Can I get some feedback for a first time commercial real estate buyer?
I'm considering purchasing a 3 story, 10,000 sqft building on the main street of a small town.  I currently work from home but have been looking to move into an office space.  I would try to rent some of the space, but don't plan on any form of revenue coming from renters (worst case scenario).

The monthly mortgage looks to be about 10% of what I save every month, so the payments present no risk.

The risk, for me, comes from never having owned commercial property.  What things should I be aware of?  What hidden costs should I be aware of?

If I were able to rent out some of the area, what am I getting myself into?  What kinds of insurance coverage should I consider?

This is less of an investment and more of my just moving my money out of a savings account and into commercial property, but I want to mitigate my risks.

Thanks.
[{"id": "cekjg8e", "text": "A few things to watch for:\n\n- Some municipalities don't include the same services for commercial properties as they do for residential. For example my city collects garbage and recycling for 1-4 unit residential but any other type must use a private service.\n\n- Some municipalities also have different mill rates for taxes on different types of properties. So for example a $250k office building may pay more taxes than a $250k house.\n\n- Commercial leases are often very different from residential ones. The law presumes that commercial landlords and tenants are more sophisticated than in residential leases. So you get more flexibility, for better or for worse. For example you can potentially include all sorts of expenses in the lease payment, such as the tenant paying a pro-rated portion of common area expenses and/or taxes and insurance. You can also negotiate who owns fixtures at the end of the tenancy. These factors mean that you cannot just compare the face rent amount of two leases to determine which one is more financially attractive to a tenant. You need to consider the totality of the lease provisions.\n\n- Commercial rents are usually higher on a per sq ft basis than residential ones. This is because commercial spaces can lie empty for a long time in between tenants and often require the landlord to make tenant-specific improvements. The increased rent compensates the landlord for the risk and expense.\n\n- As for insurance coverage you should call a couple of reputable agents or brokers and get their advice. Consider getting an umbrella policy in addition to a landlord policy.\n\n", "replies": [{"id": "cekjvl0", "text": "You......you wouldn't want to buy a car wash or a laser tag business with me.....would you?\n\n* I'll check into this.\n\n* Taxes appear to be about $4500/year.\n\n* I would pay someone that knows their stuff to draw up any lease.  Thanks for the info.\n\n* I know the current rental prices the current owner is charging and would probably go off that or slightly lower as I'm not looking to make a lot of money, just get help covering costs (mortgage, insurance, utilities).\n\n* Cool thanks.", "replies": [{"id": "cekptq7", "text": "Well... is your building capable of housing a commercial laundry with a large underground \"storage area\"? :)\n", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "cela98k", "text": "Phase I environmental at the very least. Your lawyer will take care of title search. Try to get each space your renting on it's own meter or at the very least submetering. Some commercial renters use way more energy than others. I try to have to house account at all. If there are hallways or common bathrooms, that square footage should be lumped into your tenants on a prorated basis. It's called a loss factor and commercial tenants expect it. ", "replies": [], "depth": 1}, {"id": "celbspw", "text": "Getting in is easy, but getting out can sometimes be difficult.  Always know your Exit Strategy prior to investing.  What type of future purchaser would be interested in this property?  Can it be converted to something else?  Retail?  Medical office?  General office? Apartments?  Condos?  At 10k sf, it would be difficult to see an institutional investor interested, so its local/regional investors, users or a 1031 tax free exchange purchaser.  Position yourself for the maximum number of exit strategies, and for the \"deepest\" pool of potential purchasers....", "replies": [{"id": "celchqx", "text": "Thanks for the feedback.\n\nWhat if I don't need an exit?  By this, I mean the costs of keeping it each month don't even begin to dent my cash flow.  Additionally, I work remotely and would use it as an office, myself, for the indefinite future.\n\nIt's located on the main street of a small town.  Most other buildings are occupied and have renters so it's not a dead downtown.", "replies": [{"id": "cemg5we", "text": "I'm a professional investor and that's the methodology I've used for every asset I've ever purchased - on behalf of stockholders, pension fund clients or myself.  When I say myself, I'm including my home(s).  You may think you're never going to sell, but believe me - you probably will.  Its a good sign that the other buildings / spaces are leased - find out who owns these buildings.  Why aren't they buying the building?  Is it pricing?  Is it too big?  Too small?  Right use?  All I'm saying is understand what you're getting into....", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ceo5lxx", "text": "* Zoning uses &amp; potential restrictions\n* Parking situation for your office and potential tenants\n* Ingress, egress, and regress; specifically for the space you plan to lease out\n* Deferred maintenance issues\n* Rental rates for space downtown on a per sq. ft. basis with consideration to tenant/landlord responsibilities and who pays utilities, taxes, &amp; insurance\n* RE taxes should be subject to be reassessed by the county after the sale (increase/decrease/flat). If you are paying more for the property than the current assessed value, then taxes would most likely increase and/or adjust to the purchase price, depending on if you live in a non-disclosure state. Call the county assessor.\n* Budget for potential tenant improvements\n\nLastly, you make your money when you buy, not when you sell.", "replies": [], "depth": 1}]