Buying Commercial Real Estate

If you are a business owner who is currently cutting a monthly rent check for your retail or commercial space, it might be time to consider the advantages to your long-term financial health to purchase your own commercial property and end the process of throwing your money where it builds no equity.

With property values in the region holding steady, or in many cases on the rise, it just makes sense to invest this money in a mortgage where it will gain equity. This way it will increase your financial worth, as opposed to throwing your money at an endless cycle of commercial rental payments.

How do you know with certainty if this is the right time and strategic move for you and your business? Here are some thought provoking questions to assist you in deciding if it is time to take your business to the next level.

1. How much cash can you afford to put down? With a requirement of typically 20 percent down in cash for a commercial purchase, do you have the money available to you in order to buy? Take a serious look at your finances because you do not want to put your business in a financial crunch in order to buy commercial property. It could be time to make the move and buy while prices are reasonable, but it also may be time to focus on saving for this down payment.
2. What would the difference be in mortgage vs. your rent payment? Look at your monthly costs of a mortgage, taxes and insurance and determine if your monthly expenses would increase if you buy and by how much. Determine if your business can handle these changes or whether it could put you in financial difficulty.
3. What buildings are currently on the market? A good commercial Realtor can provide you an up-to-the-moment list of what is available and perhaps some inside knowledge of who is thinking of selling property. Working with a commercial agent is your best way to find the right property to meet the needs of your business. Your agent can also advise you on the right price and what you can expect in current interest rates for your mortgage. Your agent may even be able to investigate if you could buy your existing building. Keep in mind that a move and fixing a new location to meet your needs, as well as letting your customers know about your new business location, carries a cost.
4. Are you in need of some tax benefits and more control? Any successful, profitable business will benefit with property ownership because it can reduce your tax burden. Ownership can allow for you to write off a portion of the building's cost each year. If you have needed to alter your business space, or renovate to personalize it to your business vision, but are not allowed to do so under your lease, purchasing a building allows you control of the property and what you present to the public.
5. Is your business growing and will this new building allow for it? Look at your plans for your business in the near and distant future. If things are moving quickly in the way of expansion do not consider a space too small that will not fit your needs a year down the road. If you are holding steady and do not see a need for more space do not buy bigger than you need or a building with multiple spaces, unless you can also see yourself renting out the extra spaces. However, if this potential new building has multiple spaces with business tenants already in place, there is room to expand in the future by simply ending their lease... and while they are in place their rent will help you with your mortgage payments.
6. Is this a good location and will it help your business? Look at this move as an investment of your money. Look at the location and judge it as a consumer and an business owner would. What is the market like in the area? Are there a lot of vacant commercial buildings? Is the building in good condition visually and structurally? If you need to move your business for any reason in the future, will you be able to sell or rent out the space? Are you prepared, if you rent out space, to deal with property management, rental rates and tenant issues?

First and foremost, discuss the market trends with an experienced commercial Realtor, one that you feel you can trust with this investment move and takes the time to answer all your questions. Talk about the current market climate in the area, what your budget needs to be and determine if it is time to look at commercial property and say good-bye to your landlord.