Did your Etsy account blow up? Is your storefront bakery getting a little crowded? If so, you might be looking into commercial real estate. While investing in real estate to grow your business is ultimately a good long term goal, the move is not without risk. Therefore, it’s a good idea to consider the following factors before calling any commercial real estate companies:
1. Understand your Finances
Before looking into commercial real estate listings, it is absolutely essential that you know your business’s books backwards and forwards, and that those books are good. Any of the respectable commercial real estate companies are going to want to see at least a 30% down payment commitment on the property before going forward with a sale, as typically banks will only loan up to 70% of the purchase price for a business property. You have to make sure you’re pulling in the annual profits to back up those signed checks! Assuming that’s all in order however…
2. Research (AKA Stalk) The Short List
There’s a great scene in Breaking Bad where Skyler White sits outside the car wash she wants to buy and counts the cars in and out per a day. This may have seemed excessive criminal neurosis, but in reality, she was doing her due diligence before shoring up her commercial real estate assets, and you should too. Make sure you know the locations being proposed by the commercial real estate companies are viable for the kind of business you run. Are they easy to get to? Is there a lot of foot traffic? Who do those feet belong to? Tourists? Iowa-stubborn locals? All this information will be very important to your annual return on the real estate purchase price, which, if you’re smart, can be as high as 12%. This means your new real estate could pay for itself in under 10 years!
3. Wait For The Perfect Time
The commercial real estate market changes drastically depending on the state of the economy. We all saw a stark example of this back in 2008, when the housing market crashed and all of a sudden prime properties were being sold for under $200,000. Before you rush off and court one of the big commercial real estate companies, seek advice as to whether this is a buyer’s or a seller’s market, and exploit your position accordingly.
We wish you the best of luck on your business expansion! May you have all the success of Donald Trump-minus the hair and the attitude.