A Giant Gift Horse
Commercial property is one gift horse you need to look in the mouth. And...you’ll need a team. If you’ve never been in the world of commercial property, you need experience and expertise to guide you in your decision whether to keep the property or sell it and move on with your life.
You may have dreams of the extra income the property will provide or love the idea of owning property other than your home.
Whether you’ve inherited a stripmall, industrial property, or an apartment complex, you need to start with a realistic understanding of the property as it exists now to make a decision.
Create A Team
Commercial property is just that, commercial. Owning and managing commercial property is a business. And, like any business you’ll need professionals to help you evaluate and manage the property.
The first step is to understand what you own. A team of advisers can help you comprehend your new inheritance property.
An accountant can help you understand the financial history of the property by reviewing the financial statements. Or, if there are no financial statements, reconstructing a history. Either way you’ll understand the income, expenses, and ongoing maintenance requirements. These numbers give you a clear financial picture.
You need to balance the financial flow with the current value of the property. An appraiser will help you understand the current use and any potential alternative uses for the property. For example, if the property has vacancies or leases below market value, you may want to add value by increasing occupancy or updating leases to the current market.
An attorney can review existing leases or evaluate the turnover to determine what options you have. Your attorney can help your with zoning and other local compliance like parking access and permit requirements.
Real Estate Professional
A real estate agent can provide potential buyer interest, supply current leasing rates, and the viability of the property within the area. A broker can evaluate existing leases and help with negotiating new leases if the old ones are below market rates. Make sure your agent or broker is experienced in the commercial market. This is not the time to help Aunt Susie’s friend get going in her real estate career.
Another professional you may need on your team. A lender can help you refinance an existing debt on the property, or establish a cash-out if the property is free and clear. If you decide to keep the property, a cash out can help with repairs and upgrades.
If all these professionals sound like a big team, they are. And you’ll need to add new members to the team if you decide to keep the property and enter the world of commercial property like an insurance agent, a property management company and/or a maintenance company.
The Building Inspector Low-Cost Evaluation
One of the first steps in deciding whether to keep an inherited commercial property is to get an independent, objective evaluation of the current physical state of the property. As you meet with the professionals on your team, you’ll have a starting point for your evaluation.
An appraiser looks at the property with an eye to the current market. But, an inspector looks at the physical condition of the property — exterior, interior, plumbing, electrical system, HVAC, roof, foundation, and more.
The dated written report is a legal document representing the findings. It will list any needed repairs or upgrades and their urgency. Because the inspector operates independently, he works for you to give you an objective picture of the current structural and safety conditions of the property.
The report helps you keep conversations real as you meet with potential professionals to consider adding them to your team.
The Big Decision
Yes, there’s a lot to think about. Business decisions are rational and impact your personal activities and your well being. Whether you loved or hated the person who left you the property should not be a consideration.
You need to decide if the business of owning and managing commercial property is right for you. A team of professionals can help you evaluate the pros and cons of entering the business world of commercial property.
As a business owner, you are in charge. You’ll seek advice from the professionals on your team and you’ll be managing their recommendations as well as the property. Take these management interactions into account as you decide whether to keep the property or sell.
Take the first step. Find a commercial property inspector at Inspect.com the search tool for all inspection requirements. Know what you’ve inherited.