Conducting any transaction should be done with caution, but this is especially important when conducting a commercial real estate transaction. There are a lot of moving parts and the consequences for mistakes include financial loss, damaged business relationships, and even legal action.
So here are a few tips to help you conduct a commercial real estate transaction.
Get a Due Diligence Report
Due diligence is when you investigate a potential investment to ensure that it is a sound one. This usually includes things like reviewing financial statements, investigating ownership claims, and interviewing the management team.
For commercial real estate transactions, you should always get a due diligence report. This will help you identify any risks associated with the property or transaction. For example, for a sales leaseback transaction, it’s prudent to make sure that there are no outstanding liens or encumbrances on the property.
Hire an Experienced Attorney
Especially with commercial real estate transactions, it’s best to hire a qualified attorney. The legal aspect of these transactions can be complex, so it’s important to have someone on your side who knows the ins and outs of the law.
An experienced attorney can help you negotiate the terms of the transaction and protect your interests. For example, if you’re leasing a property, your lawyer can make sure that the lease is fair and favorable to you.
They can also help you resolve any disagreements that may arise during the transaction, file any necessary paperwork and draft any contracts.
Get a Loan Pre-Approval
If you’re planning on financing a commercial real estate transaction, it’s a good idea to get pre-approved for a loan. This will give you an idea of how much money you’ll be able to borrow and what interest rate you’ll be paying.
It’s also a good way to show sellers that you’re serious about buying the property. In some cases, sellers may be more willing to negotiate on price or terms if they know that you have the financing in place.
Keep Records and Documentation
Throughout the course of the transaction, you’ll want to keep records of all communication, contracts, paperwork, and payments. Having documentation will help you keep track of the progress of the transaction and ensure that everything is going according to plan.
These records will also come in handy if there are any disputes down the line.
Conduct a Final Walkthrough
Before you finalize the transaction, it’s a good idea to conduct a final walkthrough of the property. This will give you a chance to inspect the condition of the property and make sure that any agreed-upon repairs have been made.
During the walkthrough, pay attention to things like the condition of the walls, floors, ceilings, and fixtures.
If you can, do the walk-through with a building inspector, or at least a business partner. This is so that you have another pair of eyes to catch any damages.
These are 5 tips to help you conduct a commercial real estate transaction. By following these tips, you can greatly increase your chances of a smooth and successful transaction.