Starting your own business is a way that many people see as a foundation to good future stability. Real estate is also a strategy that many view as an investment tool that will grow in value in the future. It comes as no surprise, then, that small business owners will often consider whether buying real estate with and for their business is an advisable way to get provide their business with a solid underpinning that will assist in future growth and stability.
Before making the leap to purchase real estate with your business, you should first consider your business’s stability. Many businesses fail within the first five years, so if your business has just opened, you may want to wait before making the financial commitment to purchase real estate. You will also want to consider your business’s future. A particular piece of real estate may suit your business’s current needs, but will it fit its future needs? Before purchasing real estate or a pre-existing commercial building, you need to consider whether the building will adequately serve your business’s needs for years to come.
Some business owners make the decision to purchase commercial real estate and then lease that real estate to the business entity that they themselves own and run. This means the business is paying rent to the individual. The plan is usually to sell the business to someone else in the future, while continuing to own the real estate, thereby continuing to receive regular rent payments from the new business owner. While in theory this would provide you with a rental income for years to come, it can be a risky proposition. If the new business owner fails at the business and stops making payments, you will still be responsible for the mortgage on the property, whether or not the new business owner pays.
Finally, you will want to consider the real estate market in the location where you are considering buying. If the rental market is weak enough, it is possible that your business may be able to rent commercial property cheaper than the mortgage payment would be for a similar property.
We have experience helping our clients with important business and real estate decisions. Call us today and we will talk with you about your business