As specialists in restaurant real estate, one of the questions we get asked pretty frequently is what someone can expect from a restaurant or commercial real estate transaction.
In most cases, people are quite familiar with the concept of buying and selling residential real estate but face uncertainty when it comes to conducting a commercial transaction.
Here are a few of the main differences between commercial and residential real estate transactions:
Want to know more about the nuances of restaurant real estate? You may find these blogs helpful.
- Should You Use a Residential Agent to Buy an Eatery?
- Restaurant Sales: What’s on the Table During Negotiations?
- Key Terms in Restaurant Real Estate You Should Know
The Transactions Take a Lot Longer
Although it depends on the current real estate market conditions and also the motivations and goals of the buyers and sellers, a residential real estate transaction can be short or drawn out, but it rarely takes more than a couple of weeks or even a month or two to get all the details and closing sorted out.
Commercial real estate transactions, and specifically, restaurant real estate transactions can take anywhere from 6-10 weeks to complete. The reasons for that will become clear the more you keep reading here.
Ready to start your business venture? Download our Ultimate Guide to Buying a Restaurant to get started as a restaurant owner here.
There Are More People Involved
In a residential transaction, there are usually two main parties involved and a few individuals associated with each side. There’s the buyer, seller, and then their respective real estate representatives, and lawyers.
In a commercial restaurant transaction, there are often entire teams representing each side. There’s the buyer, seller, real estate agents, lawyers, landlords, potentially franchisers, franchisees, brokers, and more. With so many people involved, it’s easy to see how these transactions are much more complex than residential.
Financing is a Bigger (And More Complex) Part of the Deal
When you buy a house, you typically get pre-approved for a mortgage, pay a deposit and a down payment, and then everything is good to go. In a commercial real estate deal, financing is a much bigger part of the transaction and is often a lot more complicated than just going to the bank and asking for a mortgage.
Perhaps you have investors, perhaps you are a franchisee, perhaps you are working with a combo of your own capital and financing, each business situation is different, which makes financing a restaurant purchase more nuanced than your average mortgage.
Check out some of our other great resources for buying and selling restaurant real estate:
- What is Included in a Restaurant Lease?
- How to Build an Adaptable Business Model
- 5 Ways for a Small Business in Toronto to Save Money
- How to Present Your Restaurant for the Best Sale Price
Restaurant Deals are Conditional Right Up Until Closing
If you’ve been following the news lately, you’ll know that we’re currently in a red-hot seller’s market. Many homes sell as-is without conditions. However, if there are conditions on a home sale, most real estate contracts stipulate specific dates that the conditions must be met.
However, in the restaurant business, real estate transactions are conditional right up until closing.
There’s a Lot of Fine Print to Go Through
With a restaurant transaction, there are so many more things to consider as part of the deal. For example, landlord approval might be hard to get based on things like restrictive uses and covenants, change of use clauses, lease adjustments, tenant validity, and more. If you don’t have experience with this, it sounds like a lot of legalese, but these finer details are critical to your success.
The key to success with a restaurant real estate transaction is to work with an experienced professional who knows what to expect. They can guide you through the process and help you make the best choices for your unique business goals and ambitions.
Interested in learning more about buying a restaurant? Download our Ultimate Guide to Buying a Restaurant right here.
