Deciding to purchase a commercial property is a huge investment and it is important to have all your affairs in order and ready before you start the process.  Here are some Dos and Don’ts to consider before you start the process.

• Do be prepared before you start the process of buying a commercial property.  Start with a thorough list of what exactly it is you are looking for and wanting in a commercial property.  For instance, do you want an office space or a store front; do you want a property with or without tenants; and what is your intent for the property?  These are just some of the questions you should have answers for before you begin your search.
  

• Do talk with a mortgage lender and get pre-approval before you start your commercial property search so that you have a clear idea of the price range for which you qualify. 
  

• Don’t just go to any mortgage lender.  Instead, make sure you work with a mortgage lender that is familiar with process of commercial property loans.
  

• Do have a lawyer you trust that can be ready to advise you throughout the process.  You will want your lawyer to go over all paperwork and contracts.
  

• Do register at www.commercialdex.com and login to research the Commercial Dex listing before you begin working with a real estate agent.  This will give you a heads up on what areas are in your price range and what properties are ideal for your search.
  

• Do work with a real estate agent who specializes in commercial properties.  Agents who specialize in commercial properties will be more knowledgeable about commercial areas and about the process of buying commercial property verses residential properties.
  

• Do become familiar with the surrounding business communities for which you are interested.  Learn about whether businesses have strived or failed before considering any commercial properties in that area.
  

• Do become familiar with the property before you consider purchasing.  This includes knowing the capitalization rate, or the Cap Rate as it is often called, of the property.  The Cap Rate is the percentage of annual return produced from the property in its current market value.  Knowing the Cap Rate will give you a good idea of how long it will take for your investment to pay off.  The Cap Rate is calculated with a simple formula: Cap Rate = annual net operating income / cost (or value).
  

• Don’t sign anything without having your lawyer’s review first; this includes the letter of intent (LOI) regarding the property and any and all contracts.  A LOI is a document that basically states your intent with the property.  A good lawyer will be able to make sure the LOI is not binding in the case that something goes wrong down the line with the contract.
  

If you follow these Dos and Don’ts, you should be ready to start thinking about your investment in a commercial property.  The most important thing to remember, though, is that you are making a sizeable purchase and it is imperative that you are very diligent throughout the process.

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