The commercial real estate industry is an elite one that turns out millionaires over and over again. Through commercial real estate, you can literally acquire wealth and riches beyond many can even dream about- especially when one invests wisely and with clear direction. One of the reasons that commercial real estate provides astounding profits is that the properties that are developed, built, and rehabbed are extremely valuable to the city and the people of the city. With commercial properties, there would not be nice places to live, shop, and work. Commercial real estate provides an extreme value to all those it touches in a community.

However, there is another reason as to why commercial real estate is so profitable, and that is because of the risk an investor must incur to create those profits. Purchasing a property can be extremely risky business especially when there are millions of dollars on the line.

What makes commercial real estate so risky? In order to answer this question, let's first look at residential real estate for a quick comparison.

Most commercial real estate investor operate with a sound team of professionals that advise and delegate in order to protect the investor and his or her assets. These professionals are extremely specialized in their knowledge and important to making profitable deals.

If you look at the residential investor, however, he or she usually does not have a huge team surrounding him or her and can usually invest in a few homes at a time with ease.

Why is it that the residential investor does not need a full time team to look watch over and consult every deal prior to purchase? Beyond the obvious reason that residential real estate does not involve nearly the millions, tens of millions, hundreds of millions and even billions of dollar price tags and profits that commercial real estate is known for, there is another very important attribute of commercial real estate that separates it from residential real estate.

This attribute is characterized by a term known as ?buyer beware.?

We all know that with most residential real estate, the buyer must be disclosed of every aspect of the property- good or bad. For example, if the roof was leaking in a home, but it was summer so the purchaser may not necessarily find out until rainy season, then the owner or agent must disclose this fact to the purchaser. It is illegal for the owner or agent to withhold any information from the purchaser. This law greatly decreases the risk on the purchaser's behalf and if a problem arises that was not fully disclosed at the time of purchase, then the purchaser could receive his or her deposit back and the owner and agent could suffer penalties.

In residential real estate, the buyer does not need to beware (in this sense) because every detail must be disclosed so he or she has the absolute facts on a property before deciding to part with a down payment or take out a mortgage to purchase the property.

The opposite is true in the commercial real estate industry. The owner or agent does not need to disclose any information about the property to the purchaser. In fact, if the new owner discovers that the land he or she purchased is toxic, and the previous owner or agent said nothing, it is the new owner's responsibility to have the land cleaned. The new owner must pay all legal and cleaning bills that come along with toxic property.

This may seem rather unfair. Why should the residential real estate industry have full disclosures while the commercial real estate industry does not? In commercial real estate, you have a certain amount of time prior to purchase to perform due diligence, or a complete analysis of the property. This may include building inspections, soil tests, infrastructure analysis, financial analysis etc. The buyer is completely responsible for retrieving the facts on a property.

It is considered an open and free market so, ?buyer beware.? There is a lack of need to protect the buyer or seller by the law. Therefore, it is increasingly important to have commercial real estate professionals looking out for the commercial real estate investor at every turn.

Because the law does not protect the buyer, the buyer must protect his or herself. Legal counsel should be brought in to oversee every single deal. This includes conditional statements on a contract and performing the most in-depth due diligence one can possibly do. Commercial real estate is not something you can look at for a few weeks and then decide you want to purchase like a home. It can take 45, 60, 90 days and more to perform due diligence, depending on the purpose of the property and how complicated the property is.

Let's look at an example. Purchaser A wants to purchase a property from Seller B. The property is raw land and is currently zoned R-1, or residential lots one lot per acre. According to the agent, there is a good possibility that the city needs additional commercial land to balance out the additional homes and apartments that were recently built near the subject property. For this reason, the city may be interested in rezoning the land from R-1 to commercial.

Purchaser A can see the profit potential of this rezone and wants to purchase the property. Purchaser A lets the owner know that he wants to purchase the currently zoned R-1 property. Purchaser A is acting in good faith that the property will be rezoned to commercial. But just in case, Purchaser A includes a conditional clause that states that if the property cannot be rezoned to commercial, then the contract is null and void. Purchaser A will no longer have a liability toward the property and owner.

This was an intelligent move Purchaser A made because in this case, the property could not be rezoned to commercial. Instead of sitting there with a much less valuable R-1 zoned property, Purchaser A was left with no property at all, but no financial or legal problems either. And that is far better than a worthless property and a legal battle to contend with.

Every commercial real estate deal is extremely different. Buyer and seller personalities, the quality of due diligence, the integrity of the buyer and purchaser, the financial needs, and skills of professionals such as the escrow company and commercial real estate owners all play a huge role in how each deal results. The best and most sound advice I can give you is never take what you hear for face value. Verify every fact and have your commercial real estate professionals available at every turn. The information they can conjure can save you a lot of money and legal headaches by simply getting the facts verified and inserting conditional clauses in the contract.

If you currently are a commercial real estate investor or are looking to get into the business, always be on the lookout for your next great professional that will provide outstanding results in your favor. Working with the best people can save you so much time, energy and money so that you can concentrate on the profit making activities of an investor- financing properties and negotiating deals.

Let others who know the legal ramifications of ?buyer beware? do what they do best. The best of commercial real estate investors know this savvy tactic and would not even think about entering a deal without a complete due diligence and a thorough investigation by his or her professionals. There is so much on the line with commercial real estate deals; it can mean immediate failure with a single deal gone wrong. Don't allow this to happen to you and always verify information with the ?buyer beware? mentality implemented at all times.