Commercial Real Estate for Sale Charlotte NC

Commercial and Investment Property Types

The OCC's handbook for its bank examiners lists the primary commercial real estate sectors as office, retail, industrial, hospitality and residential, which includes multifamily and one- to four-family residential development and construction. My guides to office, retail, warehouse and flex, medical office and restaurant space go into each type. The OCC counts both property held for lease to third parties and nonresidential property occupied by its owner as income-producing commercial real estate, and that split shapes your financing options.

Where Residential Ends and Commercial Begins

North Carolina's Residential Property Disclosure Act, G.S. Chapter 47E, applies to sales and other transfers of residential property with one to four dwelling units, so a duplex, triplex or fourplex bought as a rental is covered. The state's commercial broker lien statute, G.S. 44A-24.2, defines commercial real estate to include multifamily residential property with five or more dwelling units. The OCC's handbook glossary uses the same cutoff, defining one-to-four-family residential property as property containing fewer than five individual dwelling units. But the handbook also says that when rental income is the main repayment source for a one- to four-family loan, its repayment risk is typically more like commercial real estate than that of an owner-occupied home loan.

Evaluating a Property: NOI, Cap Rate and Documents

Start with net operating income (NOI), which the OCC defines as annual gross income less operating expenses. Operating expenses don't include interest, principal or income taxes, so NOI comes before any loan payment.

The capitalization rate, or cap rate, links income to price. The OCC defines it as the ratio between a property's stabilized NOI and its sales price, used to convert income into value. CREDA (the Commercial Real Estate Development Association, formerly NAIOP) calls it the unleveraged initial yield on the investment. The OCC also notes that rising interest rates may lead to higher cap rates and lower property values without any change to the property itself. So I don't quote a typical Charlotte cap rate. I can pull recent sales of comparable properties instead.

Documents to Request

The NC Real Estate Commission's list of commercial due diligence includes a financial review and a review of service contracts and leases. Ask the seller for these:

The rent roll, operating statements and service contracts.
Every lease and amendment. The OCC says net, double net and triple net (NNN) lack universally agreed definitions, so read each lease to see who pays which expenses.
Tenant estoppels, which banks typically keep in commercial real estate loan files along with copies of all leases.
For residential units, where tenant security deposits are held. North Carolina requires a trust account at a licensed and federally insured depository institution or a trust institution authorized to do business in the state, or a bond (G.S. 42-50).

Due Diligence: Environmental, Zoning, Survey and Title

The Real Estate Commission notes that commercial transactions often allocate risk and responsibility differently than residential contracts, and that the parties may wish to consult a private attorney, accountant or other qualified professional.

Environmental

Under CERCLA, the federal Superfund law, liability for contamination may be assigned based solely on property ownership. EPA's All Appropriate Inquiries (AAI) rule applies to businesses and government entities buying property, and to individuals buying property for non-residential use. It applies to them when they may later seek protection from that liability as an innocent landowner, contiguous property owner or bona fide prospective purchaser. The rule recognizes the ASTM E1527-21 Phase I Environmental Site Assessment standard. AAI must be done or updated within one year before you acquire the property. Parts of it, such as the site visit, must be done or updated within 180 days before you acquire it. An environmental professional signs the written report.

Zoning and Use

Inside Charlotte, zoning comes from the Unified Development Ordinance (UDO), effective June 1, 2023, which translated the older conventional districts into new ones, such as B-2 into CG. The City's zoning staff provide zoning verification letters. If a vacant building's last use no longer fits its zoning, ask how long that use has been discontinued: under UDO Section 38.2, a nonconforming use that is visibly discontinued for 12 consecutive months can't be re-established.

Converting a building to a new use goes through Mecklenburg County Code Enforcement's Change of Use process, and a new Certificate of Occupancy is issued when the permit for the new occupancy has final approval. Charlotte also has eight Local Historic Districts, where a Certificate of Appropriateness is required before any construction work begins.

Flood, Survey and Title

FEMA considers any place with a 1% or higher chance of flooding each year to be high risk. A national bank can't make a loan secured by a building in a special flood hazard area where flood insurance is available unless the building is covered for the term of the loan.

Banks' commercial real estate loan files typically include a title insurance policy and a survey showing the improvements and any easements or encroachments. In North Carolina, preparing a deed for someone else and passing upon title are the practice of law (G.S. 84-2.1), which a real estate broker may not do (G.S. 93A-6). Under G.S. 47-18, a lease of land for more than three years passes an interest against purchasers for value only from the time it is registered, so have your attorney compare the recorded documents with the leases you're given.

Financing: SBA 504, SBA 7(a) and Bank Loans

SBA business loans aren't for passive landlords: passive businesses owned by developers and landlords that don't actively use or occupy the property are ineligible, and a 504 loan can't fund speculation or investment in rental real estate. For income-producing property, banks also test the debt-service coverage ratio (DSCR): cash flow or NOI divided by debt service.

Occupancy Rules for Owner-Users

With SBA 7(a) or 504 financing for an existing building, you must permanently occupy and use at least 51 percent of the rentable space and may permanently lease up to 49 percent. For new construction, you must occupy at least 60 percent and may permanently lease up to 20 percent. You must also plan to occupy, within three years, some of the remaining space that isn't permanently leased, and all of it within ten years. The building can sit in a separate Eligible Passive Company that leases it to your operating business, and each holder of at least 20 percent of either company must guarantee the loan.

SBA 504 and 7(a)

A 504 loan provides long-term, fixed rate financing for major fixed assets through Certified Development Companies (CDCs). It is paired with third-party lender loans totaling at least as much as the 504 loan, and it is usually secured by a second lien on the project property. The 504 regulation limits the outstanding balance to $5,000,000 for each borrower together with its affiliates, or $5,500,000 per project for small manufacturers and certain energy projects. You contribute at least 10 percent of project cost. That rises to at least 15 percent if the business has operated two years or less or the building is limited or single purpose, and to at least 20 percent if both apply. A 7(a) loan can also acquire, refinance or improve real estate. SBA's maximum for a 7(a) loan is $5 million, and the maximum term is 25 years, including extensions.

1031 Exchanges

Under Section 1031, if you exchange business or investment real property solely for like-kind business or investment real property, no gain or loss is generally recognized. Gain is recognized to the extent you also receive money or other non-like-kind property. For 2018 and later years it covers only real property, not real property held primarily for sale. Real properties are generally like-kind whether improved or unimproved: the IRS says an apartment building would generally be like-kind to unimproved land.

In a deferred exchange:

Identify replacement property by midnight on the 45th day after you transfer the property you're giving up. Use a written document you sign and send before that deadline to the person who must transfer the replacement property to you, or to another person involved in the exchange who isn't a disqualified person. You can identify up to three properties regardless of value, or any number whose total value doesn't exceed 200 percent of the value of what you gave up.
Receive the replacement property within 180 days, or by the due date of your tax return including extensions, whichever is earlier.
Report the exchange on IRS Form 8824.

Your agents are disqualified persons, so they can't serve as your qualified intermediary. That includes anyone who acted as your real estate agent or broker within the 2-year period ending on the date the first relinquished property is transferred. So I can't be your intermediary, but I can help you find and evaluate replacement property in Charlotte. See my 1031 exchange guide.

Taxes and Disclosures

Seller Disclosures

Unless the sale is exempt, the seller of a residential property with one to four units owes the buyer three statements: the residential property disclosure statement and the owners' association and mandatory covenants disclosure statement (G.S. 47E-4), and the mineral and oil and gas rights mandatory disclosure statement (G.S. 47E-4.1). The first sale of a dwelling never inhabited, and a sale where both parties agree not to complete the 47E-4 statements, are exempt from 47E-4 but still need the mineral and oil and gas statement. A building with five or more units, or a nonresidential property, gets no 47E statement, though a broker still may not misrepresent or omit a material fact (G.S. 93A-6).

For most housing built before 1978, the seller or landlord must act before the buyer or tenant is bound. They must provide an EPA-approved lead hazard pamphlet and disclose known lead-based paint and lead-based paint hazards. A buyer gets a 10-day period for a lead inspection, unless the parties agree in writing on a different period or the buyer waives it in writing. When a residential rental sells, the seller has 30 days to transfer the tenants' remaining security deposits to the new owner and notify them by mail, or return the deposits (G.S. 42-54).

Taxes

Excise tax: North Carolina charges $1 on each $500, or fractional part, of the consideration or value conveyed, paid by the seller to the register of deeds before the deed is recorded (G.S. 105-228.30).
Property tax: ownership is determined each year as of January 1 (G.S. 105-285). Mecklenburg County's 2027 revaluation updates all property to market value as of Jan. 1, 2027, with notices scheduled to be mailed in early 2027, so the assessed value on a seller's current tax bill may change.
Depreciation: under the IRS's general depreciation system, residential rental property has a recovery period of 27.5 years. That is a building with 80% or more of its gross rental income from dwelling units. Nonresidential real property, such as an office building, store or warehouse, has a recovery period of 39 years. Land can't be depreciated.

Lease or Buy

There's no single answer, and your accountant should weigh in. Buying gives you the building and its value risk. A 504 loan requires at least 10 percent of project cost from you, and more in the cases above. SBA financing for an existing building also requires you to occupy at least 51 percent of it. Leasing leaves ownership with the landlord, and the lease decides which expenses you pay. See my commercial lease negotiation guide. I can price both paths with comparable lease rates and recent sales of similar buildings.

Frequently Asked Questions

This page doesn't list properties for sale. Tell me the property type, area, budget and whether you'll occupy the building or lease it to tenants, and I can send you current listings that match. I can also pull recent sales of similar properties so you can judge each asking price before you make an offer.

The OCC defines the capitalization rate as the ratio between a property's stabilized net operating income (NOI) and its sales price, used to convert income into value. NOI is annual gross income less operating expenses, and operating expenses don't include interest, principal or income taxes. CREDA describes the cap rate as the unleveraged initial yield on the investment.

There isn't one number I'd quote, because a cap rate depends on a specific property's income and moves with the market. The OCC notes that rising interest rates may lead to higher cap rates and lower property values without any change to the property itself. I can pull recent sales of comparable properties so you can compare the one you're considering against them.

Not to buy a building only to lease it to others. SBA rules make passive businesses owned by developers and landlords ineligible, and SBA lists speculation or investment in rental real estate among the uses a 504 loan can't fund. An owner-user can: with SBA 7(a) or 504 financing for an existing building, you must occupy at least 51 percent and may lease up to 49 percent to tenants.

In a deferred exchange, you identify replacement property in writing within 45 days after transferring the property you're giving up, and receive it within 180 days or by your tax return's due date with extensions, whichever is earlier. Both properties must be real property held for business or investment, and gain is recognized to the extent of any money or other non-like-kind property you receive. I can help you find and evaluate replacement property, but as your agent I can't be your qualified intermediary.

North Carolina's Residential Property Disclosure Act covers only residential property with one to four dwelling units, so a building with five or more units or a nonresidential property gets no 47E disclosure statement. A one-to-four-unit rental generally does: the residential property disclosure, the owners' association and mandatory covenants disclosure, and the mineral and oil and gas rights disclosure. A broker may not make a willful or negligent misrepresentation or omission of a material fact. The NC Real Estate Commission notes that commercial parties are typically considered more sophisticated consumers, and that before a commercial transaction, parties should carefully review zoning and permitted use, environmental conditions, and inspection and due diligence timelines.

The NC Real Estate Commission says commercial due diligence may include a financial review of rent rolls and operating statements, environmental assessments such as a Phase I ESA, zoning verification, title review, structural inspections, and review of service contracts and leases. For federal environmental liability protection, All Appropriate Inquiries must be done or updated within one year before you acquire the property. Your attorney handles the title work, and an environmental professional signs the environmental report.

It depends on your business and your numbers, so your accountant should weigh in. Buying gives you the building and its value risk: the OCC notes that values may fall when interest rates rise even if nothing about the property changes. SBA financing also requires you to occupy at least 51 percent of an existing building. I can pull comparable lease rates and recent sales of similar buildings so you can compare both paths.