1. What’s Your Type?
There are many types of commercial property that you can purchase including:
o Retail Space
o Warehouse Facilities
o Commercial Condo
o Strip Mall
The first step is to clearly define what type of property you want to buy and how you want to use it. The following information will help you maximize your investment dollars to get the best deal when buying your property.
2. Build Equity With Your Investment
Equity is Money
Building equity is the main reason if not the main reason to buy instead of renting commercial property. Let’s face it. It’s money in the bank. In fact, it’s better than money in the bank because you can’t get the same returns when you put your money in the bank than when you build equity. Additionally, if you choose the right financing for your commercial real estate purchase, you can not only build equity through ownership, but you can also leverage your capital savings to grow your business, hire additional employees, or even purchase additional locations when the time comes. .
Owning beats renting because you can sell your investment once you’ve outgrown the space or sold the business. Even if commercial property in your area isn’t valued (which is unlikely), you can recoup your investment by renting out the space after you’ve moved and by selling it at the right time.
If you are planning to expand your building, buy something larger than your current needs, and rent out the extra space until you need it for expansion. This will provide you with a steady income that you can use to help pay your mortgage or invest in your business.
3. Calculate Your Savings And Your Profit Potential
Lower Monthly Payment
Consider buying commercial real estate as savings for your business. Real estate costs are the third largest business expense, behind salaries and taxes. Long loan amortization means that your monthly payments could be less than what you would pay for the rent, because landlords usually charge more than their monthly loan payments. In other words, owning your own commercial property can actually be more affordable, depending on current market conditions.
Ask your lender to provide you with an analysis of the current market in your area so you can see which scenario is best for you (rent or buy). The lender should be able to explain your options in detail with examples of monthly rent vs monthly loan payments and the benefits of each.
Rent Value Analysis
Once you’ve found the property that interests you the most, find out the current status of the tenant (if it’s a multi-tenant property) in terms of how much rent they’re paying. Check the current market to see if the rent is undervalued, meaning below what you can get in the market today. Your realtor or lender should be able to help you figure out how much you can charge for rent and determine how much profit you can make each month.
There are many tax advantages to being a commercial property owner. In most cases, you can deduct some of the value of the building at tax time, as well as the increase you make as depreciation, which can save you more money on your taxes. Buying property in the name of your business or company is also a better tax strategy than in your personal name.
4. Do Your Research
The more you can learn about property types and options, mortgages, financing, zoning, and renovations; the better positioned you are to make wise decisions regarding commercial property acquisitions.
However, you don’t have to know everything. That’s where putting together a strong team of professionals who are proficient in their area of expertise may be your most important step. Building a team of advisors – people you can trust to point you in the right direction is critical to your success.
Understand Current Market Conditions
Keep your eyes open for news articles relating to the commercial real estate market. Is it “hot” now? Is it a buyer’s or seller’s market? What types of interest rates are available?
The internet is a great place to start. Doing a Google search for “the commercial real estate market,” for example, will give you results that include news and resources for national trends, analytics, and market research.
In addition, many realtors, lenders, and attorneys across the country offer free and timely articles on their websites explaining current commercial real estate trends nationwide.