Commercial real estate investing is a lucrative business opportunity. Although you have to spend a hefty sum initially, the ROI often justifies the spending. You get a regular passive income in the form of rentals. Moreover, the value is likely to grow over time, and you can sell the property at a premium. While there is plenty to appreciate, you cannot take things for granted. You must cover every loophole before diving in to ensure the viability of your business in the long run. Staying on the right side of the law is crucial because legal hassles are the last thing you want to encounter. Let us share the best legal advice for commercial real estate investors.
Identify your sector
Commercial real estate is complex, so you must do your homework before joining the bandwagon. The domain comprises different sectors, such as multifamily, retail, industrial, office, warehousing, and mixed-use. Although identifying your sector may not seem to have a legal significance, it has an unknown angle. Consult an attorney to seek guidance regarding the type of due diligence that applies to your sector.
Consider investment risks
Real estate investment is inherently risky because market fluctuations can affect prices and demand at any point. The risks vary depending on factors such as location, size, and age of the property. Asking the right questions can help ensure that the investment is not high-risk. A real estate attorney can assess the risk factor by reviewing the real estate taxes, utility statements, and common area maintenance invoices of the property.
Assess the local environmental regulations
The local environmental regulations often make an overlooked yet crucial legal aspect of commercial real estate investing. Overlooking them during your buying decision can land you on the wrong side of the law. Check factors such as Wetland Delineation, soil protection, and wildlife preservation to ensure that the property does not entail an environmental liability. The law may vary from state to state, so doing your due diligence is crucial to picking the legally-sound properties.
Double-check the permits and title
Property permits and titles can also lead to legal issues down the line, so you must go through them thoroughly before sealing the deals. Local ordinances for permits differ among jurisdictions, and the processes and timelines vary. You must understand your local timeline and start the permit process early to prevent potential issues later. Also, get a title search to check for title defects.
Get a structural engineer on board
Engaging a structural engineer is another essential legal tip real estate investors should not ignore. A structural engineer is qualified to check the longevity and safety of buildings and structures. They assess the structural integrity of elements such as the foundation and roof, and also check the HVAC, plumbing, electrical, and fire systems. Both play a crucial role in commercial real estate as they determine the viability of your investment. After all, no one will want to rent a place that is not safe for their workers and visitors.
As a real estate investor, you must check more than the look and feel of the commercial property before investing in it. Go through these legal steps to choose the right ones and run your business without encountering legal woes.