Should I buy or not?????

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HarryGMCPF

MGF, Master Grumble Framer
Joined
Nov 15, 2004
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Location
Northborough, MA
I may have a chance to purchase a building that I could then move my business into. It is a 2 story building with three office suites on the second floor. My shop would be at street level.

It is definately a better location. It is in the same town, on the same road, but in an area that is more condusive to shopping. Easier traffic flow, better parking, and more visable.

So if we assume that the move would be good (whether I buy or rent) what types of things beyond the obvious financial implications should I consider?

Thanks for the help.
 
If you can afford real estate, buy it, you can not go wrong. That deal is especially a good one due to the rent you could get from the upstairs office space.

"Buy real estate, never sell real estate."

That will turn out to be the best retirement package you can put your money into.

I honestly do not understand your question. You are not interested in the financial aspects of the deal. You said it is a better location, so what is your question?

John
 
JRB,
I guess what I am looking for is advice or to hear others experiences with something/anything similar. Did they buy the property personaly? Was it owned by the business?

Now, I owne a home (or should I say a mortgage) so I would not be new to owning property, but I have never been a landloard, or owned commercial property. I assume there are differences in owning commercial property as opposed to residential. I don't know.?.? Just starting to educate myself. I know you will have a mortgage, taxes, insurance, maintanance, rental income, tenants, etc... I get that. But what else is there? Maybe there's nothing, but I doubt it. Everyone here usually has good advice so I thought I would through it out there.

Hope that clears up my question.
 
I think now would be the time to have a long, heart to heart with your CPA. If you do not have one, it is probably the time for it. I do know this, do not lallygag on this project. These type of deals do not come along very often. While your thinking about it, someone else is going to buy it.

John
 
A little story here Harry.

About 70 years ago, there was a restraunt that started, and they rented.

Over the years they added a cute baby duck to the sign which was now 15' from the freeway exit before the only Interstate Frwy with a draw bridge, so that when the bridge went up, traffic was jammed for at least 30 minutes. The sign was a large clock and the sign read "Time to eat at Waddle's". And they rented.

over those years, they were offered the chance to buy the property, thrice. And they rented.

About 2 years ago, their lease was coming up for renewal.
Krispy Kream was flying high and opening up as fast as they could find places by freeways...

Did I mention the freeway and exit right there?

So now after 70 years, there is no Waddle's, no land mark, nothing but an empty building. We know where Krispy Kream went..... :D

Buy the building. And get some education about being a landlord. When you decide to retire and you sell your business....you'll still have a building that is paid off and throwing income.
 
We (almost) own our building. The first five years we rented. We, too, have a tenant, which helps pay the note. The Collinses own the building. They rent it to Howard's. Therefore, I have to sleep with the landlord to get a good rate. Sigh...
 
It's like Scarlet said, "The land, the land is so important" (she said something like that at the end of the movie).

Ours came as a package deal, business on the lot. If the business ever fails, the land is always available for lease. Our land has increased in value more so than the business.

Buy it, buy it, buy it. If you don't want to be the landlord then let an outside company do it for you. My husband and I own the land and lease it to the business, not an uncommon practice. I too sleep with the landlord, he's in bed snoring with sweet dreams and I am on the computer at 11:30 at night, what does that tell ya!

Lynn
 
When you own a business you are creating income. When you use the cash flow from that business to purchase a building you are creating wealth. Over the last five years I have made more money on the appreciation of my building than I have on framing pictures.

Peter
 
No offense to anyone who has answered here but why in the **** are you asking people here? Only you and your accountant can figure out this question.

Nobody here knows the real eastate market in your area, nobody here knows if you generate enough sales to make payments on this place, nobody here knows anything about your market, nobody here knows any future construction in your area, nobody here knows anything about your current and potential nieghbors. You have to do your own research on a local level and then make up your mind.

Good luck in whatever you decide to do.
 
We "lost" 25% of our investment (purchase price plus upgrades) on our last property, after owning it for 15 years. We bought it when commercial real estate was scarce, and we needed it. We sold it when there was a glut of commercial real estate, and we wanted to sell it quickly, not in a year or two.

However, we still netted a decent amount of cash at closing, which we could not have done if we had been renting.
 
If it's anything like our situation you will find you will bend over backwards and stick your head up your--- to get your loan, pay a higher interest rate on your mortgage and of course it is not tax deductible. You will pay a higher tax rate than a homeowner (so theirs can be lower) and (especially if you don't live in the town)have less voice in town politics and recieve fewer services. The city may tell you how your business should look and operate. Somewhere along the line you will probably have bad tenants that will stick you with a big loss.
And yet, it's the best decision we've probably ever made.
 
Harry,
To address the second half of your question, yes, there are lots of issues when you lease commercial properties. The lease is everything. (For example, are the utilities sub-metered, or will the rent cover it. How many parking spaces are allocated to each tenant? Etc...) See if you can get a local realtor (who does commercial leases) to help you write up the leases for a set fee. Since you will be the one overseeing the lease (maintenance, collecting rent, etc.) a one time fee might be ok, instead of a percentage of the lease.
Also be aware that second floor space does not rent as easily or for as much as ground floor. You always have to expect a certain amount of vacancy for your annual budget (then if it stays full you are ahead of the game!)
My husband is a real estate broker (commercial and residential) and we also personally own commercial properties...usually a sound investment, but not for the faint of heart!
 
I own my building. It's worked well for me in stabalizing and then reducing overhead, and it has been a good investment. It'll provide income for retirement and probably give our daughter a nice windfall when we're gone.
That said, I am in total agreement with the folk counselling you to seek the advise of a CPA. You really need to crunch the numbers to see if this is viable. There are too many regional vaiables to base your decision on ours.
 
Thanks to all.
I am working with my accountant on the numbers and currently chatting with the bank. We'll see how it all works out.

Tim,
Thanks for the comments, but my question was not whether or not I could make the numbers work for me and if the market research make sense. It was more a general, "Please just share your thoughts...." so I could try and fish out anything I may not be thinking about. I have in fact picked up several things to take into consideration. It was never my intention to let everyone here make the decision for me, just help me be more educated in order to make the right decision ON MY OWN. I'm not going to make a purchase like this without knowing whether or not it will work.

Thanks again to all.

Harry
 
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