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Getting in the Game: Your First Commercial Real Estate Deal

The commercial real estate attorneys at Elzufon Austin & Mondell, P.A. discuss the basics in understanding commercial real estate transactions.

As with many other sectors of the economy, the commercial real estate market suffered heavily after the 2008 financial meltdown.  With plenty of industries back on the upswing, commercial properties are in many cases enjoying a resurgence, leaving some to wonder whether the right time to invest is now.  The following are some of the essentials to know before becoming involved in commercial real estate.

The good.  The potential upside of commercial real estate takes many forms, including increased cash flow, a less-crowded market and a bigger payoff. There’s also an abundant supply of affordable property managers.

The bad.  Just as with a residential transaction, it pays not to get emotionally involved in a potential purchase.  A detached, landowner’s eye is needed to assess damages that will need repair and other potential flaws that will hamper a property’s appeal.  Enlist the counsel of a seasoned broker and attorney, and always be willing to walk away from a deal.

The different.  Understanding the language of commercial real estate is essential. An accurate comparison of properties will depend on your knowledge of terms like Net Operating Income (NOI), cash on cash and the capitalization rate (“cap rate”) for income-producing properties.  Again, having an experienced broker and commercial real estate attorney on your team will be invaluable.

The similar.  Some of the factors in a successful commercial transaction are very similar to home-buying.  For example, get to know the neighborhood by visiting at different times of day and talking to other owners.  If you’re set on purchasing in a certain area, let the other owners know you’re looking and ask them to keep an eye out, or hire a “bird dog,” someone who scouts out potential deals for you in exchange for a referral fee.  And perhaps most similar to residential buying, a motivated seller makes for a better deal.  Finding someone who needs to sell quickly can be a big factor in negotiating a deal at below market value.

Questions about commercial real estate?  Contact the attorneys at Elzufon Austin & Mondell, P.A. in Wilmington, Delaware.

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