What to Ask When Purchasing a Commercial Property

Eric Babin, President, Babin Custom Builders

Investing in commercial properties can be profitable as long as you purchase the right properties. Unfortunately, most investors share the same problem when purchasing a commercial property, which is they do not know what questions to ask. If you are interested to purchase a commercial property, Niceville commercial builders share some questions that you should ask when purchasing a commercial property.

How long has the property been for sale?

Please keep in mind that commercial properties usually stay longer on the market than residential homes. In a good market, most commercial properties usually stay on the market for about one year. If the property you are targeting has been for sale longer than a year, there might be a problem with the property.

What regulations affect the property?

Regulations and standards for commercial properties are different between cities and states. Therefore, it is very important to check the zoning regulations and ensure that your plan on the property you are targeting conforms to the local regulations. If you have to wait for a certain period of time before selling the property or you cannot lease the property, it is better to find other properties in different city or state.

What is the commercial market for your targeted property?

Checking the commercial market of your targeted property is essential to help you figuring out the amount of profit that you can earn. If other similar properties were sold at good prices in recent years, it can be a good indication. In case there are not enough data about the commercial market for the property you are targeting, you can figure out the market by finding the prices of other commercial properties in the same area.

Is the property in good condition?

Do not ever buy a property before inspecting it. Similar to residential homes, commercial properties also have hidden flaws that will remain hidden unless you conduct a thorough inspection. Therefore, make sure you conduct a thorough inspection prior to signing a contract. You can conduct the inspection yourself or hire an organization that you trust to conduct the inspection. Water, air conditioning system, heating system and electricity are some essential points to check.

Is the property profitable?

If you are targeting an income producing property, getting a pro forma is the best way to figure out whether a property is profitable or not. A pro forma is a document that lists all the income and expenses for the property. By reviewing the pro forma, you can immediately know the potential profit that you can get in a month. If you are targeting a property that will grow in value, then you need to check the future development of the area. If more businesses will come in, then you can be sure that the price will rise in the near future.

Buying a commercial property is more complicated than buying a residential home. Asking as many questions as possible about the property you are targeting can help you to avoid making wrong decision. The five questions from Niceville commercial builders mentioned above can be a good start to evaluate the property.

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