Tweet

Buying a property for your business

Guest post by: Rene Truter

Article Overview: If you're thinking about buying commercial property, knowing the ins and outs of buying in this sector will ensure that you make a sound investment with both short and long-term rewards.

Buying a property for your business

Buying a property for your business is a big decision to make, so do your homework before you commit to something you can't afford right now. Let's explore some of the most important issues around buying a business premises. Get out some pen and paper and start making notes.

The up side

Many experts agree that owning property is always a good investment. Owning your business premises definitely has some advantages:

• With each bond repayment, you're building on the equity of your own asset rather than paying money to a landlord
• If you've bought under the right circumstances, the value of your property will grow over the years
• Buying a property offers various tax advantages, both as the property owner and as a landlord
• Much like buying a house, you can decide how best to use your space - the interior design, renovating or remodeling to suit your needs, plan for maintenance, etc
• In the same vein, you don't have to comply with the rules of a difficult landlord, rent increases and complicated lease agreements
• You can lease any unused space to other small business, which will help with maintenance costs and loan repayments

Where is the money coming from?

Buying a commercial property is a huge commitment financially, so make sure you have the means to ensure the investment is profitable for you and your business.

• Work out what you'll pay on a bond vs what you'll pay in rent. Factor in the costs of maintaining the property, taxes, insurances, any rental income and any other costs that could come up
• After you've covered all these costs, are you left with any disposable income? You need to have reserves for anything that needs to be done to the premises on a monthly basis and maintenance costs can add up
• Shop around for good loan terms, interest rates and so on. Get some expert advice in this area to make sure you're getting the best value for your money

Looking at the big picture

Ask yourself what your long-term goals for your business are and anything that may happen in the future. For example:

• How much space do you need - now and in the long run? Will you consider leasing some of the empty space until your business grows?
• If your business is growing quickly, buying a premises may not be a good idea for now
• What happens when you want to close or sell your business? Is the property in an area popular with investors? If you do need to sell quickly, how long will it take to sell?

Call in the experts

The commercial property market is a complicated one, so don't try to do this without getting in some experts in this area.

• Use a knowledgeable and reputable commercial realtor to find your property. This will save you a lot of time and hassle
• Give the agent a clear brief of what you are looking for, the size and type of property, the location, neighbouring businesses, plans for growth and so on, so he/she is able to provide you with a short-list of appropriate properties
• Do your sums before-hand, so know how much you can afford and whether you want a premises ready to move into, or if you're prepared to do some renovations or upgrades to suit your needs
• When you've found the right place, only approach lenders that specialise in commercial property loans and have a good track record. If you can, find out whether you can get a pre-approved loan so you know exactly what you can afford
• Employ a financial advisor who deals with small businesses to help you structure your current and future finances so you're 100% sure you can afford the costs of buying and maintaining your property, while still having a steady cash flow for running your actual business
• Use your own commercial property lawyer to explain the sale terms to you and draw upcontracts and paperwork related to the sale

Now that you know what you're in for, you can make an educated decision about whether to buy a property for your business and how to go about doing so.

Copyright© 2010 Business Partners Ltd. All rights reserved.

Related Articles
  The truth about those Foreclosures Short and Sweet
  Buying a Business FAQs
  Setting Goals
  What a Personal Property Memorandum Can Do For Your Estate Plan
  Property Investors and the buy to let property boom
  Buying Foreclosure's Its a No Win Deal
  Appealing Your Property Taxes
  Semi-Annual Insurance and Financial Review
  Real Estate Feasibility Studies
  The Investment You Can Create
  Intellectual Property Protection Minimum Standards
  Commercial Property: 10 things to do
  Understand more About Interest Rates Mortgage Canada
  Commercial Property: 10 things not to do
  The importance of Intellectual Property when buying or selling a business
  Little Things That Can Make Property Management Easier
  Business Insurance Coverage
  Is Your Home Page Turning People Away?
  Know More about Interest Rates Mortgage Canada
  How to claim back money as a commercial property investor

Article Tags: buying a property, ins and outs, lease, mortgage, property, shop, sound investment, warehouse



Related Forum Posts
Re: Tie the equity up! - [quote="BizLoanz4u":3u3uqyzg] Anyway- Now, In the state of Texas you cannot use your primary residence for collateral (It's a state law). If you own other property, like investment/ rental property or even vacant land, it's better to use that property rather than a primary residence for collateral. [/quote:3u3uqyzg] Sad that the government has to say not to risk your home, but I hope that helps people avoid a costly mistake and especially people with a family who needs a roof over their head. Chris
How Well Protected Are The Patent Holders? - Intellectual property laws vary from jurisdiction to jurisdiction. And it is such that the acquisition, registration or enforcement of the rights must be pursued or obtained separately in each territory of interest. Intellectual property in law is a general term for various legal entitlements. The holder of this legal entitlement is generally entitled to exercise various exclusive rights. Intellectual property laws are designed to protect different forms of subject matter, in this case a Patent. A patent may be granted for a new, useful, and non-obvious invention, and gives the patent holder an exclusive right to commercially exploit the invention for a certain period of time, typically 20 years from the filing date of a patent application. Patents, trademarks, and designs rights are sometimes collectively known as industrial property, as they are typically created and used for industrial or commercial purposes. Various schools of thought are critical of the term “intellectual property”. Some characterise it as intellectual protectionism. From the perspective of economics, intellectual property is a temporary monopoly on the use or exploitation of that Patent, supported by legal enforcement mechanisms. There is a debate going on every where that intellectual property laws truly operate to confer the stated public benefits, and whether the protection they are said to provide is appropriate in the context of innovation derived from such things as traditional knowledge and folklore, and patents for software and business methods. Manifestations of this controversy can be seen in the way different jurisdictions decide whether to grant intellectual property protection in relation to subject matter of this kind, and the divide on issues of the role and scope of intellectual property laws. Most exclusive rights are the right to sue an infringer, which has the effect that people will approach the patent holder for permission to perform the acts to which the patent holder has exclusive right
'Critical Success Factors' (CSFs) in Property Management - Good morning, folks .... I am once again turning to the forum for help. I have a client who owns a small number of relatively small commercial buildings. This client has a team managing his properties. He would like take on more business, i.e. manage more properties beyond those of his own. My question is: In considering such a propostion, what are the CSFs of which he must be aware? I intend to use these as the basis of an interview template to assist to expose hidden property management market needs or as a minimum, unfulfilled needs, in the small commercial property market. You help, as always, will be much appreciated. Best regards, Terry
Re: Tie the equity up! - [quote="ChrisH":1q68f9qn][quote="BizLoanz4u":1q68f9qn] Anyway- Now, In the state of Texas you cannot use your primary residence for collateral (It's a state law). If you own other property, like investment/ rental property or even vacant land, it's better to use that property rather than a primary residence for collateral. [/quote:1q68f9qn] Sad that the government has to say not to risk your home, but I hope that helps people avoid a costly mistake and especially people with a family who needs a roof over their head. Chris[/quote:1q68f9qn] This question seems to resonate even more, two months down the line, with the vast spate of foreclosures going on right now. It's interesting (and frightening) how the whole world interconnects right now. The sub-prime borrowers who are in trouble right now are only 6% of all peple with mortgages...yet lenders are toppling because of them. You'd think financiers who've been in the banking business for decades would have seen what could happen with adjustable rate mortgages, dodgy loans, etc., but it doesn't seem as if people ever learn...
Website value via Cap-Rate - Evan, no I haven't seen it used for websites as it struck me as a way of determining value when I look at Rental properties. I'm sure if you look at the basics of the formula you can figure the numbers you'll need to extract from your Web metrics. I know in the rental market you want to look for a property that has a Cap rate of 10%. In the Toronto market you'll be lucky to get 7%. It's a quick way for an investor to determine if a property is a good buy at first glance and then go deep into the numbers reported. short answer: no I haven't seen it being used to determine website value.


Share this article with your friends. Fund someone's dream.

Leave a comment below or share on the left and you'll help support entrepreneurs in Africa through our partnership with Kiva. Over $50,000 raised and counting - Please keep sharing! Learn more.

Newsletter

Get advice & tips from famous business
owners, new articles by entrepreneur
experts, my latest website updates, &
special sneak peaks at what's to come!

Name:
Email:

Popular Articles

Fighting the Saw-Tooth Affect

Creating a Better Place to Work

How To Improve Your CTA (Call To Action)

Suggestions

Email us your ideas on how to make our
website more valuable! Thank you Sharon
from Toronto Salsa Lessons / Classes for
your suggestions to make the newsletter
look like the website and profile younger
entrepreneurs like Jennifer Lopez.