Commercial Property in Arlington and Snohomish County

Commercial value starts with what the zoning lets you do. Before you look at the building, look up the parcel's zone and the uses it allows. Find out whether the current use is allowed outright, allowed only with a conditional permit, or allowed only because it was there first, and what happens to that right if the building burns down or the tenant leaves.

A use that was legal when it started can be limited later. The answer comes from the city or county planning department for that specific parcel, not from a listing. For land in the county, the SCOPI property map and the zoning map viewer are the place to start.

Small multifamily is one of the areas I focus on. A building of up to four units is generally financed and bought much like a home, while five or more units is usually treated as commercial property and priced on the income it produces. Which side of that line a building falls on changes the loan, the appraisal and the questions you ask.

Ask for the rent roll, the leases, the utility bills and the last few years of expenses, and compare what each unit actually rents for with what the owner says it could. Vacancy, deferred maintenance and rent that is below market are all price questions.

A building with tenants is a bundle of leases. Ask for every lease, the rent roll, the security deposits, the dates the leases end, and who pays the taxes, the insurance and the maintenance. A triple net lease shifts some of those costs to the tenant. Ask whether any tenant has an option to renew, a right of first refusal or a right to buy.

Whether a lease continues after a sale depends on the lease and the law, so have a real estate attorney read them. A vacant unit is not just lost rent. It is also a question about why it is vacant.

A building with roll-up doors and a yard is judged on its working details: clear height, door sizes, power, floor loads, truck access and turning space, and whether the zone allows the use you have in mind. Ask what the building has been used for, and whether the use you plan is one the zoning and the fire code allow.

Look at the yard and the drainage as closely as the building. Stormwater rules, paving and parking are expensive to change, and a site that floods or cannot turn a truck is a different property from one that can.

Commercial buyers price a property on what it earns. Ask for the operating statements for the last few years, not just the projected year, and check them against the leases and the tax returns. Net operating income is what is left after operating expenses and before the loan payment, and the capitalization rate compares it to the price.

Two buildings with the same rate can carry very different risk, and a rate is only as good as the numbers behind it. Ask who prepared the statements, and have your accountant look at them before the feasibility period ends.

Commercial loans are underwritten differently from home loans. The lender looks at the property's income as well as the buyer, and the terms usually differ: a larger down payment, a shorter term with a balloon or a rate reset, and appraisals and fees that take longer. Talk to a commercial lender before you make an offer, not after.

The four common loan types are built to finance a home and do not carry over to a commercial building. If you are buying before you sell, read Bridge Loan and How Does It Work.

The roof, the heating and cooling, the parking surface, the plumbing and the electrical system are the big-ticket items. Hire an inspector who works on commercial buildings, look at the age of each major system, and ask for maintenance records and for permits on any work that was done.

Deferred maintenance is a price question. Get quotes for what the inspector finds during the feasibility period, so you can ask for a price change or a repair with numbers in hand.

Buyers and lenders often ask for an environmental review of commercial land, especially where there has been fuel storage, dry cleaning, auto repair or industrial use. Ask which utilities serve the property, who provides them, and whether it is on sewer or septic.

On commercial parcels outside a city, the same questions apply as for any rural land: the well, the septic, critical areas and flood zones. The wells and water, septic and flood zones sections of the acreage guide cover them.

Buying commercial property means a longer due diligence period than a home, with the zoning, the leases, the financials, the inspection, the environmental review, the title and the survey all open at once. Selling means having the file ready before the sign goes up: leases, rent roll, operating statements, permits, surveys and warranties. A complete file sells a building faster and holds the price.

Commercial deals need an attorney, an accountant and a commercial lender on your side. Where a deal is bigger or more complex than I should handle alone, I will say so and help you find the people who do it every day. If you want to talk about a property, send me the address and I will pull the records first.

This is general information about commercial property, not legal, tax, lending or engineering advice about any particular property. Verify everything with the city or county and your own professionals.