Commercial real estate is a broad term describing real property used to generate a profit. Examples of commercial real estate include retail buildings, office buildings, warehouses, industrial buildings, apartment buildings, or “mixed-use” buildings, where the property may include retail, office and apartment spaces. Essentially “commercial” applies to any property that you use to grow, expand or support your growing business.
The Pros and Cons of Investing in Commercial Real Estate in NJ
Pros
- Fixed rates agreed upon on the term of a mortgage. There cannot be a market rent increase imposed on your commercial space.
- Certain tax breaks. There could be potential capital gains and expense deduction such as mortgage interest and property taxes that an owner can implore to receive the most back from taxes.
- Total control over your commercial space. When you own a commercial building, you decide what is done with your investment including renovations for a growing company.
Cons
- Time commitment. If you have tenants you have the responsibility to manage those renters in order to maximize on your commercial investment.
- A licensed professional is required to maintain commercial properties. Maintenance issues must be conducted by someone with a license in that area of service.
- Substantial initial investment.A commercial property requires more capital. Capital expenditures and maintenance often require huge initial capital.
- Personal injury risks. Commercial properties have more public use which raises the risk of someone getting hurt.
Considerations for Buying Commercial Real Estate in NJ
Buying commercial real estate is a complex undertaking with a myriad of purchasing strategies to take into account. A good real estate agent who specializes in commercial properties can help you find the right location and property investment. From a legal standpoint it’s important to keep these elements in mind when buying and selling commercial real estate in NJ.
- Each commercial space is zoned for a specific use, such as office space or industrial usage. You need to make sure the zoning allows you to do what you need to do on the property.
- Consider how the property was used prior to purchase. It’s important to evaluate the physical condition of the property. Is there major wear or any environmental problems that could lead to liability issues like asbestos or lead paint.
- Zoning laws or building codes sometimes restrict exterior or interior alterations that can be made on the property.
- Be certain you offer adequate and accessible parking for your customers. Obviously, you want ease of parking but you also must be compliant with Americans with Disabilities Act which calls for legal access to your building.
Considerations for Selling Commercial Real Estate in NJ
Similar to purchasing commercial property there are many things to keep in mind when selling commercial real estate in NJ. From a legal standpoint it is important to keep the following in mind.
- New Jersey requires the seller of real estate to disclose all known defects on the property. The seller has an obligation to disclose information to the buyer such as bug infestations and other safety issues as well as including off-site defects such as lake and groundwater contamination caused by the commercial property. Non-disclosure is not only illegal but it could impact the contract.
It is up to each buyer and seller of commercial property to do their due diligence before entering into negotiations. An experienced commercial real estate lawyer can help complete the transaction by negotiating on your behalf and can assist you with every possible contingency to make sure you are covered throughout negotiations and provided with a clear contract.