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What should I consider before buying commercial real estate?

by | Dec 10, 2014 | Commercial Real Estate

Anyone who has dreamed of starting a brick and mortar business in Fort Collins, Colorado, has had to make tough financial decisions, like whether to buy or lease property. Unless your business deals with real estate or real estate law, it’s likely you aren’t sure what advantages, disadvantages and commitments accompany a commercial property purchase or lease.

Let’s say you’re leaning heavily toward commercial real estate ownership. You’re interested in accumulating a long-term asset with business depreciation tax perks. You’re attracted to buying property to avoid commercial landlord disputes and rent hikes — benefits that renting doesn’t offer.

Your business location may draw customers today, but what about five years from now? Relocating to follow customer trends may be easier with a lease than with a property purchase. The same could be true for businesses that outgrow a location.

Understandably, some entrepreneurs work with limited liquidity. Initially, putting money directly into the operation of the business may seem to make more sense than investing in a commercial property, renovations, maintenance and repairs.

Professional advice is invaluable when you’re making a decision this big. Accountants assess the immediate and long-range financial benefits and risks, while commercial real estate brokers locate the properties that fit your needs. Attorneys make sure the transactions with lenders and sellers are detailed and transparent.

Business owners must ask questions and sign nothing without a full understanding of the commitment to property ownership. Compare leasing with buying and inspect the building’s infrastructure. Map out plans for the growth of your business and use of the property.

Advisers should bring not-so-obvious matters to your attention, like unexpected costs of renovating a property or limits associated with zoning regulations. You will need additional guidance if buying a property also includes taking on tenants. Lawyers make sure the clear expectations of a commercial property buyer and seller are included in a real estate transaction.

Source: Inc., “How to Purchase Commercial Real Estate” Dec. 08, 2014

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