5 Mistakes to Avoid When Buying Commercial Real Estate in New York
We all make mistakes, but learning from them makes us better. That's especially true with real estate. Despite the impact of Covid-19 on the global real estate industry, the commercial real estate market in New York City remains incredibly competitive, and mistakes will happen if you don't have enough information.
Below are six mistakes I see rookie and seasoned investors alike make when buying commercial real estate in New York. Before reading, I want to note that this is a list of mistakes.
I am not saying that every company or situation mentioned will be a bad investment, but here are several examples of the above scenarios.
1. Avoiding a Commercial Real Estate Broker
If you're new to the commercial real estate game, you may want to avoid using a broker. However, working with a real estate broker when buying commercial property is important. They know the market, can help you find the right location, and negotiate the best price. Also, commercial real estate broker services come at no cost to the buyer - they get paid by the owner while protecting your interest when buying office or industrial properties.
For example, if you’re looking at residences with outdoor entertainment spaces, it's crucial to find a broker who specializes in those properties. And since you’re focusing on the New York market, they'll also guide you through the process of buying commercial real estate in the city while helping to ensure that everything else goes smoothly.
For example, if you’re looking at residences with outdoor entertainment spaces, it's crucial to find a broker who specializes in those properties. And since you’re focusing on the New York market, they'll also guide you through the process of buying commercial real estate in the city while helping to ensure that everything else goes smoothly.
2. Failing To Budget Enough for Both the Property Itself and Renovations
You may be tempted to cut costs by saving money on renovations, but this is not a good idea. If you don't have enough budget for renovations, your business could suffer if the building doesn't meet your needs or if it takes longer to get up and run than expected.
Say you’re eyeing the presently lucrative commercial real estate for sale in Staten Island, NY; try to get an estimate from an architect before signing any contracts to understand better what renovations will cost. If you're buying one that needs significant repairs, negotiate into your contract to have these repairs done within a specific timeframe (such as six months).
3. Not Understanding the Zoning and Land Use Laws
Zoning laws are important because they dictate what type of business can operate within a specific area. If your property is zoned for manufacturing, for example, you won't be able to operate a nail salon on the same premises as a factory.
You also need to check out what kind of businesses are allowed within each district and whether you're allowed to build something that falls outside those guidelines — like a new retail store or restaurant.
4. Not Thoroughly Reviewing the Lease Agreement
You should also thoroughly review all lease agreements before signing them. These documents contain details regarding rent payments, utilities, equipment requirements, and more.
If there are any problems with these agreements after signing them, they can cause significant complications when trying to sell or lease out your building later on down the line.
5. Having No Concrete Exit Plan
If you're buying a building, you need to plan for the future. Even if your business doesn't grow as fast as you'd like, it's vital to have an exit plan in case things don't work out.
And while this may sound obvious, many people don't take the time to put one together before buying a commercial property. This practice will protect you from hidden surprises or issues lurking within these documents and ensure that everything is upfront and clear from the beginning.
Takeaway
If you, or someone you know, is currently looking to purchase a commercial property in New York City, I hope the information in this article proved helpful. NYC is an expensive and competitive place for commercial real estate.
Still, with a little bit of preparation, you can feel comfortable knowing that you're making the right decision for your business.
