Clear title - A title is one of the two most important documents for the purchase of a commercial property.
It grants the owner rights to the property.
A deed is the transfer of ownership.
A clear title is any property free of any competing claims, mortgages, liens, and encumbrances.
In simpler words, a clear title means that the property is owned outright by the seller and there are no outstanding claims or issues that could potentially complicate the transfer of ownership to the buyer.
Capital improvements—Additions to the property or improvements that enhance or extend the useful life of the property.
Capital improvements are permanent structural changes to a property.
They enhance its value, increase its useful life, or allow for a new use.
They are not simple repairs.
What is the difference between repair and capital improvement?
Repairs and maintenance can transition into capital improvements when a project exceeds minor fixes.
Improvements can encompass entire structures or specific components. Improvements lengthen the building's lifespan or add value...
ARREARS—Money that is due or past due but has not been paid.
It is the state of being behind or late, especially in the fulfillment of a duty, promise, obligation, etc.
Many businesses/homeowners have fallen into arrears.
Simply - something overdue in payment or a debt that remains unpaid.
A commercial real estate broker or a real estate lawyer can help you determine if there are any arrears owing on potential property.
AMENITIES—The details that factor into the sale price or rent calculations and include features around a property that make it more attractive, useful, desirable, and/or rentable.
An amenity is a feature of a property that can make it more valuable to potential buyers or tenants. Amenities are commonly used in the real estate industry and can be found in property listings.
And last, but not least - amenities can be public or property-specific.
APPRAISAL or APPRAISAL ESTIMATE—The process that leads to an estimate of the value of a property and can also refer to the report that states the estimate and conclusion of value.
An appraisal provides a reliable estimate of an asset’s current market value and is necessary to obtain financing from a bank. Understanding the pros and cons of getting a commercial real estate appraisal is essential for making the right decision.
Buying commercial real estate is a huge undertaking, and knowing the ins and outs can feel overwhelming. Working with a commercial realtor will give you the expertise necessary to make a smart decision.
Here are some initial terms to know before purchasing commercial real estate.
I will share them over the next several weeks.
ACQUISITION COST—The total cost to the purchaser of a property, such as soft costs and sales costs. These costs recoup the upfront costs of performing due diligence on a potential property.
Have other real options you can move into.
Who is in the driving seat in your case?
Generally – the landlord.
Just like negotiating the original lease, you need to have real and viable options to create some type of leverage with the landlord. This way, if negotiations aren’t going well, you have an actual threat to move that is realistic.
How to prepare yourself for such negotiations?
You don’t need to do a full-on property search that requires a crazy amount of time to have a viable option. An online search and some back and forth with a landlord are all it takes. You can meet...
Don’t stay because moving is more expensive.
Here you go: your lease term come to an end.
With the new lease, you can probably save your company money if you are moving to somewhere that is considerably cheaper and offers a fairer deal compared to the market. It might be quite a large sum of money over the years. Think about it.
Moving is indeed a pain. It’s disruptive and takes time.
But consider this: a space that is way too expensive or bad for the company is worse than those things.
If you aren’t getting a fair shake in the next place, it will benefit over time your company...
ABCs of commercial real estate: market situation.
Pay attention to your market.
The local market ups and downs play a significant role in the process of negotiations of the lease renewal.
There are possibly already rent escalations in your lease that should be coordinated with the market, but they still can be renegotiated.
Since commercial real estate is dynamic the market can rise and fall. This is why opting into your renewal clause isn’t always a good idea.
Knowing the rent rates and square foot prices in your area is required. This is a big part of negotiations and can give...
Pay attention to the renewal clauses in your lease.
One should expect that there is a renewal clause in the original lease.
From my observations - many tenants will blindly just accept it once the time comes, locking them in for a few more years.
It can be a good idea, but that’s not always the case.
Negotiating this clause into your original lease is one thing, but the market changes rapidly and possibly will look a lot different when it comes time to renew.
Tenants can pay over-the-top prices with this clause.
They often accept this without realizing that the price has risen...
