Guide to Buying Commercial Properties in Florida
Commercial real estate transactions are daunting for novices and experienced investors alike.
The bidding process is complex, requiring in-depth research and planning. Surprisingly, the highest bid doesn’t guarantee you the deal. In most cases, it only gets you to the final table. Bidding wars can take weeks, while the transactions can take months or even years to complete.
What’s more, buying commercial real estate at can be a great way to get incredible returns on your investment.
Below are some tips to guide you through the process of buying commercial properties in Florida and increase your real estate portfolio.
1. Work with a Commercial Real Estate Agent
Bring an experienced commercial real estate agent to help you through the process. There’s a lot you need to know about buying and selling commercial property, be it office, retail, or hotel real estate. The legal implications of not knowing could leave you stuck in a deal that’s bad for business.
Commercial agents have a unique understanding of the factors that come into play in the commercial market. But that doesn’t mean any commercial real estate agent with a license will be the right one for the job. Partner with an agent with experience in the Florida commercial real estate industry, particularly in the local area you’re looking to do business.
2. Dig Into the Offering Memorandum
A well-written, accurate offering memorandum (OM) benefits both the issuer and the investor. It describes a property that is being “offered” for sale in extraneous detail, providing a detailed overview of what you can expect from the investment. The OM will also include information about existing problems with the building. Having said that, you cannot rely on the OM alone as it’s often authored to paint a rosy picture of the investment property.
3. It’s All About the Money
The last thing a seller wants is to go through a 90-day due diligence process only for the deal to fall apart at the last minute. If you successfully bid for a property, you’ll be required to put down a deposit. It’s important to have the cash ready and to be flexible with the amount you’re willing to spend on the venture. There’s no harm in haggling the price when it comes to purchasing commercial real estate.
Also, make sure you’re getting your money’s worth. The biggest issue you must consider about the purchase is the stickiness of the tenancy. Rent delinquencies are a big issue, so it’s important to evaluate the tenants as well as their contracts and whether any improvements can be made to improve your revenue.
4. Make a Good First Offer
Being among the first interested parties to make an offer helps you stand out as a serious buyer. The offer amount is, of course, important, but the seller of the property also wants to know how much work you’ve put into the offer. Make sure your first offer covers all the bases and the benefits you have to offer. It’s important to perform a level of due diligence beyond what is provided in the OM before getting to this point.
5. Think of the Buying Process as a Race
The buying process involves a number of factors, like underwriting and several due diligence meetings. Even for a property in good condition, the bidding process can last anywhere between six months and a year. There is no set time frame for a commercial real estate bidding process.
After the initial offer, the seller will reduce the number of interested parties. Once this is done, it’ll be time for a more in-depth buyer interview. Each buyer has something different to offer – one may have the highest offer while another may be able to pay faster. The sellers will also perform their due diligence to ensure they get the best deal possible.
So, your goal is to create a great sales pitch to convince the seller that your deal is the best one on the table.
6. Hire the Right Experts to Represent You
Buying commercial real estate property is a drawn-out, complicated process. You’ll need more than a qualified broker to streamline the process. Consider bringing a real estate attorney, an environmental firm, and an inspector experienced in the specific type of asset you’re buying on board.
Make sure your team goes the extra mile and is comfortable with all aspects of the building and the transaction before signing on the dotted line.
7. Know When to Walk Away
Still, it’s important to know when to walk away. You must draw the line somewhere regarding how much money you’re willing to invest in a specific property. Assess its value and determine whether the long-term benefits will be worth it – you do not want to overpay for a property.
That said, entering into a deal and then backing out may be viewed as “bad faith” and could affect your reputation as a real estate investor, making it more difficult for you to participate in future transactions. But remember, the deal sheet is not binding and can be broken by either party.
Bonus Investment Tip: Connect with Sellers When Buying Commercial Property
Attend pre-bid meetings, seek clarifications and make the time to introduce yourself to the sellers. You don’t want to be just another offer on a page.
Partner with Anthony Maccaroni for a smooth bidding and closing process. Anthony specializes in multi-family, hotel, and motel real estate investments in Pinellas County, Clearwater, Clearwater Beach, and Palm Harbor. Get in touch so we can diversify your investment portfolio today and find the best commercial real estate property for your investment goals.