Investing in commercial real estate comes with its fair share of challenges. Beginners are unaware of where to buy commercial property or who to contact. Today, we will shed light on all the dos and don’ts you need to know. This buying commercial real estate checklist will make the process significantly easier and keep you safe from making mistakes.
The most common types of real estate in Pakistan include shops, offices, plots, and warehouses. If you are confused between residential and commercial real estate and can’t decide which is more viable for you, make sure you weigh your pros and cons before reaching a final decision. Regardless of your personal choice, the benefits of buying commercial real estate in Pakistan cannot be underestimated.
Commercial real estate is no child’s play, and the whole process of property evaluation is time-consuming and overwhelming at the same time. Therefore, one must consider various factors before leasing or buying commercial real estate. A checklist will help you keep track of everything you need to do so you don’t make any blunders.
Here’s our purchasing commercial property checklist to help you start a safe journey of investing in commercial real estate.
Before anything else, collecting information about the property is the most crucial step. You should carry out due diligence and collect the basic data, which includes gathering information about the size of the property, floors, property type, commercial units, parking size, availability of civic amenities, zoning, and the NOC issued by the respective authority.
Once you have gathered the basic data, proceed with cross-checking the information. Never rely on a single source when it comes to commercial properties, and always consult multiple sellers or real estate agents with public data for verification.
You can consult with the Sindh Building Control Authority (SBCA) or Karachi Development Authority (KDA) in Karachi. Similarly, the concerned authorities for Lahore and Islamabad are Lahore Development Authority (LDA) and the Capital Development Authority (CDA). Verifying all pieces of data is extremely important instead of relying on the information the seller provides you with to safeguard yourself from any mishaps down the road.
The type of commercial property most suitable for you depends on your preferences and areas of interest. Commercial properties are classified into retail, industrial, and commercial offices.
Your Return on Investment and the risks associated with it will be determined once you have decided on the type of commercial property you wish to purchase. This choice assists you in the subsequent stages of the purchase decision. Once you analyze all the factors and come to a decision, the next step is location research.
Initially, the neighborhood’s condition should be checked. The most fundamental and necessary step is location, as the whole buying decision hinges upon the property’s location. Taking into account factors such as refurbishment and extension ensures your buying satisfaction. It is critical to consider all environmental rules when purchasing commercial real estate. Most property investors consider this as a safe way to avoid any expensive maintenance or repairs in the future.
The third item on our buying commercial real estate checklist is inspecting the structure, facilities, and utilities. A commercial investment costs a lot more than buying a residential property. Therefore, it is recommended to consult licensed inspectors to assess each component of the building’s structure. It is an all-inclusive inspection, which includes the foundation, walls, roofs, doors, windows, electrical systems, waste management systems, water supply, gas connection, fire safety system, phone lines, and other facilities.
Hiring professionals to inspect molds, termites, or other kinds of infestation is also recommended. Whether you have substantial real estate experience or are new to the business, hiring experts will always keep you safe. If the commercial property lies within a residential area’s premises, remember their bylaws during the inspection.
The property’s market value is the price at which it might be acquired on the open market. Stamp duty is charged on the market value, and it is collected by the government.
The transfer or sales deed registration varies depending on the city or province where the property is located. Therefore, if you are buying real estate outside your city, make sure you understand the governing laws and check the established forms of registration rules.
If you plan to invest in a building already occupied by multiple businesses, let us tell you it has its fair share of pros and cons. The best part is that it doesn’t require advertising or hunting new tenants, as you can simply renew their contracts. At the same time, you might have to make amendments or even abort certain contracts to ensure your rental income is smooth. Therefore, you should gather information about the current tenants and evaluate whether they suit you.
Before signing any contracts, gather as much information about the tenants as possible. Make sure you know the details of their business and how they operate. You must also verify the last monthly rent, utility obligations, and security deposits. It’s essential to examine the financial stability of each tenant to ensure they do not hinder a smooth income flow and meet the rental deadlines. Studying the tenants’ business model will also help you understand their ability to meet deadlines.
Additionally, commercial rental agreements last for a long time. Therefore, you should also verify every tenant’s outstanding liens and litigations. If you discover any business has a history of financial or legal troubles, inquire about the seller regarding their contract details. Not doing so may have an adverse effect on your property’s reputation and rental yield.
Another essential step you must not leave is reviewing all the non-physical aspects of the property. Before making a decision, review building permits, approved plans, environmental assessments, building code violations, architectural drawings, zoning documents, and financial statements. You can request information regarding past and present litigation concerns to be on the safe side. Reviewing various service contracts is also a great idea. Verify these contracts and check whether or not you are allowed to terminate them without getting a penalty.
Lastly, you need to receive and verify the original documents of the property. The list of documents you need before moving ahead with the purchase has multiple items, so be sure you don’t skip any.
You will need:
Whether you’re purchasing or leasing commercial property, take additional precautions to ensure you don’t overlook any aspects, no matter how little they appear. Furthermore, while hiring professionals for building inspection may be expensive, this cost won’t account for anything in the future. However, if you fail to carry out due diligence and some issues arise in the future, it will cost you a fortune. So make the smart choice and safeguard yourself and your investment by taking expert assistance.
With that, we have reached the end of our buying commercial real estate checklist. Follow it and make a decision that promises you a high ROI. It is also recommended to go for renowned names like Chapals Builders while investing in commercial properties so that you know your hard-earned money is safe and secure.