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How to get the right team of commercial real estate advisors

Advisors can help lower risk when buying real estate

6-minute read

Though it’s an often-overlooked first step, putting together the right team of advisors before you start shopping for a new business space is essential. It can make all the difference in getting the help you need during one of the most complex, time-consuming and expensive projects of your business career.

Knowing what particulars to look for in your team of advisors, and gaining a better understanding of how they can help, will empower you to put the right team together—one that will guide you effectively through the challenges of shopping for commercial real estate.

“There are complexities and risks when you’re buying real estate,” explains Daniel Labossière, a BDC Assistant Vice President in Winnipeg. “Your circle of advisors can guide you and help protect you against liabilities and unforeseen expenses.”

It’s important, says Labossière, to seek out professionals who have a track record of doing commercial real estate deals successfully and are willing to spend the necessary time with you as you move through the process. One trusted professional, such as your banker or real estate agent, can often refer you to others.

Labossière, who has financed more than 100 real estate purchases, notes that the following types of advisors are essential in providing the help you need when it comes to commercial real estate.

1. An accountant

Your accountant can look at your company’s financial performance and strategic plan, and help you decide whether purchasing real estate is the right decision at this time. Your accountant can also help you get financially ready for the purchase—by making sure you’ve made a realistic budget and have up-to-date financial statements to take to the bank, and by advising you on how to optimize the transaction for tax purposes.

2. A banker

Once you’ve decided to buy real estate, you should see a banker. Your banker can help you understand how much money you can afford to invest to avoid taking on too much debt or putting undue pressure on your monthly cash flow.

Your banker can also give you a second opinion on your budget to make sure you’ve planned for all the expenses you’re likely to incur that might otherwise be overlooked—and offer financing for these items as well. Typically, they include the following:

  • renovations to your new location
  • moving costs
  • additional machinery and equipment
  • downtime as you change locations
  • a contingency fund for overruns and unexpected expenses

Labossière notes that some banks offer more favourable loan terms than others, so it’s a good policy to shop around when looking for a bank to finance your real estate purchase. These terms can include financing a higher percentage of your purchase, giving you more years to repay your business loan and offering a postponement on principal repayments in the first months in your new premises, when you face high expenses.

3. A commercial real estate agent

Your real estate agent is another key advisor who can help you find a property that meets your needs, within your budget.

A good commercial real estate agent will be knowledgeable about your local market and may even know about available properties that are not listed for sale, Labossière says. You should make sure your agent is familiar with the special requirements of your industry and your business.

Once you’ve found a suitable property, your agent can also advise you on negotiating the transaction with the vendor and shepherd you—with your lawyer—through the offer to purchase and closing stages of the transaction.

“They’re as important as the banker, because they will be accompanying you through the whole process,” Labossière says.

4. A lawyer

Your lawyer plays an important role once you’ve found a property and decided to make an offer. Labossière recommends getting your lawyer to review your offer to purchase to make sure it includes all the necessary conditions. This is especially important when the property is held in a corporation, he says. Your lawyer can also help you negotiate with the seller.

Once you’ve struck an agreement, your lawyer will also review the sale contract and perform other aspects of your due diligence, such as conducting a title search and investigating leases with tenants, zoning issues, outstanding taxes, liens, easements, court orders and other encumbrances.

Your lawyer can also advise you on the tax and other personal finance implications of owning real estate, notably the advantages of placing the property in a holding company separate from your operating company.

5. A contractor

If you’re constructing a building or doing substantial renovations to an existing one, you will need to hire a contractor. Here, Labossière recommends getting several recommendations from your advisors and other business associates.

Then, it’s important to get references from the contractors you are considering and to follow up by interviewing former clients to get their opinions on the contractor’s work.

Once you’ve chosen a firm, you should negotiate a contract that includes a detailed description of the work to be done, a timetable and the price.

“Your goal is a project that’s on time and on budget,” Labossière says. “The more detailed and itemized the contract, the less room there is for disputes.”

6. An operational efficiency expert

It’s often a good idea to get the opinion of an operational efficiency expert on whether a prospective property is suitable for your needs. This is especially important for manufacturers, who will want to place machinery and equipment for optimal productivity.

Once you've purchased your property, the efficiency expert can advise you on laying out your operations to minimize waste and maximize value.

7. An environmental consultant

Many banks, including BDC, require an environmental assessment report as a condition of financing a real estate purchase. The assessment determines whether a previous occupant has contaminated the property.

Since cleaning up contamination can be hugely expensive, Labossière says it’s important for the environmental consulting firm to be qualified and experienced. It should be ready to make firm conclusions about the environmental condition of the property and stand by those conclusions, and should carry liability insurance in case of error. He recommends asking your banker for a referral.

8. A building condition inspector

While your bank may not require a building condition inspection of the property you plan to purchase, it’s a good idea to get one. Similar to a residential home inspection, a building condition inspection can alert you to issues with the building that will require substantial investments to correct.

9. An authorized appraiser

Before making a commitment to purchase, it’s wise to seek the advice of an independent, professional business valuator to determine your property’s fair market value. This can be done by the Canadian National Association of Real Estate Appraisers, a non-profit organization that licenses, educates, and certifies real estate property appraisers across the country. In Quebec, an independent evaluator from the Ordre des évaluateurs agréés du Québec can establish an objective price to buy, sell or build a property.

10. A notary

In Quebec, you will need to use a notary to prepare the legal documentation to finalize the purchase of your new business space. The Chambre des notaires is the professional order for all notaries in Quebec and ensures that they have successfully completed all the training they need.

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