Consumers business loans
Do you have business banking questions? Contact our knowledgeable commercial loan officers.
5 questions to help you decide if investing in a commercial property is right for you.
Every business—from start-ups and retailers to manufacturers and services providers—needs a place operate. Many start by leasing space as this option keeps capital requirements low and allows for adaptability. However, when leasing no longer suits business needs, owners look to at investing in commercial real estate. If your business is considering buying or building in a new location, ask these five questions to help identify a commercial property that will help you reach your goals.
Is the location and zoning right for your commercial activity?
You can remodel spaces and build new ones, but you can never change a property’s location. Evaluate how the location will affect everyone who will utilize the space, including customers, employees and suppliers. For example, is there enough parking and space to maneuver delivery vehicles? Evaluate how your business fits in with the surrounding area; is the location a good fit for your particular business activities?
Also, make sure that local zoning allows the property to be used as you intend. Yes, you can seek a zoning variance, but this takes time and resources and there’s no guarantee a zoning board will accommodate your request.
What condition is the property in?
The property’s condition will dictate how many of your future dollars are spent. Is the building up to code? Is it in a flood zone, and if so, how will this affect insurance? Is the title clean? Is the property free of liens?
If you plan to build on the property, what utilities are available? If you have to bring utilities like electricity and sewer in on raw land, what’s the cost?
Exercise due diligence and examine every detail before closing a deal.
How is the price relative to comparables?
Market comps (short for comparables) look at a specific property’s sales history as well as what similar properties nearby have sold for recently. This data can help determine a fair purchase price. Additionally, comps weigh how location and features of the property and/or building add to or detract from value.
Office and apartment buildings are classified by a letter system. Class A designation means it’s a high-quality property that will tend to have lower risk and the highest value. Class B applies to older buildings that may need maintenance and present more risk— and the price reflects this. The highest risk properties are Class C; they come with a lower price tag as well as lower rental values. A broker’s or appraiser’s report will look at properties in the same class when determining value.
When looking at price, also consider if there are any tax allowances that could make the purchase more feasible.
If you plan to lease out some or all of the property are you ready to be a landlord?
Lease income can help finance a larger place that gives your business room to grow without needing to move later. With good counsel, you can arrive at a commercial lease agreement that’s good for you and the lessee(s). However, you’ll be adding landlord duties to your list of responsibilities. Some of the duties can be delegated or hired out but being a landlord will add to your workload. Plus, you’ll have to weather the ups and downs of the commercial rental market. For many businesses, the advantages of leasing some or all of the property are worth the extra work and responsibility.
Can you secure financing?
If you plan on using a loan to purchase commercial real estate, work with a lender to secure financing before you set a deal in motion. At Consumers, you can get a commercial real estate loan with competitive terms. Our commercial lending officers can show you your options and help you along every step of the loan process.
All loans subject to approval. Rates, terms, and conditions are subject to change may vary based on credit worthiness, qualifications, and collateral conditions.
Consumers business loans
Do you have business banking questions? Contact our knowledgeable commercial loan officers.