Most would agree that there are several key advantages to owning one’s commercial office space. But when is it time to consider making the investment?
Here are three instances where it makes sense to graduate from lessee to owner of a commercial office property.
1.When they’re in position to execute a long-term strategy
Deciding whether to purchase or lease commercial office space often comes down to two factors: where the business owner is right now and where they hope to be 20-30 years down the road.
Those who are just starting out may simply not have the necessary cash-flow to make the down payment needed on a purchase. Others, especially those located in affluent geographic regions, may find renting to be the far more affordable option.
But established business owners with clear long-term goals may see greater value in purchasing their property and building equity for themselves, not their landlord.
While the initial investment may be substantial, business owners can benefit in the long run if the property increases in value over time. When they’re ready to retire, owners have the opportunity to maximize profit by selling both their business and the property.
2.When they’re looking to create additional revenue streams
Those who operate their business out of a property that contains multiple units have an opportunity to generate income by collecting monthly rents from other tenants.
If an owner has the capacity to manage a property and its tenants, this passive income stream can increase cash-flow and protect their bottom line during down months.
Owning a commercial property and leasing a portion to other businesses can also lessen one’s tax burden in a given year, thanks to deduction opportunities on state taxes, depreciation, and interest expenses.
Business owners interested in establishing an additional revenue stream through the ownership of a commercial office should take a close look at their current workload to judge whether or not they are able to take on the additional burden of collecting rents and meeting tenants’ needs. If they do have the capacity, it might be time to consider making the investment.
3.When they want more control over day-to-day operations
Those who go into business for themselves typically place great value on being in control. Unfortunately, renting office space gives business owners little decision-making power.
This can make life difficult for anyone looking to create a new floor plan or make any needed property improvements. Worse still is the ever-present worry of a surprise jump in monthly rent payments.
If lessees feel stifled in their current situation, it may be time to take control and purchase their commercial space. Once they own their office, they have far more freedom to make property adjustments while paying a fixed mortgage payment each month.
Purchasing commercial office space can require a large upfront expenditure and a significant investment of time as well. But for business owners who find themselves in certain positions during their career, owning their property can accelerate them further along the path to long-term financial success.
Leslie Smith is Managing Director of Commercial Direct. She led the launch of Silver Hill Funding in 2016, and is building on that experience to spearhead the launch of the consumer-facing direct lender, Commercial Direct.
An experienced financial services professional with more than 20 years in the industry, she has been instrumental in leading multiple initiatives that expanded companies into international markets, as well as developing systems and programs to drive operational productivity and efficiency. Leslie is a 10-year veteran of Bayview Asset Management, the parent company of Silver Hill Funding and Commercial Direct. She previously held the roles of Senior Vice President, Operations and First Vice President, Operations. During her tenure at Bayview, she led multiple divisions and initiatives in project management, banker education, systems administrator, correspondent lending and process engineering.
