Real Estate is Real Estate (Except When it's Commercial!)

By virtue of their purchasing experience, homeowners have necessarily become familiar with the basics of real estate. A Delaware homeowner may not consider her- or himself an expert in the matter, but history does allow them all to share a degree of confidence in real estate markets and the factors that are important when it’s time to make a buy or sell decision.

Real estate is real estate, after all — whether it’s here in Delaware or anywhere else, right? Not exactly. Commercial real estate is a horse of a different feather!

If you are thinking about buying commercially for the first time, understanding not only that there are differences from the residential market, but how those influence the other buyers and sellers (they make up the ‘market,’ after all) will be good preparation when the time arrives to put together a solid offer.

From a purely ease-of process perspective, buying a piece of commercial real estate in Delaware is substantially more involved than buying a typical residential property. Though not always so, there are more opportunities for extra complications: lien and title issues, rules about hazardous materials, and zoning considerations are just some.

The language used in real estate documents for commercial properties can be complicated and obscure, so of course it’s especially useful to coordinate with an experienced Sussex County commercial real estate agent.

Due to lending costs, a commercial property that is the same size as a residential one will usually be more expensive. You can still buy residential homes in the 3.5% range via an FHA loan, but banks are often (rightfully!) stringent about lending on commercial real estate purchases. Expect stricter qualifications and more money down. That’s due to the risk of doing business: the potential to make money with a commercial property is greater than with a residential property — but the risks associated with owning it are also higher. Needless to say, it’s valuable to keep those risks in mind when evaluating any commercial real estate purchase.

If you are business-minded and thinking about the advantages of owning instead of leasing, give me a call! I’ll be standing by to discuss some standout opportunities, call/text 302-228-7871 or email me, Russell Stucki, REALTOR® of Beach Real Estate Market to provide detailed information on Delaware homes for sale, investment and commercial properties, luxury and  waterfront homes, condos/townhomes, new construction, lots and land, farms and equestrian properties located in but not limited to Bethany, Bethel, Bridgeville, Dagsboro, Delmar, Ellendale, Fenwick Island, Frankford, Georgetown, Greenwood, Harbeson, Laurel, Lewes, Lincoln, Milford, Millsboro, Millville, Milton, Ocean View, Rehoboth Beach, Seaford, Selbyville, Delaware.

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First, Find Your Property, Second, a Property Inspection

You’ve successfully located the property that fits your wish list! The listing agent says it’s in “great condition!” Financing is pretty much a done deal! Time to relax!

Er—maybe not just yet.

When you are buying a commercial property, among the scores of thoughts that might be racing through your head (“Is this the best one for the money?” “Will everyone be comfortable in it?” “Will it be enough space over the long haul?”), one you definitely don’t need is “Will this property become a money pit?” 

To alleviate the worry, you should make any offer conditional on a property inspection… then order up a professional property inspection done by an experienced inspector.

When an inspector arrives at the property, he or she will invite you along on the tour. However, you don’t have to accompany the inspector to some of the less-accessible areas like the roof, attic and crawl spaces (unless you want to). The inspector will likely start outside, checking for any suspicious areas that may allow water to penetrate, then move indoors for a thorough investigation of each room in the property. As the inspection moves along, definitely feel free to ask questions as they crop up: after all, inspector works for you!

It’s important to remember that any commercialproperty inspection is not 100% certain to uncover every possible defect: an inspector, no matter how experienced, is not clairvoyant. But you will receive a thorough assessment of the potential likely problems with the systems—as well as an opinion on the condition of the property. You may be able to renegotiate your offer should conditions warrant it.

Property inspections are not intended to offer warrantees or guarantees, but an experienced commercial inspection is the next best thing. If you’re looking at buying a commercial property,  call me today to discuss the market. And once you find a likely property, I can recommend several of our most experienced and reliable property inspectors. 

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National Rent Increases Reward Real Estate Investors

Last year comprised a decision point for many a local investor who had been holding back from the Sussex County real estate market. There’d been a number of good reasons for them to hesitate.

First, there were memories of the pervasive price drops that followed the global financial meltdown. Not exactly what a prudent investor was looking for—even given the real estate’s traditionally invincible long-term record. Then there were fears that the economy’s slow reverse out of the Great Recession (a term that was in itself enough to freeze many a checkbook!) would hamper apartment and single family unit rental increases. A landlord could get squeezed by inflation…if there were any inflation…who could know for sure?

But as 2013 began, some positives that were at last beginning to provide a degree of optimism. Last year’s Sussex County real estate investment decision was looking a little less risky when the historically low mortgage loan rates were taken into account. They penciled out to what looked like a potentially rosy cash flow outlook. And even the more hesitant investors had been noticing for a while how institutions had been pouring their own cash into residential real estate—you had to wonder why so many of the larger investment concerns suddenly seemed to want to become local landlords…

Now we can look back at 2013 and realize what a fantastic year it was for a Sussex County real estate investment. First, there was the rise in real estate prices, which was nationwide. According to the S&P Case-Shiller Index, U.S. real estate prices increased 11.3%—the highest rate of increase in many years. By the end of the year, website Zillow was predicting that the rise would continue through 2014 at a steady (and less superheated) rate. That tempering was attributed to the gradual rise in still-low mortgage interest rates—and to the inevitable fact that the most extreme bargain properties had been snapped up.

 The latest news on multi-family dwellings shows that fears of inflation outpacing landlords’ ability to increase rents were exaggerated (to say the least). National research firm Reis has just reported that for the 12-month period ending in June, rents rose 3.4%—the 18th consecutive quarter of rent increases! “You have definitely seen the recovery now spread to all of the major markets around the country,” according to Reis economist Ryan Severino. Single-family home rentals are on the rise also. According to Zillow’s latest Year-over-Year Rent Index, “increase renter demand is driving rental appreciation” even though rent affordability continues to be low in terms of percentage of incomes.

What does this mean for today’s investor deciding whether to enter the Sussex County real estate market? That’s always a choice individuals make for themselves—although, as a not-entirely neutral observer I tend to side with landlords throughout the ages whose reliable backstop has always been the real estate “they aren’t making any more of.” One thing is for certain: checking out the values to be found in current Sussex County real estate offerings is the only sure way to gauge the opportunities that are out there. In other words, give me a call.

It’s only prudent!

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Commercial Property: Taking the Long-Term Perspective

This year, it looks as if the busy spring real estate season extends beyond the residential arena. Latest reports show commercial property sales on the rise throughout the nation—and in volumes that make it one of the main contributors to the overall economic upturn.

The most reliable data comes from the National Association of Realtors®, whose latest quarterly survey shows year-over-year sales increasing a full 11% (with prices rising 4%). It’s an encouraging backdrop for businesspeople and individual investors who are gauging the opportunities in today’s Delaware commercial property market. Despite the vagaries of the tax and political climate (it is an election year, after all), with rental rates increasing and leasing activity up across the nation, the market does invite a closer look by anyone considering a fresh entry into Delaware’s commercial property arena.

While working with a buyer’s agent to find and purchase a Delaware commercial property isn’t an absolute essential, it certainly can be more efficient to have professional assistance and guidance throughout the process. When you choose a Realtor who has specifically commercial experience in Delaware, you make the same kind of choice as when you seek expert help in any other area of your business or personal endeavors—an expert’s insight can be priceless!

 Whether you are buying or selling a commercial property, it’s also important to avoid fixating on short-term impacts. Today’s cash flow may be your leading financial factor, but balancing with the long-term impacts is a juggling act worth mastering. Buying or selling a commercial property has long term impacts that spread out well beyond this year’s bottom line. Don’t hesitate to discuss your current business model with your accountant or tax professional. They are sure to have concrete ideas about potential impacts that will be quite real five and ten years from now. The right commercial property in Delaware will be one that is able to accommodate your needs both now and into the future.

With the right agent and clear-cut financial goals, your search for an Delaware commercial property can result in the best financial move you make this year—or for many years to come.  If you’re weighing the value of purchasing a commercial property or placing your own for sale, call me to open the discussion about the opportunities in today’s market.

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