Things To Consider When Buying Commercial Property

If you have been checking out the real estate market lately you would have noticed that there are two types of properties available; residential property, such as houses and waterfront lands, and commercial property, such as agriculture land for sale or even coconut land for sale in Sri Lanka. So, what is commercial real estate and, as land buyers in Sri Lanka, what should you consider when buying it?

What is commercial property?

Commercial property is any kind of real estate that is used for business purposes, and can be buildings where there are offices or shops, manufacturing plants or factories, agricultural land, farm land, or even apartment buildings, hotels or other rental properties.

There are many benefits to investing in commercial property, which is why many people are doing it, as it provides a long-term investment opportunity that can yield in high returns. Here are a few benefits of investing in this type of real estate:

●        Has the potential to become a source of income: There is a huge earning potential with these types of properties, both by way of renting it out to others and selling it outright when land values are at a peak.

●        Builds professional relationships: Individuals who operate commercial properties are able to build relationships with other businesses and business owners.

●        Maintenance: If your property is rented by a retail company then they will more than likely ensure that it is in a well-maintained condition since they would not want to deter their customers with badly maintained premises.

●        Price evaluation: It is far easier to evaluate the value and price of these types of properties than other types, since there is no emotional element to it.

●        Flexible: Depending on the type of property you own; you have the flexibility to rent it out to any type of business you wish.

While there are so many benefits of owning commercial real estate, there are a few drawbacks as well.

●        Time commitment is more: As a landlord you need to be available to sort out any issues for all your tenants, and if you have many within your building, then it can tale a lot of your time, unlike residential real estate where there is only one tenant.

●        Costly maintenance: Maintaining the commercial building or other property to keep it in good condition can be quite expensive. In addition, you won’t be able to do it yourself; you will need to hire professional for it, which also can mean added costs for you.

●        Huge investment: These types of real estate is far more costly than residential types, and the initial investment you make can be huge. If you are taking out a mortgage, you may have to pay very high monthly instalments, and hence you should consider your finances prior to making a decision to buy.

●        Greater risk: These types of properties will have many people visiting it on a daily basis, which puts you, as the property owner at great risk. If someone is hurt or injured on your property and it is found that you or your employees have been negligent in some way in maintaining it and caused the accident, you could be held liable to pay damages and compensation to the injured party.

Irrespective of these disadvantages, many people are investing in commercial real estate, as a means of having an additional source of income. While the risks and investment can be high, they do have the potential of yielding a very high return for the owner.

What to consider when buying commercial real estate

Before you make a decision on whether to invest in a property of this nature, there are a few considerations you should make, such as:

●        Find a good real estate company: A real estate company deals with many different types of properties and will be able to help you locate your ideal one easily and quickly, as opposed to you trying to do it all by yourself.

●        Location: As with residential land, the location of a business property is very important It is vital that it is located within the commercial district of the town, and if it is a building, that you have excellent road frontages. If the location is not good then you will not likely have any tenants, and the money you invested in it will be a waste.

●        Classification: Commercial properties have different types of classifications, which apply to different businesses that it can be used for. Hence it is vital that you check these before investing your hard-earned money.

●        Condition: As with any residential real estate, it is vital that you get the property checked for any problems or issues prior to making a decision. This will help save you from a lot of problems and expenses down the road, especially since these types of properties have specific regulations regarding upkeep and maintenance.

●        Financing: Check out your financing options before you make a decision to buy, because it will save you a lot of time and headaches in the end.

●        Deposit: One you have selected a property, there is no doubt that the seller will request you to pay a deposit to hold it for you until the documentation is sorted. While some sellers may ask for reasonable amounts, other may not, hence you should check this aspect with the seller before you give your word regarding the purchase, so that you won’t have any unpleasant surprises later on.

●        Check on refurbishment costs: If the property you are buying needs to be worked on to ensure that it is up to your style and standard, then you should consider the cost of these as well.

●        Ensure you have a good lawyer: An experienced lawyer who deals in real estate matters is essential, because you will need to get documentation checked and sorted prior to the sale going through.