Investing in commercial real estate is smart. With the right business plan, you and your partners can realize huge profits. But there is risk involved. In the process of investing, you want to be careful about the liability you expose yourself to. Each phase of the business will present new challenges, so make sure you know what you are getting yourself into.
If you choose to use a listing agent, there are several precautions you need to take before entering a contract. You will want to define your relationship with the listing agent early on. Like any relationship, you can decide the level of commitment.
You can enter into an exclusive relationship. This would entitle the listing agent to compensation for as long as you agreed to be in the relationship. You can be in an open relationship, where the listing agent is expected to compete with other agents. You can even arrange it so the agent will not be paid unless certain condition are met. While defining the relationship, make sure to consider when the agent will be paid.
There are two established ways to pay: the majority and the minority rule. The majority rule provides that the listing agent be paid when the agent presents a buyer or seller that is able, ready and willing to enter into an agreement. The minority rule provides that the agent not be paid until the contract has been completed. If you decide to use a listing agent, keep these issues in mind.
Contracts for the Sale of Land
In order for the sale of real estate to be valid, it has to be written in writing. This must signed by the party to be charged, include a description of the property and conditions precedent. With that said, there are several ways for land to transfer from one party to another. You can transfer it through an installment land sale. This is where the seller actually finances the sale of the property and buyer agrees to pay seller back. The title is transferred to the buyer and the seller takes a deed of trust as security. You can also transfer commercial property through an installment land contract. The seller holds on to the title while the buyer makes payments.
It is important to secure title insurance when dealing with commercial property. The last thing you want is to lose money because the deed was not what was promised. Title insurance serves as an indemnity contract in the event a specific contingency affecting title occurs. The biggest challenge is deciding who pays and the amount of insurance.
If you are looking to lease commercial property, you should be aware of the limitations. You have the right to protect your investment, but the court disfavors restrictions that limit alienability. If you are worried about tenants assigning their lease to undesirable parties, you can restrict their ability to assign the lease. However, the court has held that such restrictions will only be upheld if there is a commercially reasonable objection. The court will not overturn restrictions that are agreed to in the lease.
Commercial real estate is a great investment. Make sure you know what you are getting yourself into. If you are cautious, you will come out ahead.