Buying Commercial 101
By: Chris Streett
So you’re thinking of buying or leasing a commercial property but you’re a little lost in all of the information and don’t know where to start? We’ve broken down some of the most common questions about this big decision to help you on your journey in commercial real estate.
SHOULD I BUY OR LEASE?
There are pros and cons to both. Some pros to owning your own commercial real estate are:
* Tax breaks- you can write off all mortgage interest paid during the year and by using tax code
179 you can also deduct all of your equipment.
*Potential Income from tenants, if you have additional space you could rent out.
* Help fund your retirement by selling the property, or have a steady stream of income during
retirement from renters.
*Control- By owning you have control over the appearance of the building, and the option to expand if necessary. You also have the freedom to operate according to your own needs.
* Lower overall cost of the property. If you are planning on staying in the same location for more than 7 years, you will spend a considerable amount less.
However, leasing might be in your best interest if:
*You don’t have a lot of income upfront to spend on a down payment and fees.
*You need more money to focus on your business operations and advertising.
*More stability of cash flow would ease stress on income.
*You’re short on time, the Landlord is responsible for maintaining property.
* You want flexibility. There is often the possibility to own after lease expires.
WHAT ARE SOME COMMON MISTAKES PEOPLE MAKE WHEN SEARCHING FOR A PROPERTY?
- Don’t Procrastinate! The process from searching to owning/leasing can take up to 12 months on properties 10,000 square feet or less and even longer for larger properties.
- Make sure you know your business needs and make sure that it is the best space to meet your requirements.
- Don’t just focus on the price! Look for the value of the space to meet your needs. Is it visually appealing? Does it have enough parking? Is it going to attract potential customers?
- Make sure you have done your Due Diligence before beginning your search. This will help you and your agent find the best fit for your business.
WHAT ARE SOME THINGS I SHOULD LOOK FOR IN A COMMERCIAL PROPERTY?
- Location, Location, Location! Make sure it fits the needs of your business.
- Allowable uses and zoning
- Potential for expansion
- If it is an investment property, what are the annual expenses and income.
WHAT DO THE ZONES MEAN?
The zones differ from county to county and even town to town. This is an example of where having a qualified broker can really relieve some apprehension because this is something they specialize in. Nevertheless, here is a short list of Harford County Zones and what they mean. More information can be found at http://www.harfordcountymd.gov/1003/Zoning-Classifications
RR- Rural Residential
R1-R4- Urban Residential
VR- Village Residential
VB- Village Business
B1-B3- Business District
CI- Commercial Industrial
GI- General Industrial
MO- Mixed Office
WHY SHOULD I HIRE A BROKER?
- Save time- The broker will save you time searching for listings, reviewing zoning, and negotiating deals.
- Save Money- Your broker has honed skills that will assist in negotiating the best possible deal.
- Listing Access- Unlike residential real estate, commercial listings are on multiple platforms, some of which are not accessible to the general public.
- Market Knowledge- Brokers will perform routine market analysis to keep in check with supply and demand in the region and will know the fair market value of a property.
- Contacts- Your broker has a wealth of contacts to gain access on new listings, contact politicians about zoning, and assist with funding.
- Knowledge of properties that are not on the active market.
WHAT INFORMATION DOES A BROKER WANT ME TO ALREADY HAVE IN PLACE BEFORE BEGINNING MY SEARCH?
*A business plan, pro-forma for the first year and a five-year projection as well as knowing your finances, relative square footage you require, and the functionality of the space is all very helpful in making your vision a reality.
In conclusion, starting a business is both exciting and scary. Knowing what you want and how to obtain it are just the first steps on the journey to running a successful enterprise. Using an experienced and trusted broker (like ourselves) to assist you in finding the right location can help ease the anxiety you might feel. We hope you will keep us in mind for your commercial real estate needs.
Chris has been servicing buyers and sellers in the Baltimore Metro area since 2001 and has more than $140 million in sales. He is a full-time Realtor who focuses on customer satisfaction. Chris is very accessible, a must for success in the real estate arena.Whether you are buying, selling, relocating, or renting he will provide you with the highest level of service for all of your commercial and residential needs.