Dangers of rushing into a commercial real estate purchase

It is easy to have ownership of a building through commercial real estate firms. However, most clients usually don’t have an idea on the possible dangers that such a building can carry. In order to avoid such dangers, you should know them because you can’t prevent a problem you don’t know. Some of the problems that 3cre.com can help you avoid include:


Commercial real-estate properties are costly and it is difficult for an average person to afford. Most first-time investors use leverage to get into this business. Sometimes this technique works fine and the investor manages to get equity quickly and acquires more properties. However, over-leveraging can come at a cost. If you are such an investor, you should know that anything is possible and as you with for the best, you should also be prepared if the value of the property goes down or if the interest rates change. This downside that you can possibly face is known as negative leverage. When it happens, your amount of equity instantly reduces and it can leave you with little equity or nothing at all.

Zoning changes

Government changes zoning laws from time to time in response to the changes in populations of towns and cities. You can invest in a commercial property only to be surprised when the zoning laws change your neighborhood to residential area. If the building can’t be converted to a residential building easily, you will spend a lot of money changing its look and room partitions. You can also decide to sell it to a new developer but it will be at a loss since the capital needed to refurbish the building might be taken into consideration.

High maintenance cost

When purchasing a building, you need help form experts to determine its conditions. If you happen to purchase an old building, don’t be shocked when you discover it has leaking sewerage pipes, old tiles, old furniture and other problems that will need your attention. A building with such issues will require maintenance and the more the number of rooms you do some repairs, the more the money you need for maintenance.
Vacancy rates
Unoccupied rooms in a commercial property reduces profits from such an investment. Choice of the type of investment is key when choosing the type of property. If you have a vacant residential property, it will take a few days to get a new tenant. However, if it is a bigger property like a warehouse or an industrial property, it will take months to get a new occupant. You should also avoid Properties whose lease is about to expire because they also face a high vacancy rates and their property value is always low.
Environmental problems
Human being need a safe and clean environments so that they can have good health and fitness. Some properties can be contaminated with toxic pollutants or hazardous materials. Contamination can result from a polluting firm in the neighborhood, poor waste disposal, leakage of dangerous materials from storage tanks, heavy traffic and other sources of contaminants. Contaminated areas will drive away potential tenants and customers and you may end up counting losses.
Some properties are also built in areas that are polluted such as former dump sites or decommissioned factories. Such properties will make the occupants to complain about some health problems after some time. If you are the investor, some people can possibly sue you for such problems and you will end up paying them or even in prison.
Problems with ownership documents
It is possible for a property to have multiple owners at the same time. Some real estate firms can accidentally or intentionally sell a property to more than one person and you need to have an attorney when purchasing them. You should also check the documents to make sure that there is no one else claiming an interest in the property. You should also check for the agreement between the former owner of the property and the local government to ensure that the property is legal and the former owner paid the required tax. Some properties have documents that disclose some of the activities that cannot be allowed in the building. This will restrict what you do with your building and it can cause losses.

A building has many vital intangibles that you need to know before purchasing it to avoid unpleasant surprises. Ensure you check the zoning laws, ownership documents and other requirements needed before purchasing a property.