Many small business owners struggle with the decision to purchase commercial real estate for their business or to continue renting. The current commercial real estate break down has left many with strong reservations. The traditional Real Estate Agent Jobs benefits of owning are numerous and well known. Equity build up, potential appreciation, tax benefits primarily through depreciation and control of owns future are the main reasons to own, and continue to be so.
But is this the right time for you to purchase? Here are a couple of questions to ask yourself.
Do you have enough cash for the down stroke and will your post close liquidity be enough to handle any minor unexpected challenges? Meaning after you acquire the building, will you still have enough cash on hand? Keep in mind that 90% loan to value financing is readily available, if your business will occupy at least 51% of the subject property.
Will your monthly real estate expense decrease? It’s common that by owning your cash flow House Closing Process For Seller savings will be 10 – 15% less than what you would pay in rent for a comparable property.
Will the building serve your long term needs? If you’re a fast growing business it may not be the best route to own as you may need to move to a larger facility. The closing costs/transaction fees are expensive and should be considered.
Do you believe in the local real estate market as far as long term appreciation/demand? Meaning do you believe that in 7 – 10 years that the market will increase in value? Due to the current decline in property value you need to have vision and a little courage but history has taught us that the commercial real estate market is cyclical, and that it should come back strongly in 3 – 5 years.
Likewise, do you believe in the individual building, as far as its potential for appreciation? Could the building serve many potential users? Is it well located for its type of design (i.e. retail, industrial)? If it didn’t appreciate at all in the next 3 -5 year would it still make sense?
Would you be interested in renting the facility in the future? Say in 10 years after you’ve sold your business.
For most small business owners, the opportunity to own commercial real estate maybe their best way to build significant wealth with their business over the long term. For example, how many business owners do you know that owned a service related business that after 20 or 25 years of working hard, they have little to show for it? It happens all the time. They have no assets, and their rent has consistently increased year after year.