If you’re in the market to purchase commercial real estate for your company to occupy, otherwise known as an “owner-user” purchase, it can be hard to know how to navigate the process most efficiently. The process can be more complex if you’re buying as an investor versus buying as an owner-user.
But you’re in luck: there is a basic “to do” list for those buying as owner-users and working with an expert to secure showings and information on comparable properties.
STEP 1: SECURE FINANCING
First and foremost, make sure that you’ve secured your financing. It’s better to know your price range prior to looking at space. Otherwise, you might fall in love with a space or a building that you can’t afford. And that’s not fun.
STEP 2: PROPERTY SEARCH AND CONTRACT NEGOTIATION
Once you’ve found the perfect space and secured your financing, you will submit an offer. Once that offer is accepted, the listing broker will send your broker a contract which will need to be reviewed by your attorney prior to signing. After several revisions, the contract is signed and you’re now in the due diligence period.
STEP 3: DUE DILIGENCE
During due diligence (typically 30–60 days), you’ll have the property inspected. Depending on whether you’re buying a condo or a full building, you might want to inspect the roof, HVAC systems, parking lots, common area renovations and any other potential bank-breakers.
Also, depending on whether or not there are other tenants in the building, you will want to review their leases and any other financial statements such as a rent roll, operating expenses, real estate taxes, etc.
STEP 4: VENDOR COORDINATION
Similar to leasing space, you’ll also want to meet with an array of vendors as you prepare to occupy your new space. They include, but aren’t limited to: interior designers, architects, furniture vendors, movers and IT specialists.
Dissimilar to leasing, you’ll also need to hire a title agent to secure title for the property.
STEP 5: CLOSE THE DEAL
Depending on how your inspections went, you might need to revisit the terms of the deal with the seller. Assuming all went well and your due diligence period has ended, you’ll be in the closing period (usually 30 days). Once you’ve signed the papers, the property is finally yours to occupy.
These steps paint a fairly rosy picture of how the buying process might play out. As in most types of transactions, there are usually a few hurdles to clear. But if you’re communicating often with your broker, you have a good chance of clearing those hurdles and checking “purchase a new space” off of your to do list.
Based in Princeton, N.J., Vinny specializes in tenant and landlord representation for Colliers International, working directly with his clients in the acquisition and disposition of office space. For more commercial real estate insight and trends, follow Vinny on Twitter.