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tips for buying commercial property
Purchasing a commercial property is a significant investment. It's all the more important to be well-prepared. Are you aware of the pitfalls and how to avoid them? Learn more in our comprehensive consultancy offer and secure the best conditions for your project now.
The choice of location is crucial for the success of your business. An optimally chosen location can improve accessibility, optimise logistics, and contribute to long-term value enhancement.
The financing should be carefully planned, with land loans and construction financing cleverly combined. A comprehensive loan comparison and the use of grant programmes are essential to reduce financing costs by up to 10%.
The legal framework, particularly the obligation to build and the ancillary costs, must be considered. A thorough location analysis and seeking expert advice can help avoid pitfalls and enhance investment security.
The Importance of the Right Commercial Property
Choosing the right commercial property is a crucial factor for the success of your business. An optimally chosen location can improve accessibility for customers and employees, optimise logistics, and contribute to value appreciation in the long run. Location choice not only affects day-to-day business operations but also the long-term profitability of your investment. Therefore, a careful analysis of location factors is essential.
Why the Choice of Location is Crucial
The choice of location has a direct impact on business success, long-term value development, and connectivity and infrastructure. A well-located commercial property ensures accessibility for customers and suppliers, which in turn increases efficiency and reduces costs. Furthermore, the location influences the attractiveness to qualified employees and the ability to realise future expansion plans. The right transport connections are a key factor that you should consider in your decision. For more information on optimal transport connections for your property, please refer to our article.
Overview of the Key Aspects When Buying
This article provides you with a comprehensive overview of the key aspects when buying a commercial property. We shed light on various financing options, the legal framework, and the importance of a sound location analysis. Our aim is to equip you with the necessary knowledge and tools to avoid pitfalls and find the perfect property for your business. This way, you can ensure that your project is built on a solid foundation from the start.
Grundstückskredit vs. Baufinanzierung: Unterschiede und Strategien
When purchasing a commercial property, you'll face the decision of whether a land loan or a construction financing option is the better choice. Construction financing generally covers both the purchase of the land and the building costs, whereas a land loan is specifically intended for acquiring the plot. There are two basic strategies: simultaneous financing, where the land and house are financed at the same time, and sequential financing, where the land is financed first, followed by the house. Both models have their pros and cons, which should be carefully considered. A detailed analysis of the financing options will assist you in making the right decision.
Simultaneous vs. Sequential Financing
Simultaneous financing offers the advantage of covering all costs in a single loan, potentially with better terms. However, accurately estimating construction costs upfront can be challenging. Sequential financing allows you to acquire the land first, securing construction financing later. This can be sensible if you don't have specific building plans yet or if you want to monitor market developments. However, it's important to consider the land transfer tax implications, as they can differ between the two models.
Dual-Loan Strategy: Risks and Opportunities
A dual-loan strategy, involving separate land loans and construction financing, carries both risks and opportunities. One risk is that the bank providing the land loan (Bank A) gets registered as the first-ranking creditor in the land register. This can lead the bank offering the construction financing (Bank B) to propose less favorable terms, as they are only secured as a second-ranking creditor. It is crucial to understand this dynamic and consider it in your financial planning.
Variable Loans as a Strategic Tool
A variable loan can serve as a strategic instrument to secure flexibility in financing your commercial property. Due to the short-term cancellation options often associated with variable loans, you have the ability to terminate and refinance without early repayment penalties. This can be particularly advantageous if market interest rates change or if you receive a better offer from another bank.
Flexibility Through Short-Term Notice Periods
The flexibility offered by short-term notice periods allows you to react to changing market conditions and optimise your financing costs. For instance, you can use a variable loan as interim financing until you secure long-term construction financing with better conditions. However, it's crucial to closely monitor interest rate trends and initiate refinancing in a timely manner.
Calculators and Loan Comparison: Essential Tools
To find the optimal financing for your commercial property, calculators and a comprehensive loan comparison are essential tools. Use interest, amortisation, and affordability calculators to explore different financing scenarios and simulate the impact on your monthly payments. A loan comparison across various financial institutions helps you find the best terms and benefit from the diverse risk profiles of the banks.
Interest, Amortisation, and Affordability Calculators
With interest, amortisation, and affordability calculators, you can explore different scenarios and simulate the impact on your monthly payments. You can compare various interest rates, repayment rates, and terms to find the optimal financing structure. These calculators help you realistically assess the financial viability of your project and identify potential risks early on.
Loan Comparison Across Various Financial Institutions
A comprehensive loan comparison across various financial institutions is crucial to finding the best terms for your commercial property. The risk profiles of banks can vary, resulting in different loan offers. An independent loan comparison, such as that offered by mybaufinanzierung.de, provides access to a broader range of loan options than your home bank, increasing the likelihood of finding an appropriate and cost-effective financing solution.
The Obligation to Build: Deadlines and Consequences
When purchasing a commercial property, the obligation to build is a crucial aspect that must be taken into account. This obligation requires you to commence construction within a certain timeframe. This period may vary depending on the municipality, typically being three years. Failure to comply with the building obligation may result in penalties or even the sale of the property. Therefore, it is advisable to inform yourself early about the local development plans and ensure that you can meet the deadlines.
Review Local Development Plans
The local development plans contain detailed information about permissible construction, building styles, and the use of the property. You should carefully review these plans to ensure that your planned construction project complies with the regulations. If you have questions or uncertainties, you can contact your municipality's building office. Adhering to the development plans is crucial to avoid future problems or delays.
Additional Costs: An Often Underestimated Factor
The additional costs involved in purchasing a commercial property are often underestimated but can constitute a considerable part of the total costs. These additional costs include, among others, the land transfer tax and notary and agent fees. These costs can quickly amount to 15-20% of the purchase price. Therefore, it is important to consider these costs in your financial planning and either allocate sufficient equity or include the additional costs in your building financing.
Land Transfer Tax, Notary, and Agent Fees
The land transfer tax is a tax incurred when purchasing a property. The tax rate varies by federal state and is usually between 3.5% and 6.5% of the purchase price. The notary and agent fees are other additional costs incurred when purchasing a property. The notary fees are necessary for the notarisation of the purchase contract, while the agent fees are for the mediation of the property.
Property as Security: Lending Value and Conditions
A commercial property can serve as security for a construction financing. The lending value of the property is the value the bank would achieve at a forced auction. Generally, the bank grants loans up to a certain percentage of the lending value. If the property is already encumbered with a loan, this may affect the conditions for new construction financing. Therefore, it is important to consider existing loans in your financial planning.
Consider Existing Loans
If the commercial property is already encumbered with a loan, the bank that provides the new construction financing is usually entered as a second ranked creditor in the land register. This can lead to less favourable conditions, as the bank takes on a higher risk. It is therefore advisable to repay existing loans before purchasing a property or to integrate them into the new financing. Thorough financial planning is essential to ensure debt repayment
Infrastructure and Connectivity
A comprehensive location analysis is crucial when purchasing commercial land. The infrastructure and connectivity play a decisive role in the success of your business. Good traffic connections, proximity to suppliers and customers, and well-developed infrastructure are important factors to consider when choosing a location.
Traffic Connections, Proximity to Suppliers and Customers
Good traffic connections are essential for logistical advantages and accessibility for employees. Commercial land with good connections to motorways, main roads, or public transport ensures smooth movement of goods and makes commuting easier for employees. Proximity to suppliers and customers can also increase efficiency and reduce costs.
Market Analysis: Demand and Competition
A detailed market analysis helps you assess the demand and competition at the location. A comprehensive target group analysis provides insights into whether there is demand for your product or service at the location. A competition analysis shows you which competitors are already active at the location and their market share. Based on this information, you can better assess the potential for your own business and adjust your strategy accordingly.
Target Group Analysis
The target group analysis is an important part of market analysis. It helps you understand the needs and preferences of your potential customers at the location. By analyzing demographic data, purchasing power, and consumption behavior, you can tailor your marketing strategy to suit the target audience perfectly.
Environmental Aspects and Permits
When choosing a location, you should also consider the environmental aspects and permits. Check whether the land is subject to emission control regulations or has any existing contamination. Find out about the necessary building permits and ensure your construction project complies with environmental regulations. Taking sustainability aspects into account can not only protect the environment but also save costs in the long run.
Emission Control, Contaminations
Emission control and contaminations can significantly impact the use of commercial land. Emission control regulations may, for example, restrict the types of permissible commercial operations or require additional measures. Contaminations can lead to high remediation costs. Therefore, it is advisable to commission a soil survey before purchase to identify potential risks early on.
Financing a Plot without Equity: Opportunities and Risks
Financing a commercial plot without equity is fundamentally possible but also carries risks. One option is a loan without a land charge entry. However, the conditions for such loans are generally less favourable than those with a land charge entry. Therefore, it is advisable to conduct a comprehensive loan comparison and carefully plan the liquidity planning for additional costs.
Loan without Land Charge Entry
A loan without a land charge entry might be an option if you have no equity or wish to use your equity for other purposes. However, interest rates for such loans are usually higher, as the bank assumes a greater risk. It is therefore important to carefully weigh the pros and cons and compare the terms of different providers.
Utilising Support Programmes: Baukindergeld and Riester Subsidy
Support programmes such as Baukindergeld and Riester subsidy can help you reduce the financing costs for your commercial plot. However, there are regional differences and funding conditions that you must take into account. Inform yourself early about the available support programmes and submit applications in a timely manner. Optimising financing costs through support programmes can significantly reduce your financial burden.
Regional Differences and Funding Conditions
The funding conditions and the amount of funding may vary depending on the federal state and municipality. It is therefore important to inform yourself about the specific support programmes in your region. Submitting an application usually requires meeting certain deadlines and providing specific documents. Early planning and preparation are therefore recommended.
Cost-saving Measures: Reducing Property Transfer Tax
There are various cost-saving measures with which you can reduce the property transfer tax. One option is sequential financing, where you first finance the land and later the house. Another option is short fixed interest periods and an optimal loan utilisation. By reducing the property transfer tax, you can significantly lower your financing costs.
Sequential Financing
Sequential financing can help you reduce the property transfer tax, as you only pay the tax on the purchase price of the land. If you build the house later, the property transfer tax only applies to the construction costs. This can lead to an overall lower tax burden.
The Advantages of Independent Financial Advisors
Engaging an independent financial advisor offers you numerous benefits when purchasing a commercial property. An independent advisor has access to a wide range of credit options and can help you find the best terms for your individual situation. They understand the various risk profiles of banks and can offer you tailored solutions.
Access to a Broad Range of Credit Options
An independent financial advisor works with various banks and financial institutions, giving them access to a wide range of credit options. They can help you compare the best deals and find the financing that best suits your needs. The independent advice is a significant advantage in this case.
Avoiding Pitfalls: Utilise Expertise
An experienced financial advisor has the necessary expertise to identify hidden risks and negotiate favourable terms. They can assist you in tailoring financing solutions optimally suited to your needs. By engaging an expert, you can avoid costly mistakes and reduce your financing costs.
Identifying Hidden Risks
A financial advisor can help you identify hidden risks that you may have overlooked. They understand the intricacies of loan agreements and can help you avoid unfavourable clauses. With their experience, they can also assist you in assessing the financial sustainability of your project.
Bank Selection: Flexibility and Terms
When selecting a bank, you should not only focus on interest rates but also on flexibility and the willingness to collaborate on complex financings. A bank willing to accommodate your individual needs can help you find the optimal financing for your commercial property.
Willingness to Collaborate on Complex Financings
If you require complex financing due to a lack of equity or specific construction requirements, it is important to choose a bank that is willing to work with you and find individual solutions. A bank with flexible conditions and competitive interest rates can help you successfully implement your project.
Real Credit: Low Interest Rates Through Collateral
The real credit offers an intriguing alternative to traditional construction financing, especially if you already own a debt-free property. By providing collateral for the loan with a charge on your existing property, you benefit from low interest rates. However, you should be mindful of the loan-to-value limit, which is typically at 60% of the market value.
Observe the Loan-to-Value Limit
The loan-to-value limit for real credit is generally set at 60% of the property's market value. If you require a higher loan amount, a real credit split may be necessary. This involves dividing the loan into a real credit and another loan, which can affect the interest rates and terms.
VR ImmoFlex: Liquidity for Property Owners
VR ImmoFlex is a product offered by the VR Bank, giving property owners the opportunity to create liquidity without having to sell their property. This product is characterized by flexible repayment options and the absence of an early repayment penalty. Additionally, you can utilize KfW programs to lower your financing costs.
Flexible Repayment Options
VR ImmoFlex offers you flexible repayment options, enabling you to adjust the monthly burden according to your individual situation. For example, you can make interest payments without repaying the loan. Furthermore, your heirs have the option to continue or repay the loan.
Financial Planning
Careful financial planning is crucial when purchasing a commercial property. Create a detailed budget, consider all additional costs, and review available funding programs. Determine your equity requirements and assess your creditworthiness.
Create Budget, Consider Additional Costs, Review Funding Programs
A detailed budget helps you realistically assess the financial feasibility of your project. Consider all additional costs, such as land transfer tax, notary, and brokerage fees. Examine available funding programs and submit applications promptly.
Legal Examination
A comprehensive legal examination is essential to minimize risks. Inspect the development plan, check for contamination issues, and obtain the necessary building permits. Review the land register extract and have the contract draft reviewed.
Review Development Plan, Check for Contamination Issues, Obtain Building Permit
The development plan contains detailed information about permissible construction, building styles, and land use. Checking for contamination issues is crucial to avoid unexpected remediation costs. Obtaining the necessary building permits is a prerequisite for starting construction.
Location Analysis
A detailed location analysis helps you assess the opportunities and risks of the location. Evaluate the infrastructure, conduct a market analysis, and consider the environmental aspects. Carry out a competitor analysis and analyze your target audience.
Evaluate Infrastructure, Conduct Market Analysis, Consider Environmental Aspects
Evaluating the infrastructure includes examining transport links, energy and water supply, as well as the availability of telecommunication services. The market analysis helps you assess the demand and competition at the location. Considering environmental aspects is important to minimize risks and incorporate sustainability factors.
Summary of Key Points
Purchasing a commercial property is a complex decision requiring careful planning and preparation. Consider the financing, legal frameworks, location, equity, and expert advice. Use our checklist and develop a strategic plan to successfully implement your project.
Financing, Legal, Location, Equity, Expert Advice
The financing should be carefully planned and tailored to your individual situation. The legal frameworks should be thoroughly reviewed and adhered to. The location should be carefully analyzed and aligned with your business needs. The equity should be optimally used and supplemented by funding programmes. Expert advice can help you minimize risks and make the best decisions.
Outlook: Trends and Developments in the Commercial Property Market
The commercial property market is constantly evolving. Pay attention to current trends and developments such as sustainability, digitalisation, and flexible usage concepts. Consider these factors when making your investment decision to secure your future prospects and increase investment security.
Sustainability, Digitalisation, Flexible Usage Concepts
Sustainability is becoming increasingly important in the commercial property market. Focus on energy-efficient buildings and environmentally friendly construction methods. Digitalisation offers new opportunities to optimise processes and improve user experience. Flexible usage concepts allow you to adapt your property to changing needs and increase utilisation.
Are you looking to purchase a commercial property and seeking optimal financing? We at Auctoa are happy to assist you in appraising your property and finding the right financing solution. Contact us today for a no-obligation consultation and secure the perfect property for your business. Visit our contact page.
At MyBaufinanzierung.de, you'll find guides and information on financing land to make your dream of owning a home come true.
VR Bank offers a solution with VR ImmoFlex for homeowners to create liquidity without having to sell their property.
What financing options are available for commercial land?
There are various options, including land loans, construction financing (simultaneous or sequential), real estate loans (if a debt-free property exists), and specialised products like VR ImmoFlex. A comprehensive loan comparison is advisable to find the best terms.
What is the building obligation and what are its consequences?
The building obligation requires the buyer to start the construction project within a certain period (often three years). Failure to comply can result in penalties or even property sale. It is important to review the local development plans.
What additional costs are incurred when purchasing commercial land?
Additional costs include land transfer tax (depending on the federal state), notary and brokerage fees. These can account for 15-20% of the purchase price. Careful financial planning is essential.
How can I reduce the land transfer tax?
One way is sequential financing (first land, then building), as the tax only applies to the purchase price of the land. Also, short fixed interest rates and optimal loan utilisation can help save costs.
What should be considered in location analysis?
Important factors include the infrastructure (transport connections, proximity to suppliers and customers), the market analysis (demand, competition), environmental aspects (emission protection, contamination) and the target group analysis.
Can I finance commercial land without equity?
Yes, fundamentally financing without equity is possible, for instance, through a loan without land charge entry. However, the terms are generally less favourable. A comprehensive loan comparison and careful liquidity planning are important.
What role do funding programmes play?
Funding programmes like Baukindergeld and Riester subsidies can reduce financing costs. However, there are regional differences and funding conditions that must be considered.
Why should I consult a financing expert?
An expert has access to a broad range of loan options, understands banks' risk profiles and can offer tailored solutions. They help identify hidden risks and negotiate favourable terms.
