Investors often think about buying commercial real estate for cash flow, with the difference between the rental income, operating expenses, and the mortgage payment resulting in income. But what if your primary motivation is to grow your business operations in a new location?
If you have read Five Reasons to Lease Commercial Real Estate you may have already started asking questions about the real estate solution that best fits your needs. Here’s why you should consider keeping the option to buy on the table until you have consulted your real estate professional.
1. Appreciation. Owning a property allows you to benefit from its increase in value over time. This includes the land and any improvements you may make to the property that further add to its value. Real estate appreciation is an excellent way to build equity.
2. Depreciation. Your property is considered an asset, so you can deduct its value over a defined period if time. The 2017 Tax Cuts and Jobs Act provides additional tax depreciation benefits for the purchaser. Since this law was only recently passed, see your tax consultant.
3. You’re in control. As the owner, you have the final say in every decision regarding the property. You also have pride of ownership. The property becomes part of your brand.
4. Freedom from monthly payments. Unlike a lease, you don’t have a landlord to pay and a lease to abide by. Even if you borrow to buy the property, you will eventually be liberated from monthly payments once you own it free and clear.
5. You plan to stay. If you’re going to be in the same spot for an extended period of time, and you don’t need flexibility, you should seriously consider owning.
If you decide to buy commercial real estate, retain a broker who maintains the highest professional and ethical standards so that you can have confidence that he or she is acting in your best interests. Find someone who take the time to understand your unique needs, and who possesses deep market knowledge to see that you have the best options available to choose from. Your broker should be both proactive and responsive, so that you can make the most of your time, your schedule, and ultimately your investment.
Linford L. Good is responsible for managing the brokerage activities of the sales/leasing team., including selling or leasing industrial/commercial properties for corporations, private industries, and individual investors.
This article is intended to be an overview of commercial and residential financing. It does not purport to give either legal or financial advice. Before taking any action, you should consult with your attorney or real estate adviser.
Linford L. Good, CCIM, SIOR
Senior Vice President of Brokerage Services
High Associates Ltd.