Buying Commercial Real Estate: The Process
So you’ve read all of the commentary from financial gurus and realized that the talking heads are right, that commercial real estate is the best long-term investment out there.
But now that you’ve decided commercial real estate is the right investment for you, how do you break into the market? Though the process can seem intimidating to outsiders, Beck-Reit Commercial is here to guide and advise our clients, both veteran and novice, every step of the way. For those of you considering commercial real estate as your investment portfolio’s next addition, let us break down the process for you from start to finish.
Depending on the project, land might be your best bet! 5100 Springdale Rd, purchased for the development of a medical complex.
The process begins by sitting down with an agent to discuss your ideas and goals, but in order to make that conversation as productive as possible, you should do a little leg work before hand. Firstly, you’ll need to come up with a rough budget. As a rule of thumb, commercial loans typically require 25% down, but depending on a buyer's appetite for risk, more may be advisable. Knowing what your cash on hand looks like will determine the size and scope of your opportunities. Compiling your financials before meeting with an agent will not only help said agent advise you, but will save time down the road when that information will be required for lenders’ review.
If this is your first Commercial Real Estate purchase we ask our potential clients to meet with a Lender before meeting with the Beck-Reit Team. To perform at our best we need to know what you are qualified to purchase. If you have not worked with a Commercial Lender shoot us an e-mail now and we will send a list of 3 that will be pleased to meet with you and get everything in place that we will need for searches and offers.
Next, having a sense of what type of project you’d like to undertake is helpful, but not as helpful as knowing where you’d like that project to be. Location, in many ways, guides the direction of a project. As Austin experts, all of our agents at Beck Reit Commercial can be extremely helpful when it comes to questions of location and use.
Once you know your budget and have some sense of desired location and project direction, it’s time to meet with an agent to flush out these ideas further. Our team has unique expertise in several areas of the commercial real estate market and would be happy to take your call. For a more detailed description of each agents specialty, here’s a concise breakdown
Finally, before starting a property search we recommend every buyer sign a buyer representation agreement. This suggestion isn’t an attempt to coerce new buyers into a financial commitment, but rather to protect buyers and agents while making the property search as efficient as possible.
Buyer representation agreements transform an agent’s customer into a client, and the difference is not arbitrary. As a customer, an agent showing you property has no fiduciary duty to you, but to the property seller instead. This technicality has implications on confidentiality, namely that even though the agent still owes you honesty and fairness, they owe confidentiality to the property seller. As a sub-agent of the seller, most agents working without a buyer representation agreement will register potential buyers with the seller or seller’s agent before showing the property in order to protect their fee. In some market conditions, this process can impact the timing of a transaction and cost a buyer missed opportunities.
1417 Anderson Lane, bought off-market through a Beck Reit Commercial connection
With a buyer representation agreement in place, a buyer becomes the client of their agent. As their client, an agent has a fiduciary and confidentiality duty to them for the duration of the contract. Additionally, the agreement provides the financial incentive for an agent to find a buyer the best property for their situation in the shortest amount of time and at the best price possible. This is where efficiency comes into play, and in high growth markets like East Austin, time is as valuable as money.
At this point, we can get the property search under way. Using a plethora of online search engines as well as personal contacts built through experience, Beck Reit Commercial can take a wide swath of the geographic area of interest and/or the market desired from which the most promising prospects can be identified. Once we’ve decided on a property, our financial analysis of current and potential leases using comparable projects will help determine an offer. If the offer is accepted, we’ll negotiate terms and apply for a loan and appraisal. Know that if our clients don’t have a preferred or known financial lender, we are capable and happy to recommend options appropriate for the size of the project and needs of the buyer.
With a loan secured, all we’ve got to do is follow through on the contract terms and close. The process can seem intimidating, but the right help makes it quick and painless. Beck Reit Commercial’s mission is to grow business and build wealth, and we look forward to helping each of our clients do so on their own terms. Please don’t hesitate to set up a meeting with any of our expert agents!