Commercial Real Estate

Written by Lori Covington
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Commercial real estate is a hot property in more ways than one, and many investors make their fortunes in commercial real estate. People who bought property in Manhattan or L.A. in the 1950s can sell even small lots for millions today. But real estate's lucrative potential is mediated by its complexity: negotiations, contracts, disclosures, rental obligations, and unexpected expenses make commercial real estate enterprises a real challenge to buyers, sellers, and investors alike.

If you are getting ready to buy or lease commercial property, perhaps to expand your business or take a home-based business out of the home, you are probably wondering how to go about it. When people are house hunting, they tend to start looking at houses on the Internet, in newspapers, or by wandering through the neighborhoods where they want to live. Attending open houses may lead to meeting a real estate agent who seems knowledgeable and reliable, and before you know it, Saturdays are spent visiting houses up for sale.

Buying a house is one of the most stressful and expensive events in the life of a couple: marriages have been known to come to an end over disagreements about attached garages and second bathrooms! But buying a house is relatively simple: the intricacies and potential pitfalls of commercial property makes buying a home look like child's play.

The Complexity of Commercial Real Estate

Commercial real estate properties often cost more than the average single family dwelling. Issues such as appraisals, zoning, build-outs (that's remodeling to fit the needs of the new owners), and commercial mortgages are complicated and potentially dangerous in the legal sense. Reading, writing, and negotiating leases and purchasing agreements take special knowledge: an understanding of real estate laws and the local regulations are just the beginning.

When acquiring commercial real estate, start out by thinking about your needs, both immediate and in the longer run. Consider space requirements carefully: you don't want to end up moving to a still larger space in a couple of years because you underestimated your needs today! Will you need temperature-controlled storage space, natural light, kitchen facilities, and/or parking? The more you understand about what you need, the more likely you will be able to make effective choices between properties.

You probably already have a general idea of the location you want: you can contact commercial realtors to find out what space per square foot costs in the areas you're researching. What you learn may impact your decisions about location and space: the trade-off is often between larger spaces in less-ideal locations and great locations with smaller space. Talking with commercial realtors is also a good way to start working on the next step in your commercial property venture: finding a responsive and responsible commercial real estate broker.

Get a Broker for Your Commercial Real Estate Transactions

Commercially-oriented real estate is no place for do-it-yourself attempts: you want the advice and assistance of someone who knows the market, who is familiar with available properties, and who knows the pitfalls of commercial real estate. A trustworthy broker can save you tens of thousands of dollars by keeping you informed and sharing his or her professional expertise. An ethical broker will prevent you from making costly mistakes, and will work to make sure your needs are met in the choosing, negotiating, and buying of your commercial property.

Some brokers represent both buyers and sellers, and while many of these brokers are responsible and concerned about all their clients, you may prefer to work with a broker who specializes in meeting your particular needs. When you work with a broker who only works with buyers, you can feel more confident in your broker's ethical representation. Your broker will try to get you the fairest price under the best terms: there are no competing interests.

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