Investing in commercial real estate can be a great way to generate income and build wealth. If you’re a first-time commercial real estate investor, it’s essential to understand the transactions involved. This blog post will explore the different types of commercial real estate, the transaction process, and tips for navigating it.
What is Commercial Real Estate
Commercial real estate is any property used to generate a profit, including warehouses, office buildings, shopping centers, apartments, and hotels. This type of real estate can be an attractive investment opportunity because it can generate income through rent payments, asset value appreciation, and other revenue sources. However, commercial real estate can be more complicated than residential, so working with an experienced commercial real estate attorney in your area is advisable.
Types of Commercial Real Estate
Commercial real estate is a broad term that covers various types of properties. Some of the most common types of properties involved in commercial real estate transactions include:
- Office buildings
- Shopping centers
- Industrial properties
- Multi-family properties
- Office space
- Hotels and resorts
- Medical offices
Steps in a Commercial Real Estate Transaction
Commercial real estate transactions are complex, involving multiple parties and numerous steps. Here’s an overview of the steps involved in a commercial real estate transaction:
- Create a purchase agreement: After an offer is accepted, buyers and sellers sign a purchase agreement, which outlines the details of the transaction. This agreement includes information about the price, financing terms, timeline, buyer’s and seller’s obligations, contingencies, and other provisions related to the transaction.
- Open an escrow account: The buyer deposits money with a third-party escrow company to demonstrate their commitment to the transaction. It serves as security for both parties. Escrow for a commercial deal is more tightly controlled than residential real estate sales. No funds from the account are released until both parties meet the terms they’ve agreed on.
- Buyer receives books and records: Buyers should ask for a complete set of financial and operational documents from the seller to ensure they understand the property’s condition before the closing. This may include financial statements, tax returns, leases, permits, licenses, surveys, and appraisals.
- Inspect the property’s physical condition and title and negotiate buyer’s contingencies: Buyers should inspect the property and thoroughly review any liens or other encumbrances on the title before moving forward with the purchase. Buyers can also negotiate contingencies with the seller that they must meet before closing.
- Apply for a loan: If the buyer requires financing, they need to apply to a lender who will determine whether they are eligible for a loan and at what terms. Generally, buyers don’t make a non-refundable deposit with their lender until after contingencies are met.
- Close the transaction and notify tenants: Once the buyer has completed all inspections and the lenders approve the loans, the transaction is officially closed, and the title changes hands. The buyer should notify all tenants of their new ownership.
Speak With a North Carolina Commercial Real Estate Attorney
If you’re investing in commercial real estate in North Carolina, it’s essential to consult with a knowledgeable and experienced attorney. At Mullen Holland & Cooper P.A., our team of attorneys has experience in all aspects of commercial real estate, from contract negotiation and drafting to due diligence and financing. We understand the complexities of real estate laws in North Carolina and can help ensure that your transaction runs smoothly and efficiently. With our help, you can be sure that your interests are protected and that any risks are minimized. Contact us today to learn more about how we can help with your commercial real estate transaction through a legal consultation with a North Carolina real estate lawyer.