Own Your Office Space
How to Buy Office Space for Your Small Business
Making a long-term investment in a building for your small business when buying office space is a decision not to be taken lightly. Do a detailed and realistic evaluation of your current cash flow, the business’ long-term prospects, and the location you are considering. If you have the substantial cash required for a down payment and other upfront costs, you are planning to own and operate your business for 10 or more years into the future, and you can find the right building available at an affordable price, buying a building for your company might be a good choice.
The benefits of owning your own building include fixed monthly costs, not being subject to ever-increasing rent costs, the potential for extra income from tenants, and ultimately having a paid-off mortgage. And if real estate in your area appreciates over time, you will also have a solid investment.
Here are five tips on how to purchase a commercial space for your small business.
Identify the appropriate building to purchase for your business, based on location, size, building cost and facility needs. Unless you have experience in commercial real estate dealings, it is advisable to work with a professional who can guide you through the process. Choose the location carefully, since you will be tied to it for a long time. Arrange for a professional inspection of the building to ensure it is in good shape and not in need of substantial repairs or upgrades.
Perform a detailed analysis of your financial situation to ensure you have a strong cash flow and available funds for a down payment, which will be 10 to 25 percent of the cost of the building depending on the type of financing you acquire. Compare the costs of the mortgage payment, insurance and other expenses of owning the building against your monthly rental expenses that would be eliminated to determine whether you can manage the monthly cash outlay.
Establish a limited liability company or other similar entity to own the building. Since owning commercial real estate has risks that are different from owning a business, the LLC allows you to keep the two completely separate. The LLC can then lease office space back to your business, as well as to other tenants if space permits.
Work with your commercial real estate agent and financial professionals to obtain the best possible financing package for your building purchase. The 504-loan offered by the Small Business Administration helps small businesses buy real estate, equipment or machinery at below market rates. If you are eligible, the 504 is an excellent financing option, since it requires only a 10 percent down payment and provides long-term financing at low, fixed rates.
Complete the required facility inspections, obtain business insurance and close the deal. Move your company into the new building. If there is considerable extra office or floor space in the building you don't need, work with your real estate professional to lease out the remaining space. There are additional responsibilities involved in being a landlord, but the added income will help defray your monthly costs.
Purchasing property for your business is a good idea. It’s a chance to build equity, make your expenses more predictable and possibly gain tax advantages. 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.
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 any small business.
Neighborhood Partnership Housing Services is mission-driven realty services offering a Commercial Real Estate Service program designed to enable emerging entrepreneurs to grow, succeed, and create jobs. NPHS Realty Services is a unique mission-driven real estate brokerage offering commercial real estate services addressing the specific needs of emerging entrepreneurs and nonprofits located in the Inland Empire and Eastern Los Angeles County. For more information on commercial real estate, please contact Carlos Tena via email at firstname.lastname@example.org or call (909) 983-4921.
There are benefits to buying and owning your own office space. Use the Small Business Assistance Tool to find assistance for starting, growing, and accelerating your business.