Introduction to buying commercial real estate property for your business

January 30, 2024 | 5 minute read

Commercial real estate may be one of the best investments you ever make. Whether you’ve successfully built your small business from the ground up or you’re just starting out, a question you need to answer may surface eventually: Should you purchase property for your business? Purchasing commercial property can be very complex, even for insider pros. It’s not the same as buying a home. It takes time, research and planning.

 

Owning commercial property is also a decision that must be weighed very carefully, and each scenario is different for every business. In the right circumstances, it can be a wise investment, and the potential rewards can be great. In this article, we’ll highlight the possible benefits of buying commercial property, offer purchasing tips and suggest ways you can make it work for you and your small business.

 

Why buy?

Purchasing property for your business can be a good idea. When it comes to commercial real estate, the word “commercial” applies to any property that you use to grow or support your business. This can be anything from manufacturing facilities, general purpose offices or buildings, medical offices and more. With that in mind, there are many reasons to consider making such an investment. It’s a chance to build equity, make your expenses more predictable and possibly gain tax advantages. You may even realize a cost savings versus renting, depending on your current lease agreement and operational expenses.

 

Here are more reasons to consider purchasing commercial property:

 

Fixed rates

Enjoy the peace of mind of knowing what your costs will be month to month with a fixed-rate loan; there is no exposure to payment fluctuations like when market rents increase.

 

Tax breaks

The costs involved in owning and running your business space can result in favorable capital gains treatment and expense deductions like mortgage interest, property taxes and more. Consult with your accountant or tax advisor before you decide to buy.

 

Total control

When you own, you call the shots. You have direct control of your investment, as well as any potential tenants or uses of the building. Think it’s time to renovate? Go ahead.

 

You have the freedom to customize and tailor your business as needed, which can really be a plus as your business evolves.

 

Public exposure

Show off your brand and establish the personality and culture of your business for all to see. Maintaining, customizing and improving the quality of the property helps represent your business and promotes strength and stability.

 

Tips for purchasing commercial real estate

Although there is no tried-and-true formula or one-size-fits-all strategy to buying commercial real estate, there are common guidelines that any small business owner can use to get started. Before you begin, you should be clear about your objectives and know what you want. 

 

Ask yourself the right questions:

 

  • What kind of property are you looking for?
  • Is it for your own business? To rent out? To build equity?
  • What area would be ideal?

 

Find the property that fits your business

Here are some things to think about when deciding where to buy:

 

Location

This is the number one issue in purchasing commercial real estate. Where you set up shop can make all the difference, whether you want to be close to your customers; need access to rail, highway or shipping lanes; or other factors.

 

Legal considerations

From commercial office space to industrial warehouses, make sure local zoning allows for the type of business you’re bringing.

 

Physical condition

Have a thorough inspection done of the property and find out beforehand about potential environment or liability issues, such as asbestos or lead paint.

 

Limitations

Be familiar with all zoning laws or building codes because there may be conditions in place on whether you can make changes to the outside or inside.

 

Parking and easements

Make sure you have enough parking space, as well as up-to-date, disability access. Also review the property’s easement to local roads.

 

Flexibility

If you’re planning to grow your business, look for property that you can expand. Also consider the opposite scenario: If you don’t end up using all the space, can it be rented out?

 

Assemble a team of experts

Surround yourself with specialists who are experts in areas outside of your expertise.

 

Commercial broker

Consult a real estate broker to help you locate potential properties in your price range.

 

Accountant

Bring in an expert who will advise you on what your business can afford, navigate you through tax benefits and forecast your operating budget.

 

Lawyer

Make the process easier on yourself with a legal representative to negotiate and complete the entire transaction.

 

Ways to make commercial real estate work for you

There are many ways your small business can benefit from owning commercial property, including:

 

Investment potential

Owning is an investment that can increase in value over time. Typically, and depending on the location, commercial properties could return between 6% and 12% each year. That’s much higher than the average 1% to 4% experienced with single-family residential properties.

 

Explore other income streams

Cross advertise with local or neighboring businesses, where it makes sense. Offer services to tenants. Make additional services available to purchase for those renting from you, such as premium parking spaces, trash removal and maintenance services.

 

Owning commercial real estate can really pay off

As a small business owner, the upside to owning commercial property can be very enticing. You become your own landlord and it can also boost your visibility to patrons and fellow business owners.

 

With the right amount of due diligence and research, buying commercial real estate can be a wise investment — and fertile ground for the growth and success of your small business.

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