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Commercial Real Estate

Commercial property, also known as commercial real estate, encompasses buildings and land intended to generate a profit. This profit can come from capital gain or rental income and includes office buildings, industrial property, medical centers, hotels, malls, retail stores, farm land, multifamily housing buildings (such as apartment complexes), warehouses, and garages. With regard to apartment complexes, many states have their own qualifications—the number of units in a said building will determine its status as a commercial or residential property.

 

Commercial real estate necessarily falls into several categories: leisure (hotels, restaurants, cafes), retail (stores, malls, shops), office (office buildings and serviced offices), industrial (warehouses, garages, distribution centers), healthcare (hospitals, nursing homes), and multifamily (apartment complexes).

 

Commercial property is acquired via a commercial property transaction process. Most often, a broker will identify a property that fits one set of criteria listed above. The broker’s firm will then perform an assessment of the location and potential profitability—if they are interested in acquiring said property, they will produce a letter of intent, also known as an LOI.

 

The LOI then leads to a purchase and sale agreement, known as a PSA, and the initial deposit. Only one LOI and/or PSA can exist for a single property at a time. Once the PSA is executed, the acquisitions team has thirty days to perform due diligence (extensions can be granted), thoroughly reviewing the property to uncover damage or anything that may affect the profitability or final selling price.

 

Once due diligence is complete, the acquisitions team will determine whether to move forward with the purchase. A sale closing is conducted to finalize financing.