When you purchase a new car, it usually comes with a number of added features, some of which may seem quite nonsensical. The same is true with commercial buildings. There are a number of features that buyers aren’t looking for and that will even push them away as they do not want to pay more for a property due to a strange and unwanted feature. Sometimes, sellers are confused by this. For instance, someone may have installed solar panels to make the property more energy efficient. In itself, this is a fantastic idea, until it is noticed that those solar panels have taken up 10 parking spaces. While the previous occupant may have had a good carpool system in place, the new owner only sees the loss of 10 parking spaces. So which are some of the upgrades you should invest in and which ones should you avoid?
Freeway Frontage
Generally speaking, a freeway frontage is highly beneficial.
Many studies have been done over the years to try and quantify the economic benefits a freeway may have on an area. A study commissioned by the American Highway Users Alliance in June of 1996 says that the Dwight D. Eisenhower System of Interstate and Defense Highways has enriched the quality of life for nearly every American and returned more than $6 in economic productivity for every $1 spent.
However, a freeway frontage may also lead to transients, debris, noise, and loiter. As such, the kind of buyers who are actually attracted specifically by freeway frontage and who would be willing to pay more for it, are retailers who see an increase in customer exposure. Others, however, do not see it as a benefit or even regard it as a drawback.
Signalized Corners
Signalized corners usually encourage people to stop in front of where you are, which means that this helps a business get a lot of exposure. However, this is only a benefit for those businesses that rely on destination customers. All others would prefer not to be on such a busy area. Nevertheless, there are always some exceptions. If the property could be converted to one with a different purpose in the future, at which point the intersection could benefit, an investor with a strong future plan could be interested.
Office Space in Industrial Properties
Most industrial properties will need some office space as well. Adding this type of space, however, is incredibly expensive. It requires permission, timing, construction, furniture, and more, and can easily cost about $100 per square foot. That is a significant amount of money that only certain buyers will be willing to pay.
Additionally, it is likely that buyers will not like the office space as it has been built. They might not like the outdated finish, they might want to change the layout, or they might think that too much industrial space has been taken up. Furthermore, should there be more office space than is really needed, they will have to pay for its removal, which means they will be likely to look elsewhere.
Assumable Financing
Another possible issue is that of assumable financing.
An assumable mortgage is a type of financing arrangement in which an outstanding mortgage and its terms can be transferred from the current owner to a buyer. By assuming the previous owner’s remaining debt, the buyer can avoid having to obtain his or her own mortgage.
One paper, this may sound great. However, lenders want people to take out mortgages, offering up to 90% loan to value ratios at interest rates of just 4%. The assumable mortgage might have much worse terms and conditions. Hence, unless it is truly a good deal, this isn’t something that will help you sell.
