Most Common Financial Challenges after Choosing a Commercial Property
harkins / March 19, 2018
Buying and leasing commercial property is a serious financial undertaking. Unfortunately, after the ink has dried on the paperwork many common challenges may still exist. Here are a few of the most common financial challenges that occur after choosing a commercial property to buy or lease.
Changes in Funding Arrangements
It is impossible to be prepared for every financial contingency. The particular commercial endeavor in the property may require some form of government permit or zoning variance. Interest rates may go up, raising the mortgage payment for people with variable rate loans. Property tax rates may be depended upon to rise. These alterations in funding arrangements have the potential to disturb one’s finances. It is essential to keep funding in reserve to meet challenges such as these.
Damage and Hidden Costs in the Property
The reason why most loans on commercial property require such thorough inspection of the land and the facilities is that commercial properties have a way of concealing any number of enormously expensive problem. Sometimes these conditions are concealed by the seller, but most often they are caused by problems that previous owners were unaware of. A tiny leak in a pipe buried far under a commercial property can, over decades, cause such extensive foundation damage that the property must literally be condemned. Although this sort of misfortune is rare, there are many emergent issues that have the potential to cause costly damage. They are best prevented with expert inspection and timely maintenance.
Changes in Economic Conditions
Critical issues such as taxation, insurance rates, utilities, and the interest on commercial loans all have one thing in common; they are almost completely out of the control of the commercial landowner. One simply hopes for the best and adapts to changing situations. Although it is somewhat remunerative and morally satisfying to stand up against unjust applications of tax codes, zoning, and other governmental missteps, the effort put into this project must always be balanced against the utility gained. Of course, the vast majority of true economic disturbances are beyond even these modest means of redress. These inclement economic conditions can have a direct and measurable effect on profit and loss. Maintaining reserves of funding are the only way to face unforeseeable problems such as these.
The experienced commercial real estate brokers at Harkins Commerical Real Estate can help you prepare for and avoid these financial challenges by providing you with all the information they can. Call today to learn more.
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