Property is a precious commodity and calls for a lot of capital and buying a commercial property is a complex undertaking and become difficult not only for the buyers whose areas of expertise are in different industries but sometimes also for the property experts. It is also a venture rife with risk, as buyers, sellers, agents, and renters alike can suffer the consequences of a dip or spike in demand. So, it is important to research a property thoroughly before laying down the cash.
Here are the number of factors and tips which you should consider while buying the commercial property to mitigate the risk of wrong decision:
- Location Analysis
- Property Analysis
- Legalities
- Local laws and Government policies
- Cost Analysis
- Financing
1. Location Analysis
Location is the most important and primitive factor which you should consider while buying the any kind of property. If you are buying commercial property, you should check the following points:-
- How far is the location from your suppliers, employees and the customers or is it easily accessible to your customers, employees and suppliers?
- What is the Infrastructure (road, railways and highways, telecommunication) state of the location?
- How far it is from the residential place?
- Is the location likely to develop “drop in” or “impulse” consumer traffic?
- What other types of businesses are located around your site? Are they going to compete with your business?
- Is fire protection close by?
- Are basic utilities available (E.g. water, electricity, sewer, gas etc.) at a reasonable cost?
- Are you going to be transporting products from one part of India to the other? If so, are the expressways located close to your location?
2. Property Analysis:-
Once you have decided the location, you should find out the available properties in the selected location and should evaluate each and every property. You should carefully compare several properties to make sure you’re getting the best location at the best price. You should consider the following points:-
- What is the price of all available properties and why there is difference among the property prices in the same location?
- If you buying in the property which is in the construction stage, What is the completion period as time is the money in business.
- What are the services and facilities being offered by the seller?
- Is the seller offering the furnished offices or the unfurnished offices?
- Is the site located at a popular area (E.g. Near a movie theater or a shopping complex)? If not, you will have to spend a lot of money marketing your product/service and it will eat into your profits!
- What is the history of the site? What types of businesses were previously run at the site? Why are these businesses no longer there?
3. Legalities:
It is really important to check the all legal aspect while buying the commercial property. You should consider the following points:
- Determine the title and interest of the seller to ensure that seller is the legal owner of the property
- Check the all legal document such as ‘No Encumbrance Certificate’ and ‘No Objection Certificate’ from the Builder/ Society.
- Check for authentic approvals from government agencies like the land development, planning authority and Income Tax Department
- Get a full and true disclosure of all outgoings such as municipal and other local taxes, taxes on income, water charges, electrical charges etc.
- Make sure to include every conceivable clause in the Sales Agreement. A Sale Agreement is the only written evidence of the deal so it should include everything from payment terms to exact description of the title.
4.Local laws and Government policies
It is always advisable to check the local laws and Government policies for buying the commercial property, starting and running the business. You should the consider the following points:-
- What are the tax laws such as how much tax you have to paid?
- What are the labour and employment laws and policies?
- What is the environmental laws and policies in that area?
- Does Government offer the some kind of benefits such as subsidies for buying the commercial property in that area?
5. Cost Analysis
Cost is the crucial part of any buying decision and specially in high value buying. You should examine the each and every component of the cost and find out how much the property will cost you. You should check the basic price per square feet of office, fees payable to any professionals you may have hired as consultants to close the deal, any registration or other legal expenses to be paid.
6.Financing
Financing is a crucial part of any buying. It is rare that you will have all the capital necessary to invest in commercial property. Therefore, you are likely to require a commercial property loan. To get this loan, you are going to need a lot of documentation on your business operations, your financial status and earning potential and the property title deed, to convince the lender that their money will be safe.
You should consider low down payment and longer-term loans as this preserves your capital for better utilization, keeps your cash flow high, and allows you to redeploy the “capital savings” into other profit-generating business activities.
As buying a commercial property is a complex process and involve the various legal aspects, so you should assemble the team of experts such as accountant, property analyst, lawyer those will help you to buy the right property and in making the buying process easy.