# Making an offer on commercial property



## randel (7 Nov 2011)

I am currently looking to buy a commercial premises for a new business I am starting. There are 3 or 4 suitable properties in the area. In one or more of these the owners in my opinion are quoting me ridiculous values given the current state of the property market. I have not made an offer on any of these properties yet.
My question is : Can I make any offer to one or more of these owners similtaneously even though I only intend buying one of them? I.e what is the etiquette for making an offer? Can you make an offer even though you really have no intention of purchasing (unless a low offer is surprisingly accepted)
Thanks.


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## Jazz01 (7 Nov 2011)

An offer is an offer... your final decision is then made up depending on a number of factors. I don't see any issue with making offers on multiple properties... 

Have you looked into the "rental" side for the commercial property? Might be less overheads for your new business...


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## oldnick (7 Nov 2011)

what do you mean by ridiculous values ?
 From an investment point of view  a very rough guide to what is "value" is comparing the cost of any property ,residential or commercial, to the rent of similar properties nearby.
 If someone is asking more than 20 times the annual rent then it's a bit steep -If he's asking only ten times then it's good value. 
Why not be bold and make offers for 8 times annual rent ...

The good thing about buying commercial is that all loan interest is tax deductible.


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## Brendan Burgess (7 Nov 2011)

Hi randel

There are many forced sellers out there and very few buyers, so you are in a very good position. 

A contract for the purchase of a property is not binding until both seller and buyer have signed the contract. Up until then, either party can pull out. 

As a general matter of business practice, it is better only to make an offer with which you intend to proceed, if accepted. It's also better being honest with people. 

I would suggest the following. Identify the building which best suits your needs. Tell the vendor that you are interested in three other buildings, and that your offer is open only for one week and subject to them signing contracts within 4 weeks. 

Alternatively, you can make two offers, and tell them that you will proceed with the first party to accept your offer. 

Be upfront. Tell them that you will only deal with someone who is offering a great bargain. 

I presume you are buying the property in your own name and not in the name of your company? 

Brendan


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## onq (7 Nov 2011)

Watch out for any rates still owed on the property.
A few leaseholders have posted to AAM about it
I don't know if this affects purchases.


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## randel (8 Nov 2011)

Thanks for all your replies.
Do any of you see any problem making an offer in writing? It still doesn't tie me to anything?
I'd prefer to do that rather than relying on the auctioneer to get my message across.


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## Complainer (8 Nov 2011)

Are you really, really sure you want and need to buy a property? Very few businesses directly own their properties these days. Why not rent or lease a property at least until the business gets off the ground.

If you do decide to go ahead and buy, get professional advice on how to structure this. Under our current tax structures, you would probably be better off to buy the property personally, and then rent it to the business.


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## Brendan Burgess (8 Nov 2011)

randel said:


> I am currently looking to buy a commercial premises for a new business I am starting. .



Hi randel

I had overlooked this. I agree with Complainer. Most new businesses fail and you will be left with a property with no tenant. 

Some new businesses go much better than expected and need bigger premises. 

As it's a new business, you should rent for the time being. 

The only reason to buy would be if there were very high fit-out costs and you were quite sure you would be successful and not moving again.

Brendan


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## randel (8 Nov 2011)

I understand the advantages of leasing. In this case I plan to set up a medical type practice in my home town. I'm in my thirties now and hope to work there until I retire. The fit out costs would be substantial so id prefer to be fitting out my own premises rather than someone elses and I would like to take advantage of the current slump in property values.


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## Brendan Burgess (8 Nov 2011)

Hi randel

That is fair enough. The practice is likely to be successful and it's unlikely to grow much beyond yourself and a receptionist I presume. 

A lot of pharmacies let spaces free to GPs. Might be worth considering, although it might create a bit of a conflict of interest.

Brendan


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## Purple (8 Nov 2011)

Brendan Burgess said:


> A lot of pharmacies let spaces free to GPs.


I haven't seen this. Reduced rents yes but free; not in my experience, not in prime locations anyway.

Randel, if you do rent/lease the cost of fit-out  should be covered in part by the landlord. 
Wherever you locate make sure there is ample free parking.


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## randel (8 Nov 2011)

Has anyone any experience with "lease to buy" arrangements?
ie. lease for 3 years with option to then buy.
Are they workable? How is the purchase price agreed?


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## onq (8 Nov 2011)

Make sure you have the premises professionally assessed before buying.
Your proposed use may involve a change of use and a new fire safety certificate.
Assess whether or not you need a separate fire escape from the rear of the premises.
Many "long" sites in historic town centres are remote from lands or places of public safety.

Budget for your

- fit out
- services renewal
- furniture
- comms
- I.T. systems
- wifi systems
- fire-proofing
- fire doors
- fire detection and alarm systems

You may find that your initial years budget for accommodation multiplies severalfold.
Its important to form an idea of the total cost to move in before committing yourself.


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## Complainer (8 Nov 2011)

onq said:


> Make sure you have the premises professionally assessed before buying.
> Your proposed use may involve a change of use and a new fire safety certificate.


Would a Disability Access Cert be required also?

Regardless of the cert, you should certainly make sure that the premises is easily accessible for people with disabilities. It's not just about ramps and toilets now.


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