While purchasing or leasing any type of real estate involves risks, buying commercial real estate requires additional attention. One important factor affecting Missouri commercial real estate purchases is the fluctuating market. Although a commercial property could have a high value one year, it may plummet in price another year because the location may no longer be desirable.
When making commercial real estate acquisitions, it may also be a good idea for buyers to consider the property’s liquidity. When people place all their business assets into their real estate, they may be hindered from quickly converting the property’s value into cash. However, if they can leverage their assets, they may be able to raise cash to invest in additional real estate or other projects.
Those who are considering investing in commercial property they plan to rent out to tenants may face difficulties such as tenants who are delinquent in paying their rent, expensive and unexpected repairs, and maintenance costs. These issues could cause property owners to incur legal fees and significantly hinder their cash flow. Potential buyers should perform due diligence prior to committing to purchase the property. Issues such as third-party access rights could put the investment at risk.
There are many benefits involved in purchasing commercial real estate, such as asset appreciation and tax concessions. However, there could also be complex issues to arise, such as zoning and boundary issues that could hinder the investor’s plans. An attorney who has experience with these types of matters can often assist in performing a thorough review of the property in order to spot potential problems before they arise.
Source: NuWire Investor, “Buying Commercial Real Estate: a Beginner’s Guide”, Nov. 4, 2016