Before we work with any client looking to buy a building, we ask them to go to the bank and determine how much of a loan the bank will give them. Some of our clients end up talking with a teller or bank manager who doesn’t really know how to do this. They will tell them to come back when they have identified the building and have a signed purchase agreement. You need to make sure you are talking to someone at your bank that is in the commercial real estate department.
If you want a lower down payment than their standard, you also need to find out who handles the SBA loans where only 10% down is required. The banks will usually allow you to put any construction costs into a loan, so you need to know what improvements your building will require. Don’t waste time running around looking at buildings you can’t afford.
Also make sure you have plenty of time to find that building. There are fewer for-sale inventories for smaller office, retail and industrial buildings. Since the economy is heating up there are less and less buildings under 10,000 s.f. for sale so be ready to make offers quickly after you find them.
When you find the perfect building, have your agent put a letter of intent (bid) together. If the offer is accepted, then you can set a timeline to negotiate a purchase agreement. If you obtained the mortgage amount up front, you will be assured you can close in a reasonable amount of time.