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Understanding hidden costs when buying commercial real estate

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One of the biggest mistakes many businesses make when evaluating their real estate purchase is underestimating major expenses associated with the transaction.

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Understanding hidden costs when buying commercial real estate

  1. 1. Understanding hidden costs when buying commercial real estate One of the biggest budgeting mistakes many businesses make when evaluating their commercial real estate purchase is underestimating—or worse, entirely missing—major expenses associated with the transaction. To avoid this potentially costly budgeting pitfall, make sure you’re taking these factors into account. FOR SALE Purchase costs Purchase costs include more than just the price of the property. You may have to spend a significant sum on due diligence, such as an environmental assessment, a building condition assessment, an appraisal, a title search. Renovations and repairs Renovations may be needed to make the site suitable for your business. Big-ticket items can include, the roof, the foundation, windows, siding, plumbing, electricity, heating, ventilation, air conditioning. Closing costs Closing the deal costs typically involve, land transfer tax, legal fees, realty commission, sales tax, prepayment penalty (if you have an existing mortgage). Moving costs It’s also important to consider the cost of moving furniture, equipment and inventory, setting up phones and Internet, making signs, marketing your new address, cleaning up any site contamination or hazardous building materials, and repairing your existing location to return it to its original state. Downtime Be sure to calculate the cost of any ramped‑up production needed to build inventory to ensure uninterrupted supplies to customers. Permits You could also face costs to resolve any permit and zoning issues, encroachments, and easements identified during due diligence. Operating costs Utilities, property tax, insurance and maintenance, such as snow removal, janitorial services, landscaping and property management. bdc.ca BDC@bdc_ca BDC

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