General Business Files

A commercial development of any size is a serious undertaking. Get it right and you come away with a good profit and happy buyers or tenants. Get it wrong, and you could lose money and your reputation, making it difficult to obtain financing next time round.

The project

A proper project plan should take you all the way through your development. By necessity, it needs to be comprehensive, but the detailed requirements of such a project often turn the project plan into a complex document that confuses everyone who reads it. Use the following steps to help keep everything organised:

Write a clear initial plan outlining each “chunk” of the project:

• Land purchase
• Use and design
• Planning requirements
• Initial building requirements
• Central building phase
• Fitting-out
• Marketing
• Sale or rental

Each of these areas should be further broken down so that you know exactly what has to be accomplished and in what order to make the project successful. It is a good idea to use the available expertise of your architect, designer, construction company and other advisers to ensure that everything is covered.

The timetable

A project should always have an achievable timescale. Trying to accomplish a development too quickly could result in corners being cut and in a lower standard of build and finish. This in turn will have a negative effect on your ability to rent or sell the development on at completion. A realistic timescale is essential, and you should have an estimated time schedule against each of the items in your project plan so that you can see which items can be done simultaneously and which need to be done consecutively.

Keeping on track

A commercial development uses the talents and expertise of a large number of people and there will be an ongoing requirement to source and track contractors to make sure that everything runs smoothly. It is important that there is someone in charge of the project on a full-time basis to keep it on track. This allows contractors to have a single person to report to and shows everyone that the project is being effectively run.

Successful commercial projects are those that have been carefully planned, costed and scheduled before any work starts on the site. These projects are always fluid and you should be prepared for things to change along the way, but without a clear plan and a method of executing that plan, your commercial development could be at risk.

Are you looking for a good return on your money? A better return than you can ever get from a bank or money market investment? Why not invest in commercial real estate. Although the residential real estate market has pretty much bottomed out throughout most of the United States, the commercial real estate market is thriving. If you have always wanted to invest in the real estate market but are hesitant about the current residential market, invest in commercial real estate.

When you invest in commercial real estate, you need to understand that there is a vast difference between commercial real estate and residential. Not only is the market different, but so are the laws. Due diligence in commercial real estate is different than that in the residential market. You still want to make sure you get an inspection of the property prior to the settlement as well as a survey of the property. You also have to make sure that you get any easements included in the sale if they are needed.

Most people think of easements as those that burden the property, such as those for utilities and sewer. With commercial property, there are often easements that benefit the property. In some cases, in order to get to a property people have to drive their vehicles over other property owned by other people. In such a case, the person who purchases the commercial real estate will want to make sure that they get the easements needed for parking or entering and exiting. These can be included in the deed or in an easement agreement.

The only way to see if you need easements is to get a survey of your property depicting not just the property but any easements that pertain to the property. The title insurance commitment should also reflect a legal description of the easements. The title company needs to search not only the commercial real estate property that you are purchasing but also any other property in which you are receiving an easement. The reason for having this property searched includes the following points:

1.You need to know that the person who signs the easement agreement or deed is legally entitled to convey interest in the property;
2.You need to know that there are no burden on the easement property that would prevent you from using it;
3.You need to know that the taxes on the easement property are current. It would be unfortunate to purchase commercial real estate property that is dependent on easements and discover that the property is in a tax sale. A person who purchases the property could insist that you pay money to use their property; they may even erect a fence to prevent you from using the land.

When you invest in commercial real estate, make sure that you have an attorney who is well versed when it comes to commercial real estate, not just residential real estate. Commercial real estate is an entirely different than residential real estate and your attorney should be knowledgeable in this aspect of the real estate industry.