One of the key differences between buying commercial property and buying a home, is that the buyer usually orders the appraisal.
THE COMMERCIAL ADVANTAGE - PICK YOUR APPRAISER
This is an advantage, because you can choose a real estate appraiser with deep experience in commercial properties. But if you're not an old hand at buying commercial real estate, there are a few additional things you should know:
WATCH OUT FOR ENVIRONMENTAL ISSUES
Once you take ownership of the property, it becomes your responsibility to clean up any waste. This means if they've been using oil or kerosene to kill weeds along the fence line, even if there are no visible drums of chemicals, you might have an environmental issue.
CAN YOU GET & DO YOU NEED FLOOD INSURANCE
Do check on flood zones, just like you would for a home. Just because there are many other businesses in the area, doesn't mean it hasn't been flooded, won't be flooded, or that you can even get proper flood insurance easily, if the area has a history of flooding.
APPRAISAL WILL EXPOSE DEFERRED MAINTENANCE AND REQUIRED IMPROVEMENTS
A key aspect in deciding whether you even want to own the subject property is what maintenance issues exist, and which issues do or don't require or warrant repair. Before you get too far into the investment, invest in the commercial real estate appraisal, on your own dime. The bank wants to give you a loan. Even if the bank does an appraisal, it's your money and your credit, and you really need an appraiser working for *you* who provides a fully detailed report with considerations that could affect your investment. It's a mistake to skip this part to save a few bucks on such a large purchase.
LIKE CHOOSING THE RIGHT APPRAISER, CHOOSE THE RIGHT INSPECTORS
A commercial investment should not end up being a black hole of ongoing cost. While you're negotiating, things like a thorough pest inspection can give you extra relief, if there's a serious problem discovered. Think square footage, and the special cost often added to commercial real estate by contractors who work in this field. Choose quality and qualification over cost in being aware of what you're buying and what it might need. Likewise, once the appraisal is done and the inspections are done, you can take your own contractors for a walkthrough and get estimates on needed repairs or remediation.
Commercial real estate investment can be lucrative, if you've taken stock of the proper concerns and are ready to take them on. Don't hesitate to get consulting on this from a qualified professional. If you want appraisal consulting on a commercial property, or a series of commercial properties you're considering, we have the experience to take that on. Don't hesitate to call us.