A Quick Professional Guide to Buying Commercial Property

May 6, 2020 Property

Here at Northstar Financial, we know that buying commercial property for your business or investment portfolio is all about knowing what you want and building a smart sequence of steps to get there. There are so many different types of commercial property ranging from pocket-sized retail to large manufacturing plants that your priorities and confidence are what make the biggest difference in a successful deal.  For cannabis businesses, you’re likely looking for either a spacious growing area or a modest shop space in town. Both usually fall into the mid-range of local pricing.

Whether this is your first major commercial purchase, you are purchasing on behalf of someone else, or you are branching out from a previous routine of investments, it helps to have a road-map. Today, we’re here to outline a quick buying guide for commercial property. Join us for a step-by-step outline of the right way to investigate, prepare, and purchase commercial property.

Buying and Renovating Commercial Property


  • Refine Your Priorities
  • Define Your Price Range
  • Compare All Suitable Properties
  • Secure Your Financing
  • Build Your Buying Team
  • Conduct Negotiations
  • Close the Deal
  • Renovate Your New Space

Refine Your Commercial Property Priorities


When planning to buy property, your first step should always be to refine your priorities. What are you looking to accomplish with this purchase? What size and features and qualities should the property possess to be a candidate worthy of consideration?

The best way to tackle this step is with three separate lists:

  1. Needs
  2. Wants
  3. Deal-Breakers

In one list, write everything that a property must absolutely have for you to consider it. This includes size, amenities, location, parking, and anything industry-specific that would be required to make the purchase worthwhile.

In the second list, write everything it would be nice to have, but you won’t insist on it. This might include a nice outdoor space, newly renovated infrastructure, an indoor gym or cafe, or other types of business in the nearby vicinity.

In the final list, write down everything that would cause you to walk away from a deal, no matter how many needs and wants it might also have. This list might include poor plumbing, paid parking, a cracked foundation, or certain types of non-compatible neighbors.


Define Your Price Range


Next, define how much you can afford to put into the purchase. Remember to break this number down. You may have a lump-sum in mind for your total investment budget, but property purchases always involve a mass of costs in addition to the down-payment and loan. These include inspections, title checks, realtor fees, closing fees, utilities, property tax, renovations, and more.

Use this math to calculate the true cost based on the “Sticker Price” listing cost when calculating how much you can really afford or are willing to invest.


Make a List to Compare All Properties Available That Meet Your Needs


Now that you have a definition of your needs in a building and the listing price that measures up to your budget, it’s time to collect candidates. Work with your agent to find and explore local opportunities that meet your needs. Put together a list of every property in your search radius that might meet your needs both effectively and financially.

Don’t forget to include buildings that can be renovated to suit your needs. Some locations are diamonds in the rough with considerable office renovation benefits. Their imperfections are opportunities to buy at a lower price and transform the space into your dream-facility instead of buying something finished and workable.

With this list, you can compare properties side-by-side based on price, commercial value, attractiveness, and amenities that might sway your decision one way or another.


Secure Your Financing


Before you take a serious next step, make sure your financing is 100% in order and ready to bid. Talk to your bank and get the loan processed and pre-approved. Target that pre-approved loan with the amount you’re prepared to put down and the maximum loan amount you’d be willing to take out. This gives you room to breathe so that you can reach to your upper-limit for a great place or scale down if the best option is lower cost than your maximum budget.


Build Your Buying Team


Now that you’re preparing to make a final decision and buy, it’s time to put together your team. In addition to your agent/broker, you will likely also want to line up your accountant, title-checking service, and your inspectors. For certain properties, it’s a great idea to also bring along your favorite renovation contractor to provide a helpful rough estimate of costs for any updates, improvements, and renovations you may want to do if you buy.


Run the Numbers on Each Property Candidate


The next step is to get serious about each of your property candidates. Work with your team to run the realistic numbers on what it would cost to purchase, update, renovate, and maintain each property on your list. This will reveal the true details of each purchase option beyond the surface listing price and assumed property tax.

Put together a dossier on each property so you can compare them side-by-side on closing costs, upgrade costs, maintenance costs, and comparative value based on your buying priorities.


Conduct Negotiations


When you’re ready to make a bid on one or more properties, contact the sellers and open negotiations. In this phase, you will most need the assistance of your real estate agent/broker and your lawyer to check and double-check each term proposed. Every negotiation is different, and every seller/property combination will provide a unique negotiation experience.

Sometimes, a seller will point out legitimate extra qualities to the building you hadn’t noticed, and sometimes you will need to bring them down based on discovered maintenance concerns. Be aggressive but fair, willing to give and take. Especially if the seller offers to throw in extras like vehicles, furniture and equipment, ongoing sweetheart deal contracts, and more. Assess the value of everything brought up in negotiations and consider each property you negotiate on based on how the negotiations shake out.


Close the Deal


Finally, when you reach the best possible cost-for-value on a property, it’s time to close the deal. Closing is a lot more complicated than just shaking hands, but you can rely on your real estate agent/broker to guide you smoothly through the title transfer, closing costs, and final contract signing because they have done it dozens to hundreds of times before.


Renovate Your New Space


When the papers are signed and the new property is completely yours, it’s time to renovate. Almost any commercial building will have a few things you will want to update or change. Many businesses have an interior style based on brand and company culture or the experience you want to create. Every commercial real estate purchase is different, but your renovation contractor can make your vision of a property’s potential into reality and enjoy the considerable benefits of office renovation. Create your perfect office space, hospitality venue, or industrial work environment with the full freedom of a property owner. No need to worry about putting it all back at the end of the lease. You have the deed and this property is yours to transform to best suit your sense of style and the needs of your business.


Learn More About Buying Commercial Property


Buying a commercial property is a far more involved and carefully weighed process than buying a home because there are so many more factors to consider. Whether this is your first commercial property purchase or you’re looking to hone your skills after rocky previous experiences, the right financial decisions will help smooth the process. Contact us to explore your financial and legal options for buying commercial property in your state.