Real Estate

Four Effective Negotiation Tips when Buying a Commercial Property

If you are planning to buy a commercial property, negotiating the purchase can be tricky as you need to take into account many things. These include the amount to pay for the asset, whether the commercial property has a tenancy in place, the leasing terms, and more. If you are not a pro to negotiating, you may find these considerations nerve-wracking. Below are some tips to help you when dealing with trick negotiations and how to use them to your advantage:

Determine the Right Commercial Property for You

A number of commercial properties provide substantial depreciation opportunities on equipment and plant. Property owners can use these opportunities to offset taxable income. Other properties are likely to provide strong returns and are bought based on rental income. You will find your search for a commercial property easier if you understand your investment requirements. Also, this will let make strategic negotiations. You can get more helpful advice from Béatrice Baudinet.

Investigate the Asset’s Historical Performance

Undertaking independent research and investigating the historical performance of the asset you are planning to buy will help you assess their worth. Look at the performance of the property over many years and evaluate its capital growth performance and yield. If you discover discrepancies, these can give you room to negotiate.

Analyse the Leasing Documentation

This will help you know about any pending or outstanding lease renewals. A number of leases might be near the end of their agreement and you or your property manager will have to look for new tenants or deal with the renewal. When you review lease documentation, consider the potential of some tenancies to support an asset’s success.

Moreover, make sure you also review the tenants’ payment history and whether there are payments in arrears. This will help you evaluate proper management or tenant quality.  Negotiating with the current owner of the asset will help you collect or settle an outstanding debt or account for this in the final purchase price.

See if the Rent Commensurate with the Market Rate

Commercial property owners must set a fair and reasonable rent which reflects the geographic area, sector, and size of the property. In case the rents are higher than expected, check if the agreement permits a rental review or if the lease is nearing completion. Sometimes, a tenant is likely to pay a higher rent to the landlord to repay a fit-out that the former funded. In case the agreement is terminated by the tenant, see if the lease protects the landlord and stipulates reimbursement for the landlord.

Author Since: Mar 17, 2019

Related Post