Purchasing an Austin Office Condo

If you are a buyer of an Austin office condo or office building there is a process that takes place to make your purchase easier than if you did it on your own. The first 2 categories or we can say questions you should ask are as follows: Are you looking to be an owner-user of the office condo or is this an investment in a property such as a multi-tenant condo or office building? Each type of property is in different sub-markets and some are more plentiful than others in specific areas of Austin. Another and most important question that sometimes is overlooked is : Are you going to require financing?

Purchasing with financing

As a rule when a buyer looks to purchase an Austin office condo and they need financing. There should be some pre-cursory discussions with their lender of choice. Within those discussions, the question ask is how much does the borrower qualify for? Pre-approvals move the purchase process further along initially.

All purchases of commercial real estate property has to go thru underwriting and different lenders have different requirements. These requirements are based on their portfolio and the type of office condo, office building or client that want to have on their books. As the process moves along, Shire Commercial helps you as the client find the best potentials first. After potentials are found, then we start a tour. Once the tours of the commercial real estate property are complete, a short list of made of the best candidates.

Austin Office Condo Interior

Making an offer on an office condo

Can you make an offer at the same time on two separate office condos or office buildings? Yes you can. Sometimes office condos for sale in Austin are part of a portfolio of properties. Portfolios are more of an investment scenario than an owner user scenario. Once the purchase contract is in place and money is escrowed the property has to be inspected. Expect the cost to be dependent on the size of the office property. Sometimes an offer is made to purchase and an inspection shows that the office condo in question may need some work that was not anticipated. Before the due diligence period has expired, it is up to the Buyer and the Broker to decide if they need to counter the sales price of contract with the seller. It all depends on the specifics of what the inspections showed and if the repairs are quite costly or just standard wear and tear items.

Sometimes in a purchase contract , independent consideration is made to the Seller. When would that happen? Typical situations may be where the Buyer wants to “buy more time” say 70+ days (in today’s market 2013) which is considered to be long. Independent consideration is usually not refundable and if the Buyer does not move forward they will forfeit the funds to the Seller.

Cap rate effects on Commercial Real Estate

Long term leases have a stabilizing effect on cap rates for Austin office space or warehouse property. Cap rates on commercial real estate typically lag interest rates and money markets by at least 6 months on a mid sized investment and up to one year on larger investments. In other words cap rates (values) of commercial real estate do not move as quickly as bank rates or money market rates. Office space and warehouse space lease rates do not change every time there is an interest rate change in the market. So keep in mind a cap rate is going to change more slowly and is a lagging indicator.

Interest rate affects on Commercial Real Estate

When interest rates rise, investors for commercial real estate may expect a lower cap rate on an Austin office property or warehouse investment . On the flip side, when interest rates are declining, most investors expect higher cap values. Stocks and real estate have been described as inverse of each other, higher stocks correlates to lower real estate values. Commercial Real Estate is often seen as a flight to safety if stocks are declining. All of these factors can affect the cap rate on an office property investment or warehouse investment.

Current interest rates

Ratio of mortgage money to fair market value- Loan to value

Amortizations available

Balloon or maturity dates

Market conditions

Forecasted market changes

Yield

Other investments that compete with commercial real estate

Shire Commercial represents Buyers in finding the right properties and helping clients execute an investment or purchase on office properties , office condos or warehouse space in the Austin, Texas area.