By Preston Yaggi, SIOR, CCIM, Principal at Lee & Associates – Houston
Think you know enough to handle it all? Before embarking on your own, here are six common mistakes commercial real estate buyers make when purchasing a property.
- Not using a broker: Knowing the market is not as easy as it’s perceived. It’s important to know that you are getting the right deal and the right fit for your business. Hiring a qualified broker means you’re getting an experienced professional who understands your needs and will provide you with market knowledge and trends. An expert broker will also guide you through the pros and cons of the properties being considered and where you would get the most value for your money.
- Not conducting inspections Many may want to pass on commercial property inspections because of the added cost of hiring a professional inspector; however, in the grand scheme, it’s a minor cost that could prevent major problems for you and your business down the road. An inspection can rule out potential issues and ensure the property is worth investing in. This can also be used as a negotiation tool to receive a lower sale price or better lease terms depending on the repairs, although, that’s not always the case.
- Not getting an environmental study: Banks require an environmental report to be completed before closing on a transaction. If you’re purchasing a property with cash, an environmental report is not required, but still highly necessary and should be the most important item on your list. Think of the environmental study as an insurance policy because when purchasing a property, you’re inheriting all the unknowns that may come with it as well.
- Review restrictions: Make sure you understand the covenants, conditions and restrictions (CC&Rs) that come with the property. Just because the property works for your business, it may not work for the next company or developer that plans on purchasing and/or leasing the property from you. A knowledgeable broker can help you with this, but it is highly recommended to have an attorney review the CC&Rs and the title commitment.
- Review the survey: It’s important to review and understand where everything is located on the survey and ensure the survey correctly lists all the items from the title commitment. If you are purchasing a property with an expansion area, make sure you know the limits and how it may affect your company’s future growth. Understanding easements, setbacks, possible future roadway expansions and right-of-ways are critical.
- Not purchasing enough property: More often than not, a buyer will purchase what they think they need and not what they actually need, which means purchasing a property that is too small for business operations and expansions. Take an adequate amount of time to analyze exactly what you need for current and future projections. Relocating isn’t cheap and expanding through leasing, at first, is a more economical option for a short-term “Band-Aid.”
Preston Yaggi, SIOR, CCIM, specializes in the leasing and sales of industrial properties, as well as design-build and build-to-suit processes. Preston’s executed deals throughout Greater Houston and surrounding areas, however, he predominantly focuses on Houston’s northwest and west sub-markets. To contact Preston, please call (713) 744-7440 or email firstname.lastname@example.org.
Learn more about commercial real estate services at Lee & Associates – Houston.
Lee & Associates – Houston is a fully-integrated commercial real estate company specializing in office, industrial and land real estate investments. As the fastest-growing broker-owned firm in the nation, with more than 60 office locations in North America, Lee & Associates’ supports real estate needs in the local, national and international markets.