Finding your best location.
A time and money saving guide to avoiding bad real estate investments for businesses of all sizes!
Red
Flags
You need to watch out for these in site selection. Some, if
not all of these, can be site killers.
Believe it or not, I have run into every one of these problems
in my work as a commercial real estate broker and site
selector for a national franchisor. These are just some of the
problems that can hit you between the eyes. Be careful and
check everything. Don't rely on hearsay or birdseye viewpoints.
Get the facts instead.
The
following is a summary taken from the book, Site Selection
finding and Developing Your Best Location by Kay
Whitehouse, CCIM
Red
Flags
1.
PROJECTS COMING SOON:
Sometimes they never come.
2.
UNCOMPLETED PROJECTS: When the
projects do actually begin construction, it is not unusual for
a project to hit a snag, run over budget, or simply be poorly
planned and come to a dead standstill before completion.
These delays can destroy your project.
3. TRAFFIC
JAMMERS: Traffic can be wonderful
for your business but watch out for potential traffic jams going in and
out of your site.
4. INGRESS
AND EGRESS (GETTING IN AND OUT):
Your clients or customers need to have a safe way of getting
in and out of your business. Alternative entrance and/or exit
will cost you thousands of dollars in missed or late
deliveries and impatient clients or customers.
5. TREES:
Trees are beautiful. Don't
be caught with your business hidden by trees the city, county,
or state won't let you cut down.
6.
ENDANGERED TREES OR PLANTS:
Trees can also be endangered species. Double check the
endangered species list before buying a site that you can't build on.
7. MORE
TREES: Be careful of the cost of
clearing a property that is well populated with trees and
foliage.
8.
TOPOGRAPHY: Get an estimate
before purchasing a site that you will need to fill, grade,
remove boulder, de-muck or any other preparation needed to build on
your site. It might cost as much as your building.
9. SITE TOO
SMALL: Don't try to squeeze a
project on a piece of property that is too small. You
will have to fight for every parking space, every easement,
every setback and your project could still be inadequate for
your project.
10. SIGNS:
Find out the guidelines for your signage from your city or county. You don't want to
be left with
a great site but no one knows you're there.
11. COMPETITION:
Be careful of your competing neighbors.
Don't start a project that will make you number two.
12. DON'T GET CAUGHT
BEHIND ANOTHER BUILDING: You have
a great project. Be sure to check the site plan so that
you are not hidden by any structure or access.
13. CROSS PARKING:
If your project is an out-parcel
to a shopping center and needs additional parking for your
customers ask the shopping center developer if he can spare a
few squares (parking spaces).
14. CROSS PARKING, PART
II: Be careful of reciprocal
cross parking easement. Sometimes cross parking
agreements say if your project uses their parking
then their project can use yours. Which defeats the
idea.
15. DON'T GET CAUGHT IN
THE MIDDLE: Planning your project
in the middle of two similar projects can be risky.
Customers will not stop if it is inconvenient or untimely.
16. MEDIAN CUT:
Line up your project with a median cut.
Its inconvenient to make a u-turn in order to enter your
business.
17. FUTURE ROADS:
Double check for road construction.
Road construction can reduce accessibility for long periods of
time or re-route the road from your project leaving you off
the main path.
18. FLOOD PLAIN,
GREENBELT, SWAMP AND WETLANDS:
Serious development problems, including
a reduction in buildable acreage, can accrue with these types
of property details.
19. BAD SIGNAGE:
If your project is a shopping center,
don't get caught under a strict sign ordinance. You will have
a hard time finding tenants if they cannot display an
appropriate sign for their business.
20. BEING OUT-POSITIONED:
Make sure if your competition is
extremely close or across a four lane highway that your site
is the most convenient for the time crunch, ingress & egress,
visibility, parking, etc.
21. OUTSIDE THE HUB:
Don't get caught twiddling your thumbs
waiting for the heavy shopping area to find you down the road.
For optimal business be inside the hub of activity.
22. SEWER CAPACITY:
Be sure you have a sewer for your
project.
23. ADEQUATE UTILITY
LINES: Check the utility
lines for any upgrades or replacing. It's easier to do
as you build your project vs. after your business is open and
not working properly.
24. IMPACT FEES:
To know your impact fees are very
important and expensive. Starting a project without the
correct impact fees in your budget can bring your project to a
halt.
25. SOIL TESTS:
Always have your own soil test.
Keep in mind even if the Seller has a soil test done he wants
to sell the property and he may not be looking out for you.
26. DEED RESTRICTIONS:
Deed restrictions have been around for
more than 100 years. Be sure your have an attorney or a
reputable title company to turn up any deed restrictions.
27. EASEMENTS:
Title search and/or surveys should pick
up any easements. Easements can keep you from building
your project where you want to on the site.
28. FUTURE ASSESSMENTS:
Can include new traffic signal or new
utilities which will have you paying your proportionate share
of it as a tax assessment.
29. ACCELERATION AND
DECELERATION LANES: This is
another one to plan on during your project and not after.
The department of transportation will not let you open your
business if the road needs work.
30. OTHER USES:
If you are an out-parcel to an office
building or shopping center, find out what else is going into
the center as well as on the other out-parcels. Ask the
developer or leasing agent to give you a written agreement
that restricts a direct competitor from coming into the
project.
31. VISIBILITY:
Your client or customer can't do
business with you if he cannot find you. You have to be seen!
32. WHAT'S NEXT DOOR:
Check out your neighbors. If your
project is a residential area it may not be to popular across
the street from a county jail facility.
33. NEW GROWTH AREA:
New growths area are a lot of fun but
because of the rapid growth taking place, they can get
saturated prematurely. Don't be "too much, too soon."
don't go charging in with the cavalry until the settlers get
there.
34. REMODELING:
If your plan is to remodel, do it well.
Don't cut corners. Establish a whole new image and
identity for yourself. It wouldn't hurt to find out why
previous occupant didn't make it, or is no longer in
business.
35. PREMATURE OPENING:
Coordinate your opening with any project
or projects that will establish your area. For example, new
road, waterway, or
shopping center, etc.
36. BARRIERS:
Any barriers can bring an active area to
an abrupt stop, or possibly change the entire atmosphere of a
town. Plan your project away from river, mountains,
state forest, bridges, interstates and railroads barriers that
might block your business access flow.
37. CURB CUTS:
You cannot make a curb cut anywhere for
an entrance to your property. You need to contact the zoning and planning department and the
department of transportation.
38. NEW ROAD:
A project on a new road can cost you
corrections or completion. Make sure it is up to
standards and has been dedicated to and accepted by the
appropriate city or county.
39. LEASED PROPERTY:
If you are purchasing an improved
property that you want to use immediately, before closing have
the Seller vacate all the tenants and save yourself the headache.
40. TITLE COMMITMENT:
Title Insurance companies research
the seller's title and write an insurance policy that provides
coverage for a problem that might come up at some future
date that could affect the title. Ask the seller to
provide you with a title commitment as soon as possible
(within 15 days). If the title isn't clear then you will save
time and money on other property tests.
41. AGREEMENTS:
Words are cheap. Only written
agreements are recognized, so get it all in writing.
42. GET A SURVEY:
If there has been a recent
survey within 3 months by a certified surveyor it should be
adequate. Make sure the legal description, acreage,
buildings, fence, encroachments are the same as what is on
your contract.
43. FEASIBILITY STUDY:
Watch your expenses and
estimate your projected sales or income realistically.
Underestimating your costs, being misinformed, or too
optimistic about your future sales or income for your project
can result in financial ruin.
44. OLD GARBAGE OR
CHEMICAL WASTE DUMPS: A soil
test is extremely important. Garbage and Chemical waste can
produce toxic fumes or contaminate the drinking water, among
other disasters. Double check previous uses in case
someone has plowed under waste and added top
soil.
45. ACCESS ROAD OR
FRONTAGE ROAD: Some areas are
using a frontage road that runs along the major highway with
limited entrances or access. Your
competition might have been grandfathered in and an advantage.
46. IMPROPER
CONTRACT:
Be sure to include all the
clauses you need in your contract. If you need an
easement and the seller is to provide it, add that clause to
your contract. Have all clauses, agreements and
contingencies in your contract.
47. DEVELOPMENT
STANDARDS: Check the
requirements for developers and developments with all
agencies. The water district, environmental agency, tree
and wildlife preservation board, as well as the local planning
and zoning board requirements must be met.
48. GRANDFATHERED-IN
ZONING: Buildings that are on
property with grandfathered-in zoning should be discussed at length with the zoning
department. Most of the time, if you change the use or
if the building is damaged you will have to
adhere to the new zoning requirements.
49. ADDRESS THE
INSURANCE: Insure the
property
at closing. Contracts can be full of contingencies and
take a longer time to close. If you are going to be
working on the property before closing, specify how insurance
will be carried and by whom.
50. DON'T GET EMOTIONAL:
The worst thing you can do is
fall in love with a piece of real estate and want it no matter
what. When this happens, all your logic and business
sense goes out the window. Keep a good business head
on your shoulders and look at the facts and feasibility of any
projects.
MORE FLAGS TO
WATCH OUT FOR
CEMETERIES-
One old family grave in the middle
of your property can absolutely ruin your site plan.
PLATTING-
If you are buying a parcel of a larger
piece of property that has been platted into several parcels,
make sure the plat has final approval. A preliminary
approval could be affected by changes in zoning or building
codes.
FINANCING-
If you are going to need to
secure a loan be careful to structure your contract subject to
your financing. If you do not add this contingency to
your contract, and are unable to obtain financing, you could
lose your escrow deposit.
PERMITS-
If possible, try to have all of your
permits in hand before closing on your site.
HISTORIC STRUCTURES-
Buying a piece of property
that qualifies as a historic structure which cannot be torn
down, removed, or changed, can turn out to be a real
historical event in your life. Check it out.
ARCHEOLOGY FINDS-
A good soil test might be able to
prevent you from buying a piece of property only to later
discover with just one bull dozer ride, that you have
uncovered the "archeological find of the century." This
puts your whole project on hold until the "find" is worked,
making your holding costs sky high.
WILDLIFE HABITAT-
The habitat of an endangered
species cannot be developed. Know your property before
you close.
MINERAL RIGHTS-
If someone owns the mineral
rights on your site, it can make it impossible to obtain a
loan using the property as collateral because the mortgage is
second to the mineral rights.
IMPROPER SIGNATURE-
Make sure the person who has
signed your purchase contract is the legal owner. If the
owner is a corporation or partnership, have your attorney
verify that the person who signed the purchase agreement has
the authority to do so. You could spend money on
engineering, soil tests, etc., and have the proper owner sell
it right out from under your nose.
TREES NEXT DOOR-
Trees on adjoining property can
block your visibility or the visibility of your sign.
Deal with this before you buy the property and get any
agreements with adjoining property owners in writing.
SINKHOLES-
A soil analysis map might be able
to alert you to areas prone to sinkholes.
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