) a RE agent likely isn't going to have that ability to evaluate everything- at least a residential agent, also there's bias.

rjp

I agree- there are all sorts of pitfalls but the biggest seems to be future zoning, zoning in the works etc. As cities are ever changing especially now with the continuing decline of manufacturing in the Us etc. Heavy industrial zoned properties are being turned into light industrial or retail zoned space. At least out here in the West in the bigger cities. This and PRIOR USE issues such as chemicals, oil, other contaminates. Don't wind up with a super fund site. I worked with a guy who bought up old warehouse space near the new ballpark in SF only to wind up getting slapped with a super fund debacle that froze his loft project for 7 years while the lawyers sorted things out. Eventually it was decided by the city to remove 12 feet of soil from 1/3 of the entire build site and bring in uncontaminated soil. Owner to pay cost, seller sued for cost, lawyers win win win.

its much safer to stick with retail space but more money can be made with industrial if you want to play the chips right and count cards. At least as far as I can surmise from the experience of friends who play the game.

[berettafan]

i like self storage. do NOT like contractor storage/office.

[RANDY P]

Originally Posted by berettafan

i like self storage. do NOT like contractor storage/office.

Self-storage rocks. All concrete, low maintenance and liability, can't burn it down (easily)

Trailer park is good cashflow too.

[Scott R]

I have a couple of self serve car washes sitting on my land that are operated by the owner. I've never done anything but collect checks.

[onewhippedpuppy]

Originally Posted by RANDY P

Self-storage rocks. All concrete, low maintenance and liability, can't burn it down (easily)

Trailer park is good cashflow too.

My grandfather had self storage and multiple mobile home parks. I had a great teacher.

[john70t]

Originally Posted by rsNINESOOPER

I worked with a guy who bought up old warehouse space near the new ballpark in SF only to wind up getting slapped with a super fund debacle that froze his loft project for 7 years while the lawyers sorted things out.

Hunters Point supposedly has one the highest incidents of breast cancer in the country.
Coincidentally, there are many tens of known military dump sites as well, left over from yesteryear.

[MT930]

Originally Posted by notfarnow

A lawyer will help protect you in due diligence, and button up a tight deal... but I'd want to be dealing with an established commercial realtor who is NOT the listing agent.

A local commercial realtor should know the local "players" and the ebbs & tides of local businesses. You want someone who knows what might be coming down the pipes, what other businesses could affect yours, what municipal bylaws or restrictions (existing or pending) could affect the profitability of the business.

I do 95% residential, but occasionally I have someone buying or selling commercial, and in those cases I ALWAYS get help from an established commercial agent. Their advice and experience can save you THOUSANDS before you start paying a lawyer by the hour.

^^^^^^Bingo Get a good experienced commercial broker that represents you and you only. Not a Sales associate.

Someone who has been practicing for 8+ years that holds a Brokers license

Give your self more time than you need as far a due diligence. Government is slow as far as getting answers on properties. Do the math yourself.