The Things to Keep in mind when buying Commercial Real Estate


Image: Office Life (Office Life; Melburnian; Flickr.com; Creative Commons.)
 
The one question that lingers in the mind at the start of each month is that of buying or renting when it comes to commercial real estate. The answer, of course, is never simple, and depends on whether conditions are favorable. And right now, with interest rates being extremely favorable, and prices at an all time low, it is definitely a great time for you to jump on your dream property.

While it is a more upfront investment, ownership really has its perks

  • In the Driver’s Seat:  Since you own the property, you can control every aspect of it. You can see whether the property meets your needs, and you can modify your buildings to suit your needs better. When buying, you are given a lot more choice, and you get exactly what you want. You can perhaps even lease some parts of the building for some additional income.

  • Cash Flow: When some of your money is flowing into your mortgage ever month, you can use the equity thus generated to get loans for better equipment, or for anything that you feel is essential.

  • Value Appreciation: More often than not, commercial properties appreciate over time, and keeping the above mentioned equity advantages in the fray, you would be getting a great financial boost by owning the property rather than renting it.

  • You get to decide:  As the owner, you have control over every aspect of your property, from decoration to furnishing to tenant management, workforce management and much, much more. You can even set rent rates, and it is this micromanagement that can turn your newly acquired property into a cash-generating asset


Now you may be wondering that if ownership is really that advantageous, then every own should be buying properties left and right. But the fact is that even though ownership offers these perks, it does not mean that it it totally risk-free. In fact, there's quite a lot of risk involved with real-estate ownership.

One of the primary reasons is that your cash-flow may not be able to accommodate a large investment like ownership. Even if you can afford to acquire commercial properties, you may not have the cash-flow to support you in case of unexpected situations, which do arise frequently when it comes to real-estate.


Your business cash flows growth stage
You should ask yourselves whether your business is resulting in significant and sustainable cash-flow towards you, and whether it is stable. You should also know that real-estate is a risk-fraught business, and you should seriously weight the risks before getting into ownership of commercial properties. Another thing you should keep in mind is that in addition to ownership costs (Which is already high), you need to pay maintenance costs, insurance costs, taxes, legal fees and also costs arising due to unexpected situations. Only when you have cash set aside for all of these should you even consider acquiring commercial real-estate.

Real-estate involves significant investments, and that's why you should not skimp out on real-estate agents, legal representatives and financial advisers, because you need to make sure that the people who help you invest,  help you manage your money and represent you in disputes are the best you can afford.

Examining the tax perspective
Since I am not an expert on the subject, and since it varies from situation to situation, you should hire a good financial adviser who can help assess the situation you are in, and advise you on how to save money 

There are certain tricks like using expenses are depreciation or the rent are personal incomes to get lower tax-rates.


You make your money when you buy, not when you sell
When buying property, keep in mind only the current factors, and don't try to predict what may happen. A property may appreciate after you buy it, but the thing is, it never really is certain. That's why paying more and keeping expenses like maintenance, legal help, taxes, etc out of your original calculations and basically not researching correctly are not wise decisions, and may result in huge losses 

The thing you should keep in mind is the current cost, and other expenses, and only when it all seems favorable should you jump on it. Well-vetted decisions often result in a  better return on investment.

Once again, paying more for a property in hopes that it would appreciate is not a wise decision, and unforeseen circumstances may lead you down a path much different from what you originally envisioned. 

Pay the best price you can get, and to get the best price and make the best investment, discuss with an esteemed real-estate agent such as such as Anne-Marie Perno from www.Laurentides-St-Jerome-Tremblant-Immobilier.com


What you should remember
We have barely cracked the surface of real-estate, but we have broadly covered the major aspects of  buying commercial real estate. To recap, here are the advantages of being an owner:

  • Choices
  • Equity
  • Appreciation
  • Power

 

And here are the things you should always remember:

  • Make sure that your cash-flow is sustainable and would last well into the future
  • Property investments should only happen when you have extra money, and you should ensure your growth strategy is not affected.
  • You should be able to afford the cash-down, the maintenance, the legal fees, and all other costs associated with ownership of the property
  • Don't skimp out on financial, legal and real-estate advisers
  • Don't pay much heed to free-advice, which ironically costs you more in the long run
  • Take the building's cash-flow into consideration
  • Don't factor in appreciation when evaluation a property