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Steer Clear of These Commercial Real Estate Deal Breakers

If you're searching for a new or larger space for your business, here's what you need to know before signing on the dotted line.
Steer Clear of These Commercial Real Estate Deal Breakers
Image credit: Justin Sullivan | Getty Images
By Entrepreneur Partner Studio Staff

Maybe you’re looking for a physical space to set up shop. Or you’re in growth mode and looking for a larger office or store that can allow your company to flourish. Whatever your particular set of circumstances, we all know that plenty of hard work goes into finding the perfect property that meets your business needs.

To help ensure that your next commercial property-buying experience goes well, Entrepreneur spoke to William Brown, 2017 president of the National Association of Realtors®, who identified a few deal breakers that you should be aware of before you sign on the dotted line.

Signs of problems

During property tours, take a serious look around. You aren’t being paranoid. After all, you have to match up attributes of properties with aspects of your business. It’s the normal thing to do. And of course, you have to be on the lookout for flaws.

A crack in a plaster wall or on a basement floor could be a sign of serious damage to the foundation. Pay close attention to musty smells or dark spots around windows or in bathrooms, which could be indicators that the building you’re considering has mold damage.

“If you lease a building that's physically impaired and or has mold issues, you're just buying yourself a ton of headaches,” Brown says.

Also, look for water stains or other evidence of leaks that could leave you on the hook for major repairs after the first rainy day. The right property inspector will be able to spot these things, but the wrong one may overlook them. Brown recommends working with a Realtor®—a member of the National Association of Realtors®—who can join you in reviewing properties with a fine-toothed comb.

Poor property management

Business owners who lease their workspaces are at the mercy of building owners and property managers. It’s important to know exactly what you’re getting into long before you commit to a lease, since it can be difficult and costly to get out of it. As with your search for property to buy, you should inspect rental properties closely for signs of poor management. Does the manager ensure exterior landscaping is maintained year-round? Are there indications of neglect? Conduct your property tour with the same scrutiny you would if you were taking ownership and you’ll avoid tying yourself to a bad lease.

“Find out how well the owner of a property responds to their tenants' needs because stuff does go wrong,” Brown says. “It doesn’t hurt you to speak to some of the other tenants who are there to make sure that they’re happy with their property, that their light switches work, their outlets work, that they don’t have any problems with water or electricity.”

Hidden fees

Sellers and property managers can be sneaky when they’re trying to fill office spaces. You may find there are hidden fees, such as utilities you thought were included in the monthly lease. Before renting, it’s important to ask leasing managers to clarify in writing any fees that are your responsibility as a tenant, including maintenance costs and parking.

Brown also stresses the importance of getting the best deal possible when agreeing to a new lease. One idea is to take over someone else’s lease if they have vacated the office.

“Especially if a space has been vacant for more than six months, I’ll guarantee you that owner wants to rent the space and it’s a good time to make a deal,” Brown says. “Let’s say it was renting for $1,000 per month. They would lose $1,000 every month having it vacant.”

Brown says that by working with a commercial real estate professional, many businesses avoid some of the issues that they would normally run into when buying or leasing a space on their own. However you decide to approach your property search, though, it’s important to make sure you get everything in writing and carefully read all contracts before signing.

A Realtor®—a member of the National Association of Realtors®—can help you find the right place to grow your business.

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