Commercial real estate presents a compelling opportunity for long-term income, diversification, and asset growth. For many first-time investors or business owners, buying commercial property can feel overwhelming at the outset. However, with the right approach and professional guidance, it becomes a manageable and rewarding process. In markets like Holland, MI—where the economy is supported by a strong manufacturing base, a growing downtown district, and proximity to the Lake Michigan shoreline—commercial properties continue to attract interest from both local entrepreneurs and out-of-state investors.
For those new to commercial real estate, the process differs significantly from residential property transactions. It requires a deeper understanding of zoning, leases, financing, valuation, and long-term strategy. Michigan Homes & Cottages works closely with clients in West Michigan to simplify this process and ensure that each investment aligns with financial goals and market trends.
Define the Purpose of the Investment
The first step in buying commercial property is to clearly define the intended use. Commercial real estate encompasses a wide range of property types, including office buildings, retail spaces, industrial facilities, mixed-use developments, and multi-family units with more than four dwellings. Whether the goal is to start a business, lease to tenants, or develop for resale, clarifying this purpose early will guide decisions related to location, financing, and property type.
In Holland, retail storefronts along 8th Street in the downtown corridor may serve a different investment profile than an industrial warehouse near US-31 or a medical office on the north side of town. Understanding the demand in each submarket is essential for evaluating income potential and long-term value.
In Holland, retail storefronts along 8th Street in the downtown corridor may serve a different investment profile than an industrial warehouse near US-31 or a medical office on the north side of town. Understanding the demand in each submarket is essential for evaluating income potential and long-term value.
Understand the Local Market
Location is as critical in commercial real estate as it is in residential, but the metrics of success can differ. When buying commercial property in Holland, MI, investors should consider local business trends, infrastructure, zoning regulations, and economic indicators. Proximity to traffic corridors, population centers, public services, and labor markets can significantly affect a commercial property's viability.
For example, commercial properties near Hope College and the Holland Hospital campus may benefit from stable tenant demand for office and service-based uses. Meanwhile, light industrial or warehouse space may be more suitable in the city’s outer commercial zones or industrial parks, where accessibility for logistics and delivery vehicles is prioritized.
Zoning is another critical factor. Holland’s zoning map distinguishes between general commercial, central business district, industrial, and mixed-use areas. Ensuring that the desired property aligns with permitted uses can save time and potential legal complications. Zoning laws will also affect whether modifications, renovations, or tenant build-outs are feasible.
For example, commercial properties near Hope College and the Holland Hospital campus may benefit from stable tenant demand for office and service-based uses. Meanwhile, light industrial or warehouse space may be more suitable in the city’s outer commercial zones or industrial parks, where accessibility for logistics and delivery vehicles is prioritized.
Zoning is another critical factor. Holland’s zoning map distinguishes between general commercial, central business district, industrial, and mixed-use areas. Ensuring that the desired property aligns with permitted uses can save time and potential legal complications. Zoning laws will also affect whether modifications, renovations, or tenant build-outs are feasible.
Assemble the Right Professional Team
A successful commercial real estate transaction often requires a team of qualified professionals. These may include a commercial real estate agent, lender or mortgage broker, attorney, accountant, and property inspector. Partnering with a local real estate professional who understands the Holland market is especially valuable when buying commercial property for the first time.
Commercial agents provide insight into available inventory, comparative market data, rental trends, and investment potential. They also guide clients through negotiation, due diligence, and closing—a process that is often more complex than residential transactions due to leases, title issues, and property-specific regulations.
An experienced real estate attorney can assist in reviewing contracts, understanding zoning compliance, and protecting the buyer’s interests. Likewise, a CPA can offer guidance on how to structure the purchase for tax efficiency, including the use of LLCs or partnerships.
Commercial agents provide insight into available inventory, comparative market data, rental trends, and investment potential. They also guide clients through negotiation, due diligence, and closing—a process that is often more complex than residential transactions due to leases, title issues, and property-specific regulations.
An experienced real estate attorney can assist in reviewing contracts, understanding zoning compliance, and protecting the buyer’s interests. Likewise, a CPA can offer guidance on how to structure the purchase for tax efficiency, including the use of LLCs or partnerships.
Evaluate Financing Options
Financing commercial real estate differs from obtaining a mortgage for a residential home. Lenders typically assess both the borrower’s creditworthiness and the projected income or business plan for the property. Loan-to-value ratios (LTVs) for commercial loans tend to be more conservative—often capped at 70% to 80%—and interest rates may be slightly higher than residential loans due to increased risk.
There are several loan types available when buying commercial property, including conventional bank loans, SBA (Small Business Administration) loans, and commercial mortgage-backed securities. Each comes with different terms, down payment requirements, and underwriting criteria. For example, SBA 504 loans are popular with small business owners looking to buy a property for their operations, offering long-term fixed rates and lower down payments.
Understanding the anticipated cash flow from the property—such as tenant lease income—helps determine how much financing is sustainable. Lenders often look for a debt service coverage ratio (DSCR) of 1.25 or higher, meaning the property should generate at least 25% more income than its debt obligations.
There are several loan types available when buying commercial property, including conventional bank loans, SBA (Small Business Administration) loans, and commercial mortgage-backed securities. Each comes with different terms, down payment requirements, and underwriting criteria. For example, SBA 504 loans are popular with small business owners looking to buy a property for their operations, offering long-term fixed rates and lower down payments.
Understanding the anticipated cash flow from the property—such as tenant lease income—helps determine how much financing is sustainable. Lenders often look for a debt service coverage ratio (DSCR) of 1.25 or higher, meaning the property should generate at least 25% more income than its debt obligations.
Conduct Thorough Due Diligence
Due diligence is a vital step in buying commercial property, particularly for beginners. This period allows the buyer to investigate every aspect of the property before closing. Standard inspections may include structural assessments, HVAC and electrical systems, roof condition, and compliance with building codes. Environmental assessments may also be required, particularly for industrial or older properties, to determine if there is any contamination or environmental liability.
Buyers should also request current leases (if the property is tenant-occupied), rent rolls, utility costs, tax bills, and maintenance records. Understanding the financial performance of the property provides clarity about its potential and risks. Reviewing all relevant documents also helps avoid surprises post-closing.
If the property is being purchased for development or a significant remodel, site plans, engineering reports, and permit timelines should be reviewed in advance. Local ordinances in Holland may affect parking, signage, stormwater management, and architectural design.
Buyers should also request current leases (if the property is tenant-occupied), rent rolls, utility costs, tax bills, and maintenance records. Understanding the financial performance of the property provides clarity about its potential and risks. Reviewing all relevant documents also helps avoid surprises post-closing.
If the property is being purchased for development or a significant remodel, site plans, engineering reports, and permit timelines should be reviewed in advance. Local ordinances in Holland may affect parking, signage, stormwater management, and architectural design.
Prepare for Ownership and Management
New owners must consider how they plan to manage the property after acquisition. In many cases, especially with multi-tenant or complex properties, hiring a professional property manager is a smart move. Property managers handle lease administration, maintenance coordination, tenant communication, and rent collection—freeing the owner to focus on strategic decisions.
For those purchasing a commercial property to house their own business, planning for the transition, renovation, and operational setup should begin as soon as the purchase agreement is signed. Coordinating occupancy timelines, tenant improvements, and marketing (if leasing vacant space) can ensure the property begins generating value quickly.
For those purchasing a commercial property to house their own business, planning for the transition, renovation, and operational setup should begin as soon as the purchase agreement is signed. Coordinating occupancy timelines, tenant improvements, and marketing (if leasing vacant space) can ensure the property begins generating value quickly.
Plan for the Long-Term
Commercial real estate is typically a long-term investment. While some buyers may see immediate cash flow through existing leases or business income, the true value often comes from appreciation, tax advantages, and strategic refinancing. Investors in Holland often look for properties that offer stable returns and align with the area’s economic development patterns.
Whether holding the property for rental income, repositioning it for resale, or occupying it as part of a business plan, success in buying commercial property begins with sound planning and informed decision-making. Understanding your investment horizon, risk tolerance, and exit strategy can help maximize returns and reduce exposure to unforeseen issues.
Whether holding the property for rental income, repositioning it for resale, or occupying it as part of a business plan, success in buying commercial property begins with sound planning and informed decision-making. Understanding your investment horizon, risk tolerance, and exit strategy can help maximize returns and reduce exposure to unforeseen issues.
Begin Your Commercial Investment with Michigan Homes & Cottages
For new investors or business owners in West Michigan, buying commercial property can be a transformative step toward financial growth. With the right guidance, the process becomes not only achievable but also strategically beneficial. Contact Michigan Homes & Cottages today to explore commercial real estate opportunities in Holland and surrounding areas. Their experienced team offers expert insight, market knowledge, and personalized service to help you invest with confidence.
