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Watch for these red flags when buying commercial real estate

On Behalf of | Nov 10, 2023 | Real Estate |

As reported by Doorloop, U.S. commercial real estate revenue has dropped 6% over the last five years. However, it is still going strong with $1.2 trillion in revenue per year. Entering the commercial real estate market can be an exciting venture. Whether you aim to start a new business or expand an existing one, acquiring property is a significant step. However, this major financial decision comes with its share of risks.

Being well-informed about potential pitfalls is the best defense against making a poor investment. Some issues might be obvious, but others can hide beneath the surface, requiring a more thorough investigation. As you embark on this journey, remember that due diligence is your responsibility. Stay alert and question anything that seems off, even if it means taking a little more time before committing.

Sudden availability

When a property suddenly hits the market, ask why. A quick sale could indicate that the seller is trying to offload the property due to issues they prefer not to disclose.

Unusually low price

If the price seems too good to be true, it probably is. Investigate the reason behind an unusually low price, as it might be a sign of underlying problems with the property or location.

Zoning and land-use restrictions

Check the local zoning laws and land-use restrictions. Ensure the property aligns with your intended use, as ignoring these can lead to legal complications and financial losses.

Signs of neglect or disrepair

Take a close look at the property’s condition. Signs of neglect or disrepair might not only affect the value but could also lead to significant additional investment to bring the property up to standard.

Incomplete or problematic history

Request a complete history of the property, including previous uses, any environmental assessments and ownership changes. Gaps or problems in the property’s history could be costly to you in the future.

Environmental concerns

Be wary of properties with potential environmental issues, such as contamination. Addressing these problems can be an extensive and expensive process.

Purchasing commercial real estate is a decision that requires careful thought and due diligence. Take the time to thoroughly investigate these red flags. Doing so can help you make a well-informed decision and protect your investment for years to come.