How does commercial real estate differ from residential real estate?
Thats a great question and I hope my reply helps : real estate leases can be defined as simple ownership rules and complicated ownership rules Buying/leasing a house is simple, the odds of getting a sour house lease is rather difficult if you follow common sense. Buying/leasing commercial property is always complicated ( even when its easy ) so lets break down a tiny bit apartment complex type industrial sites and plants storefronts and malls in any of these transactions, the due diligence is going to take a while ( ever look at 80 leases for a rental apartment building ?). or worst, the multiple leases that exist ( land lease, the the lease on the building, then the tenant leases ). and these leases have loopholes of all sort. On an apartment building, you are inspecting every unit, and looking for where the seller deferred maintenance, some places, youll even discovered that beams are missing. I was in a building once with a team of inspectors, someone blew a whistle and an airhorn, everyone ( inspectors) quickly got off the site. they discovered a wooden support beam rotted completely that was painted over and ready to fail. the inspector call the city, boy was that seller pissed that we backed out of the offer. So imagine that I would have take that building as a lease, then insured it, then it collapsed a few months later. I pray to god that I would have had the coverage to cover some of the construction or did I negotiate that in the lease. How about income stream insurance coverage. Lots of little details. on industrial sites you have to do a chemical analysis of the land just to make sure its not toxic ( toxic sites can have a history and cost you a fortune in insurance clean up cost ). then zoning issues and then all other issues. a lease holder could be liable ( no, they will be liable ) because they are in possession of the property. on storefront, office space, and malls zoning regulation and permits and traffic counts and a load of other shit. leases my even cover the maximum noise a leaf blower can make. You can do a deal that closes in 30 days, but the chance of that happening are rare commissions : seller usually has a commision to his agent only and that agent does not co-broke. Buyer has his team and their agent gets paid by the buyer. Commercial sellers always try to take your commissions, that is why the transaction must happen in escrow, and all claims must happen with the funds still in escrow, in fact there are legal firms that have a small but steady business niche in this field.