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Buying Commercial Real Estate – Sometimes Better to Lease?

When choosing to purchase a commercial property, you need to consider the possible risks involved. Buying commercial property only to later realize that renting was a better option is a feeling you don’t want to have. This post addresses some of the potential risks for businesses when buying commercial real estate

The property market is volatile; a trending neighborhood can lose its value for reasons such as poor maintenance and slow development. That is not all – the market is susceptible to many contingencies, including global, political and economic conditions. Of course, such factors can also work in your favor when buying commercial property.

Investing in real estate may put your business in a cash-flow crunch. A commercial real estate transaction can generate huge funds to revive your business. Nonetheless, selling a commercial property can be challenging, especially during tough economic conditions that can lock your funds when you need them the most.

Sometimes when you rent out commercial property, the chances are that tenants may stop paying their rent. Additionally, a real estate can incur unexpected and expensive repairs, draining your rental income. For non-paying tenants, you would need to hire an attorney, which is an additional cost for your business. It is advisable to vet the tenants’ background before renting out your property. You also need to visit your property regularly to overlook operations and identify problems before they get out of hand.

A natural calamity can leave your property severely damaged. If not entirely, a natural disaster can cause a major financial loss to your business and may require extensive repairs.

Ultimately, when buying commercial property, the decision comes down to economics. Seeking the advice of an experienced property dealer would be a great idea to shortlist your options. An experienced property dealer or real estate analyst would take into account multiple factors such as market trends and growth forecasts. They could discuss how market trends could impact your anticipated real estate needs

Surrounding yourself with experts in different fields can improve the efficacy of your commercial real estate transaction. In addition to a broker and a mortgage broker, you should also consult an accountant. They can assist you in assessing the cost of the property and analyze tax impact on your operating budget. Of course, most importantly, when buying commercial real estate, hire an experienced attorney.

 

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