Commercial property management is a fundamental issue for any business. Buying a commercial property is a great investment and a sign of prosperity. A growing business needs new space, and this is how you may find yourself looking for new facilities to expand your commercial operation. Acquiring a commercial property can also be a great way to seek financing. In addition, refinancing a property can be just as tricky as buying it. For this, we offer you a brief guide to guide you in making these decisions.
What is a commercial property?
Let’s start with the basics. A commercial property is a real estate property intended for the operation of a business. Since businesses are generally different from one another, the characteristics of these properties vary widely. Some may have particular service facilities, others may be designed for a particular industry, etc.
Now that we understand the basics, we can move on to the important part: the purchase or refinancing of your commercial property.
Buying a commercial property
Buying a new property for your business can be a big step. It means a big investment, and therefore should be made with care. The advice of a good real estate agent can be critical. When you have seen a commercial property for sale that interests you, you should consider the following:
- Location. Although it is not the only factor, it is of utmost importance. Ask yourself which are the main access routes to the premises and if your clients will be able to get there easily. It is important to know the area well before buying: Is there competition? How much traffic is there at different times of the day?
- Function. What use do you plan to give to the property? It is important that you have this defined beforehand, because this way, when you see the premises, you will be able to evaluate if it is appropriate for you or not. Also, you should have in mind what kind of repairs or remodeling you will need. Many times buyers focus on the cost of acquiring the property and forget to add the cost of remodeling, which can be costly. It is very important to get a quote from a contractor, who has all his licenses in order so that you can study the necessary budget for the project of the purchase of your new property.
- Regulations. Find out about the area and function of your activity. This will avoid some unpleasant surprises that may affect your investment.
With those three points in mind and a review of your budget, you can now think about starting the process of obtaining financing for the purchase of a commercial property for your business. Always remember that a commercial property is a great investment and with good advice you can obtain a commercial loan to get the property that fits your business.
Refinance a property
If you already have a commercial property that has financing, what you want to know is whether you should refinance it or not. That is, if you want to renegotiate the terms of your payments, whether it is the balance of the debt, its years, or its interest rate. This decision is of vital importance because the state of your business finances depends on it. Refinancing a property is a decision that will directly affect your future, and therefore cannot be made lightly.
I want to finish my debt in fewer years
In this case, what the owner is looking for is to finish the payments as soon as possible, in order to become the definitive owner of the property, in the shortest time possible. Most of the time, this means increasing the monthly payment. In this type of negotiation, it is important to consider your income level.
Refinancing to pay off your debt in a shorter term means that you are generating a higher income than normal and that you expect that to be sustained for years to come. If that’s the case, it’s also likely that your credit will improve, so you may be able to get a lower interest rate on your payments and the total contribution amount may not increase.
I want to gain liquidity
This case is the opposite of the previous one. Instead of increasing your payments, you spread them out and reduce them. There are many reasons for wanting to do this, but the main one is that you want to pay less interest on the mortgage of your property, and therefore, you want to increase the amount of money you spend on other things. You can reduce your monthly payments by extending your debt for more years; or you can reduce it by negotiating a decrease in the interest rate you are currently paying. This decrease may be justified by several factors, such as improvements you have made to the property that increase its value or changes in the market that result in lower interest rates.
The management of a commercial property is a matter of great responsibility for businesses. They are a major investment and require some financial knowledge. They can be a strong investment or a source of financing, and in either case, a definite factor in the company’s finances. That is why it is important to seek good advice before making decisions about them. That is why it is important to seek good advice before making decisions about them.
