5 Key Issues to a Successful Commercial Real Estate Acquisition
Buying real estate is a costly undertaking, and business owners need to exercise due diligence every step of the way. Without proper planning, entrepreneurs can face a host of problems and lots of painful financial future, including inadequate financing, unexpected construction costs, inefficient layout and environmental lawsuits. Smart Investor need to be vigilant on every level and avoid errors that will cost you down the road, it just makes good sense to take the time you need before you decide on that location. Although real estate costs have shot up in recent decades, entrepreneurs are still usually better off buying properties than renting them. Benefits are like you won’t be faced with rental increases and your property may appreciate in value, Plus a buyer can deduct the value of a loan, mortgage interest or depreciation in the value of a building from company taxes – this is something that can’t be done when renting. This is a best factor not to miss.
So what makes a successful acquisition?
There are 5 key issues to be put in your attention.
Understand the local real estate market
Before making that important decision on what to buy, entrepreneurs should pay definite attention to where they’re buying. Each local market has its own tax rates, land inventory and environmental issues. The supply of skilled labour in the area also needs to be considered. Municipalities can often provide helpful information on future industrial developments and environmental considerations, it is also recommended to take professional realtor’s help who work in the specific subject.
Get your financing in order
Affordability is a big issue in commercial real estate today, so before you go to a bank, you should work with an accountant to determine your budget. Bankers will want to see high-quality financial statements and evidence that the profits you generate are being retained by your company. All of this will play a big role in determining whether you get the loan you want. It’s also worth considering alternatives to conventional banks. A bank may be willing to finance 65% of the capital needed but ask you to put up the remaining 35% — a substantial personal burden if a $1 million property is involved. Financing for purchasing land or building offers more flexible terms than banks, based on each client’s case; it also provides financing for a broad range of needs, including land purchases and bridge financing. Smart Investor also considers side by side help from right mortgage broker.
Whichever route you choose, resist the temptation to sway credit institutions in your favour with overly optimistic forecasts; payment problems later on can boost costs and reduce your maneuvering room.
Get expert help with tax issues
Tax implications can be complex in real estate transactions. It is advisable is to see your accountant who will know the ins and outs. Entrepreneurs will need to know, for instance, whether their purchase should be considered a corporate or personal transaction. Other issues include succession planning, Transition financing and decisions about how assets will be broken up when the business is sold. This makes proper & smart plan to go ahead with the project.
Plan your Layout or Business well
Whether it’s an existing building or one that you’ll be renovating, you’ll need a layout plan that gives you a competitive advantage. The right layout can lower operating costs and improve your capacity to move to new productive level as well as your ability to generate higher rate of return. A good layout has a major impact on its operational efficiency optimize processes and reduce waste.
Choose the right builders
Less construction time, less money and more value should be your guiding principles when choosing a builder. Investor should be looking for quality builders who have a good reputation and are responsive to their needs. Key point to note here for good builders is including experience, timeliness and knowledge of your industry. For example, if your building must meet accommodation or food-industry standards, your builder should have
expertise in that sector. A builder’s financial history should also be noted. Investor doesn’t want a situation where contractors are taking their deposit to fund a previous job where they ran out of money. In any doubts, do a credit check with their permission or due diligence. Ultimately, there are no sure recipes for making a successful building or land acquisition. However, if you pay attention to these five areas, you’re more likely to make the most of your investment.
It is always advisable to get the professional help of respective subject in real estate investment like Realtor, Mortgage broker, inspection team, lawyers and financial advisory team of your own.