If you are a business owner who is weary of leasing, you might be thinking of buying your own commercial property. There are distinctive advantages to owning your own Boston Metro commercial real estate – along with a few drawbacks. Here are some considerations to help you weigh your options!
Location. If you are in a prime location that contributes to your business success, it may be difficult to duplicate those conditions on the same scale of economy. This is one reason that some business owners decide to stay put and lease. In other cases, it’s easy enough to have your customers follow you to your new location; it depends on the nature of your business.
If you have capacity issues that require you to relocate your business whether you lease or purchase, think about the positives of your current location – such as parking, high foot traffic, and public transportation. Seek similar location benefits in your next property.
Financing. Obtaining a mortgage for your commercial property usually requires a healthy down payment and strong credit. While financing may be available with as little as 10% down, many lenders prefer to see 20%-25% down. Self-employed business owners may also find the loan approval process to be rather involved; especially if you have complicated tax returns. Contact us for referrals to excellent local lenders who specialize in commercial real estate mortgages.
Tax strategies. Owning your own commercial property can lessen your tax burden, if your business is profitable. Owning your building gives you the opportunity to write off depreciation, even while your building potentially improves in value. We would recommend consulting with a cost segregation expert like Jeff Hiatt before purchasing the property.
There are also sophisticated tax strategies available with ownership, such as owning the building as one tax entity (yourself) and then leasing it to your company. Consult your tax preparer about these strategies and more.
Long-term pros and cons. Review your long-term business plans, and imagine the best and worst-case scenarios. Are you financially able to handle major building repairs if they become necessary? Could your company outgrow your location? Do you plan on selling your business in the future? If your business were to fail for unforeseen reasons, would owning the building provide a financial benefit or an additional burden?
When you are ready to explore your options, we can provide you with experienced market guidance to help you make sound comparisons. You should also gain the input of your tax preparer, accountant and business attorney. By evaluating your risks and opportunities objectively, you can decide whether you should buy or lease Boston Metro commercial real estate.
Please contact us whenever we may help you!