Is buying commercial property the right decision? This is a common question many business owners ponder at some point. Whether you’re a start-up company, looking to move, or considering an expansion of your current retail operations, there are many factors you must weigh before investing in retail real estate.
Commercial property transactions are complex, and it requires a great deal of research and planning. Of course, there’s always the option of leasing retail space, but it also has its advantages and disadvantages. Overall, buying property offers numerous upsides for business owners who take their time to learn about the purchasing process.
Why Buy Commercial Property
Buying retail property is an asset to a business. It’s a solid investment that gives you the flexibility you need to grow and expand your enterprise. Additionally, it gives you more control over how the public sees your company. As the property owner, you can renovate, customize, and tailor the building in a way that best suits your firm’s image, brand, and culture. The other commercial real estate investment benefits include:
- Potential tax breaks – there are tax advantages that come with owning your own business, such as property tax and mortgage interest deductions. Make sure you consult with your accountant to see what is and what isn’t deductible.
- Fixed-rate loans – a commercial loan helps you manage the cost of doing business. With fixed rates, you always know how much you owe on a monthly basis. This isn’t always the case when you lease, because rental costs are subject to market fluctuations.
- Equity – owning your commercial property allows you to build up equity, which you can leverage to make additional purchases or reinvest in your business.
Buying commercial real estate has its perks. While this investment is ripe with potential upsides, there is a risk involved. One of the best ways to minimize your risk is to surround yourself with a team of experts who can guide you through the transaction process. You need specialists in your corner who can assist you with everything from locating property to negotiating the final deal. These professionals include lawyers, accountants, commercial brokers, and mortgage brokers.
Tips for Purchasing Commercial Retail Property
Retail investments require a plan of action. There are general guidelines that can help you navigate the buying process. Knowing what to do and when to do it may be the key to avoiding a financial loss. Commercial investing requires massive capital, experience, and solid risk management. Below are a few tips that can position you for success.
The first order of business is being clear on your objective. For instance, are you looking to build equity? Do you want to expand your facility at some point? Would you like to rent out space to generate additional revenue? These are the kinds of questions you must ask when developing a winning investment strategy. Here are other factors to consider:
- Property condition
- Building codes
- Parking space
- Disability accessibility
- Zoning laws
There is no one-size-fits-all approach to buying retail property. Every business owner is different. Factoring in your short-term and long-term objectives places you in the best position to make the most suitable purchase for your needs.
Leasing Pros and Cons
Sometimes leasing property is a better solution. For instance, if you’re just starting out as a small business owner, renting space may be more affordable. It also allows you to test the market without being tied down by a mortgage. On the downside, leasing leaves you at the behest of a landlord.
One of the biggest issues with leasing retail property is rent hikes. Your monthly rental payments are subject to fluctuations because of market changes. If there is high demand in the area, landlords can raise the rent. If the property owner doesn’t have enough tenants to cover costs, he or she may increase your rent to help meet financial obligations. Your monthly outlay for leasing a space can double or more, which eats away at your profits.
Every time you pay rent, you’re building up the property owner’s equity. It’s like you’re throwing hard-earned money out the window. Additionally, if the lease isn’t renewed, you must uproot your business and move to another location. This can make your business look shaky and unstable. It interrupts your operations and confuses your customers. The change of location requires that you update your marketing materials with a new address, which is an added expense.
Partner With Proven Commercial Investment Experts
Many business owners face the decision of buying or leasing retail property. If you purchase, there are many benefits that work in your favor. With that said, making a wise choice requires research, planning, and specialists working on your behalf. Here at Royal Commercial Real Estate, we have expert brokers who know how to spot the best investment properties for our clients. Contact us today and let us watch over the details of your transaction.