Plenty of real estate investors are buying properties sight unseen. Thanks to technology and the rising popularity of video tours, e-signing tools for documentation, and an easy ability to access almost all the information you need on any given topic online, investing from afar is not only possible, it’s something many investors prefer to do.
Is it riskier to invest sight unseen when you’re buying commercial property?
Not necessarily. As long as you surround yourself with local experts, complete your due diligence, and have a clear set of investment goals, you can invest in buildings and properties without seeing them.
When you’re thinking about investing in a different commercial market, you may not get the opportunity to see a property for yourself. As long as you have a great local team, including a real estate agent and a property manager, you can buy a property virtually. We often work with investors from other California cities who are interested in High Desert commercial investments. We help out-of-state investors too, and even people from outside of the country are interested in what’s available in our commercial market, and they know they won’t be able to see the property in person before they make an offer.
Nothing is impossible.
Let’s take a look at the risks and the rewards of this kind of investment, and what you need to know about how the process will work.
Financing is Your First Hurdle
You cannot buy sight unseen without a good idea of how you’ll be paying for your investment. It won’t be easy to get a seller in another market to take you seriously if you don’t have a financing plan in place.
Are you paying in cash? Great. That’s one way to do it, and it will likely put you in a stronger position to negotiate with sellers. It also means you don’t have to worry too much about rising interest rates or the cost, requirements, and hassle of a commercial loan.
When you’re financing this investment with a loan, we recommend you get pre approved as quickly as possible. Lenders will look at your finances and your credit – both business and personal. They’ll want to know about the property you’re considering, and you’ll have to approve for the application process. Working with a great broker can help you increase your approval odds. Move things along quickly by offering a larger down payment or additional collateral.
Investing in High Desert Commercial Property Sight Unseen: Risks
Take a look at your investment goals before you invest in a property without seeing it. How much risk can you tolerate? How many unknowns are you willing to take on?
When you’re investing sight unseen, your biggest risk is that you don’t know the area. You aren’t experienced in the market. You may not understand the supply of properties, nor the demand. It may be difficult to understand where home values fall and what the purchase price will ultimately look like. Local demographics and requirements may take some time to learn.
These risks underscore the importance of surrounding yourself with local professionals.
Mitigating Risks with Local Partners
You don’t actually have to walk through a property yourself to know it’s a good investment. You can leverage some of the technology that’s available, such as virtual tours. Those videos and photographs that your agent sends you will tell you what you need to know. However, it’s never going to be the same as standing inside the property and knocking on the walls or walking through the parking lot. By investing without seeing it, you’re taking some chances.
You need local support.
- Choosing a High Desert Real Estate Agent
Start with a local real estate agent.
We recommend choosing a High Desert Realtor who has experience working with non-local investors like you. As you move through the process of identifying the right property, making an offer, and closing the deal, you won’t have to worry about not being there. You can rely on your agent to handle the showings (you’ll want them to see the property themselves), the communication with the seller, and the negotiation of purchase price and other terms.
Expect your commercial real estate agent to:
- Identify potential properties based on your budget and investment requirements. You’ll need some meetings to discuss what you’re looking for so everyone is on the same page.
- Send you information on these properties, including photos and videos. Your agent should do some research on the property and provide feedback and insight on whether it fits your needs.
- See the property on your behalf. You could potentially be on a video call, or you could review their report and recommendations later.
- Recommend an offer and manage the counter offer process and negotiations.
- Represent you at the closing.
With the right real estate partner, you’ll have a local expert who can show you some good options based on your investment needs and your budget.
- Choosing a High Desert Property Manager for Commercial Properties
Look for a property manager, too. It’s important not to wait to find a management partner until after you buy the property. You need some insight on how the commercial space will rent. This is especially essential when you’re buying sight unseen.
Why a property manager in addition to a real estate agent?
A property manager has a different set of skills than your real estate agent, and a lot of experience in the High Desert rental market. With a property manager helping you invest sight unseen, you will have someone who knows:
- How much rent the space you want to buy is likely to earn in rent.
- How much work the property requires before it’s ready for the rental market.
- What vacancy and turnover statistics look like in the market.
- What you’re likely to spend on routine, emergency, and preventative maintenance going forward.
- What sorts of tenants are likely to be interested in your commercial space. Will you attract retail tenants, industrial tenants, or are you hoping for renters who need office space?
Property managers and real estate agents should work together to deliver an easy investment experience for you. They will provide the eyes and the ears that you need to invest in a property without seeing it.
Don’t Skip the Due Diligence
When you buy a commercial property without seeing it and doing your own walk-through, a full inspection is absolutely necessary. Do not skip this step, no matter how quickly you want to close the deal.
A comprehensive property inspection is fundamental when you decide to purchase real estate that you have never seen and will likely never visit. You’ll want to know about any potential problems, especially when we’re talking about an investment property that you’re required to keep safe for tenants and their business operations.
Contract with an inspection company that will take a special look at the structure and foundation. This includes the roofing, basements, walls, floors, and frames. Have the electrical system checked. The wiring needs to be modern and up to code. Outdated wiring is often a problem in older buildings. Do all the outlets work?
Review the inspection report carefully, and talk about it with your real estate agent and property manager. If the inspection unveils extensive damage, a price adjustment might be in order, or you may want to look elsewhere.
Make an Offer and Close the Deal
The offer process on a property that’s a sight unseen offer won’t be much different than the way you make an offer on a property in the traditional sense. Decide on what you’ll offer, gather your best advice from your agent, and put in a proposal. Once the seller receives your offer, there may be an immediate acceptance. Or, the seller will reject it or request a change or make a counteroffer. These details will be managed by your agent.
There may be a few more contingencies in your offer when you’re making one sight unseen. You can establish certain criteria before the deal closes. Once you’ve had your offer accepted and all inspections and appraisals have been completed, you’ll close on the property. Sometimes, you can attend the closing virtually, but that may not be necessary. Let your agent handle the closing on your behalf.
This is not as risky as it may seem. Not only do you follow the process almost exactly to the letter as you would with a traditional investment purchase, you’re saving yourself some travel expenses and a lot of time by not flying out to see the property yourself.
The ability to invest in properties and make offers even without seeing the space opens up a lot of doors for investors. You can cast a wider net when you’re looking for new markets to invest in, and you can take some steps to diversify your portfolio by investing in properties you may not have considered earlier.
We are here to help. If you’re interested in High Desert commercial properties, please contact us at Preston-Lee Management Company. We’ve been providing property management services in the High Desert for more than 30 years.
