Tips on How to Get the Right Site

by Sue Basile, CCIM, CRS, GRI, Broker & President of J.M.Basile & Associates, Inc. – Commercial and Industrial Real Estate Brokers and Vice President of the Board of the Montgomery County Chamber of Commerce

Tip 1: Identify Your Real Estate Requirements

• Determine the location – If you are buying, remember the ABCs of Real Estate. Location! Location! Location! Consider safety aspects of the location. Also, consider access to major highways.
• Quality Expectations: High Quality Space: Expect a high rent or sale price. Lower quality space: Expect lower rent or sale price.
• Adaptability: Taking the space “as is” will be your best deal. The more work you want done, the higher the cost to you.
• Size: If you are buying, plan on future expansion. Buy one third larger than your present need or have enough ground to build on an addition.
• Budgetary Constraints: How much are you willing to spend? Are additional related costs figured in?
• Term Commitment: If renting, how long of a lease term? Lease terms less than two years are highly unusual and most often unacceptable. Expect an annual adjusted rental. Option to renew is practical, normal and extremely important.

Tip 2: Points to Ponder when Shopping for a Location

• Governmental restrictions and requirements: Zoning. Is your use permitted?  Requirements may change from Municipality to Municipality.  You will need a Use and Occupancy Permit for which you will be charged a fee. Is the building you are considering approved for your Use by the State Dept. of Labor and Industry? Check on signage permitted and be prepared to pay a Sign Permit Fee.
• Taxation: Wage Taxes, Per Capita Tax, Business Privilege Tax, Others?
• Real Estate Terminology and Documentation: Avoid using terms such as net, gross, triple net. Be specific. Who is responsible for what? Write it down for future reference.  Anything of an important nature should be written in the Agreement. Include precise Property Description in the Agreement. Leave as little as possible up to chance.

Tip 3: Why You Should Use a Realtor

• Realtors are ethical and knowledgeable. They know their trading area, government restrictions and zoning, market conditions and the ins and outs of real estate. Not all real estate agents are realtors.
• Not all real estate agents are realtors. Realtors prescribe to ethical standards and they are backed by Local, State and National Real Estate Associations.
• In cases of wrong doing, realtors have a fund established to settle claims.

Tip 4: Be Aware

• Your Real Estate Agent(s) work for the Landlord, or the Seller. This is mandated by State Laws.
• Beware of terms like rentable, usable, or pass-thru and common area. You could be charged costs above and beyond the rent.
• Have your Agreement of Sale, or your Lease Agreement reviewed by a knowledgeable person, preferably an attorney, before you sign it.
• If you are buying, be represented at Settlement, preferably by an attorney.

Tip 5: Steps for Purchase of Real Estate

• Have the property insured the day you sign the Agreement of Sale.
• Have the deposit money placed in an interest-bearing account with all accrued interest to your credit.
• Check into comparable sales of like properties in the same area. This is a proven test that you are not overpaying for the property.
• Have conditions added to the Agreement of Sale such as: Pest Infestation Certification (usually Residential), Radon Certification (usually Residential), Environmental Certification, Mortgage (including type, amount and interest rate) and Zoning (Use & Occupancy Permit).
• Arrange for Pre-Settlement Inspection
• Include the Right of Assignment in the Agreement of Sale. Your Accountant and Attorney should be consulted on how the purchase is to be made and in what name.
• Include in the Agreement of Sale, a specific listing of what is included, such as: Trade Fixtures, Special Lighting Fixtures, Signs/Sign Boxes, Window A/C Units, Other Items Negotiated.

Tip 6: Leasing Real Estate

• Watch out for detrimental Lease conditions, including Confession of Judgment Clause, Landlord’s entry to premises, Landlord’s rules and regulations. Generally, where Landlords permission is concerned, add compromising wording such as “shall not be unreasonably withheld,” or “reasonable.”
• Have Escrow Funds placed in an Interest-Bearing Account with all accrued interest to your credit.
• Watch escalation clauses in your Lease. Try to negotiate no escalation, especially on Leases where you are required to pay everything (including taxes, insurance and maintenance). On other Leases, a five percent (5%) annual increase is fair. If a Consumer Price Index provision is included, ask for a five percent (5%) ceiling. Be prepared to give the Landlord a floor percentage number.
• Negotiate for your best deal. Incentive (free) rent. Set-up (free rent) time. Alteration & Improvement work. Option to purchase. Option to renew the Lease. Expansion option. Termination option in cases of death or disability.
• On Commercial Leases, demand Non-Compete Clause. This is also applicable with the Medical Profession.

Tip 7: Some Important How-To’s

• How To: Determine the monthly rent you’ll pay from the square footage rate: 1,500 square feet is $10.00 per square foot. $10.00 x 1,500 square feet = $15,000.00 per year. $15,000.00 divided by 12 months = $1,250.00 per month.
• How To: Determine the square foot rate you’ll pay from the monthly rental: $1,250.00 per month for 1,500 square feet. $1,250.00 x 12 months = $15,000.00 per year. $15,000.00 divided by 1,500 square feet = $10.00 per square foot.
• The above deal: With three months incentive (free) rent, ($3,750.00) $7.50 per square foot. With two months incentive (free) rent, ($2,500.00) $8.32 per square foot. With one month incentive (free) rent, ($1,250.00) $9.16 per square foot

Contact Sue Basile (610) 768-4000 for all of your real estate questions and for more tips from the expert!