Watch Out for These Red Flags When Closing on Commercial Property

Buying commercial real estate comes with a degree of financial risk, but do not let that stop you from making a purchase. Owning commercial real estate opens many doors that can provide you with a lucrative income.

Commercial properties are in high demand across all Hawai’i locations, so it is critical to act on a property as soon as you know it meets your needs. Unfortunately, buying commercial properties can put you in jeopardy of making a bad deal. Looking for red flags can help you avoid acquiring real estate that will return little if any profit.

Possible red flags you should recognize

To ensure you are getting the most out of your investment, watch for signs of a bad deal. Common red flags involving the purchase of commercial real estate include the following:

1. Lack of repairs. When someone wants to sell commercial real estate, they will do everything possible to make the property attractive to buyers. Ask the seller to provide you with copies of inspection documents and work permits to ensure the property is in good condition.
2. Unfair maintenance agreements. Before you sign a purchase or lease agreement, make sure to find out who is responsible for maintaining the property. If the bulk of the maintenance falls on your shoulders and at your expense, it is probably not the best deal for you.
3. Significant damage. If the property that drew your interest has substantial damage, be wary about finalizing your purchase. Unless the property price is so low that making repairs will not increase your overall costs, it is wise to avoid real estate containing a large amount of damage.

We also urge you to learn more about commercial real estate transactions before you make a firm commitment. A great way to increase your knowledge is by consulting with an advocate experienced in the commercial property market.

Notice: We are providing this as general information only, and it should not be considered legal advice, which depends on the facts of each specific situation. Receipt of this content does not establish an attorney-client relationship.