Commercial Real Estate For Business Owners

With interest rates now at historically low levels and the United States economy growing at a strong pace, many business owners have been considering the purchase of commercial real estate for their business locations. The benefits and drawbacks to commercial real estate ownership vary from business owner to business owner but potential buyers should educate themselves about the obvious and sometimes hidden benefits to the ownership of a commercial property. Below are some of the major benefits to ownership as opposed to leasing a commercial space.

Tax Deductions

For many business owners one of the primary benefits of commercial real estate ownership are the tax deductions that can be taken on the interest portion of the monthly commercial loan payment. These deductions can be substantial and each business owner should consult a qualified tax specialist about their unique situation.

Equity Appreciation

On average, commercial real estate properties will appreciate about two to three percent above inflation over the long term. This equity appreciation can result in significant financial gains over a period of decades.

A Retirement Fund

Many small business owners will not receive a pension when they decide to retire. The equity appreciation on commercial property can be significant. An owner can decide either to sell their property at retirement, cashing in on equity appreciation or lease it to another business for a continuous retirement income stream. In fact, in many situations, a business owner may be able to lease out an unused portion of his property, such as a spare office, before retirement for additional income.

Added Value To Business

As opposed to residential loans, many commercial loans are assumable. This makes the business and real estate much easier for a buyer to acquire and enhances the value of the business tremendously.

No Taxes To Pay On Your Rent

When a business leases their real estate they must pay sales tax on the rent paid to the landlord. When you own the real estate there is no tax to pay on the rent. The savings can be significant.

Easy Access To Financing

Great fixed rate loans for terms up to 30 years are now available for owner occupied commercial properties. In fact, in some instances, with strong financials, a business owner may qualify for loan financing up to 100% of the purchase price for his commercial real estate. Business owners should consult an experienced commercial mortgage adviser before making an offer on a commercial property.

In addition to the easily tangible benefits outlined above the business owner who purchases a property to house his business location will be able to have the satisfaction that only comes with ownership and he won’t be making his landlord rich.

Selecting Commercial Real Estate for a Potential Business

Congratulations! You have a great idea for a new venture. You’re ready now to turn this idea into a real brick-and-mortar company. The next step is to pick the location.

There are a number of things about your business that are determined by where it is. Competing businesses, workers, expansion room, zoning, and renovation all play an important part in your ability to turn a concept into a profitable enterprise.

Most owners try to choose commercial real estate in an area where there will be the most exposure to potential customers. While your ability to attract people to your store is important, there are other, less obvious factors that also need to be considered.

Competition

Situating your new venture within sight of a competing outlet is a risky move, one that most owners don’t wish to take. Customers tend to go with what they know, which, in this case, would be the more established business. You would have to work extra hard to win them over to your storefront. Instead, placing an outlet in an area where there aren’t as many ventures like yours is a great way to stand out and attract new, loyal customers.

Room for Expansion

Your initial idea might call for a small storefront, but it is always a good idea to have room for an upgrade down the road. The alternative-moving your business to another location-can potentially drive away customers and hurt sales. Having the ability to add storage, table space, or sales floor space quickly can bolster your business.

Zoning

Zoning can be a big hurdle for potential new companies. Zoning is the local government’s authority to control the use of the land within a certain area. Each city is different and has its own unique zoning laws. Potential bar and club owners should be the wariest of zoning laws because these industries have strict regulations in most cities.

Renovation

Few pieces of commercial real estate come “move-in ready.” There will be a fair amount of renovation involved with any building in order to fit it to the needs of your business. Even so, there are some buildings or spaces that are better adapted to the needs of your venture. Consider how much of your budget you can devote to making the space your own.

Government/Economic Incentives

In some areas, state or local governments offer different loan, tax, or other financial incentives to create a certain type of business. Location often determines whether you qualify for any of these programs. Government assistance can be a big boost to a fledgling company, providing needed backing without having to deal with private investors.

As you get into the final stages of selecting the perfect piece of commercial real estate, it could be to your advantage to contact a local commercial real estate company. This agency will have a clearer picture of what sort of financial support you can expect from the community, it can also give you more insight into the market, and it can be a useful ally in closing a deal once you’ve settled on a prime target.

After that, all you have to do is start construction!

How to Market Commercial Real Estate for Sale or Lease

To sell or lease a commercial property as a real estate agent you have to tap into the target market and do it well. This says that you have to understand that target market in your location before you start the process of promotion. To define a target market is sometimes hard given the relative property.

Ask yourself these questions:

  1. What media will reach the target market in a direct and sustained way?
  2. What is the best time to promote the property to the target market?
  3. What is the capability of the target market to act and purchase the property at the moment?
  4. Why would the target market buy or lease such a property now or at any future time?

These questions lead to critical decisions to market the property. Today we have a selection of media to choose from; some of which are more effective than others.

Consider these alternatives of marketing a commercial property for sale or for lease.

  • Newspaper
  • Internet
  • Database
  • Direct mail
  • Direct telephone contact
  • Signboards
  • Neighbouring property owners
  • Businesses in the area
  • Email
  • Promotional flyers
  • Radio and TV

So what method is best? Only you can make that decision when you know what your target market is. The seller of the property should be fully briefed about your definition of target market before you ask for vendor funds to market the property.

It is wise to have a series of say 3 marketing packages from which the client can make a choice. The logic of gold, silver, and bronze marketing packages to promote a property for sale or lease is productive and sensible. At the end of the day the vendor should be asked for promotional funds but in doing so they should be given a choice of how much to spend and in what way.

The internet today is playing a significant part in the promotion of property. It is cheaper but available to all in most marketing campaigns. It has a sustained promotional life and has the ability to capture enquiry for many weeks.

When the enquiry starts to come in, it should be captured and categorised. The value of a great database of buyers, sellers, landlords, and tenants is high in the operation of a real estate office. The more people you know the better the listings and enquiry will be. This is where a team of good salespeople all running an accurate database of well qualified prospects can make a significant difference in the market place.