Are you thinking about buying your own office space instead of renting? It could be a great decision, but here are some things you may wish to consider before you make a final decision.
1. Is Buying Really the Right Option?
First, you have to decide if buying is really the right option for your business. When you buy, you're tying up a lot of your financial resources and preparing your business to incur the long-term costs associated with owning. You might face ongoing problems, such as repairs and maintenance. Renting can make you more flexible and has its other advantages, but that doesn't mean that buying is not the right option. When you buy, you have more control over your space and can lock in a rate so you don't have to worry about rising rent costs. You can also rent out part of the building or even the whole space if you want to move in the future.
2. Are You Ready to Commit to the Location?
Moving can be a difficult proposition when you buy, so you do need to be ready to commit to the location for the long term. You don't know for sure what the future holds, and you need to be sure this is where you want to be. It doesn't have to be permanent, but it can be a major hassle trying to sell the office space where you're operating, while also looking for a new location and running your business at the same time.
3. Know the Local Rules
Before you buy, you should familiarize yourself with what the local government will expect from you, particularly if you're moving to a new city. Even if you're in the same city, you'll need to know the rules for commercial property owners.
"Every city has its own set of rules," explains Matt Marsh at Marsh & Partners.* "And before you buy a building, it's essential to understand what that means for your business. A property’s zoning dictates an allowable set of uses. That permitted use may or may not accommodate your business's operations. Additionally, depending on the municipality, your ability to upfit the space, modify the building, or develop the site in the future may be restricted. A working knowledge of local regulations will help in avoiding future heartburn."
4. Is Your Business Credit in Good Standing?
Having good business credit can help you buy real estate. You may have trouble doing so if yours is not in good standing. If you try to get a real estate loan, your business credit will be a key factor. Make sure it's in good shape by keeping your information updated with commercial credit bureaus, paying bills on time, using your business credit card or line of credit responsibly, and maintaining a low credit utilization ratio.
5. Keep Growth Expectations in Mind
Before you decide which property to buy, you must assess your growth plans and expectations. You don't want to commit to a place that will be too small in a year or one that will be too big to justify.
"Assessing your business’s current operations is an important step to take before buying property, but it’s also important to consider how your business might grow over the coming years," says SmallBizClub.** "With a lease, it’s easy to simply move to a new location if you end up hiring more people or garnering a larger customer base than you’d expected. (Of course, if you’re really successful, it’s always an option to purchase another location, too.) Projected growth can also give you important information about how much property you can afford today with an eye toward what your financials will look like tomorrow."
6. Discuss Options with Your Bank
It's a good idea to talk about your options with your bank when you're ready to look into buying commercial property. Get an idea of what you can afford, and then look at what's available in your price range. Your bank can also assist you with finding the right loan option.
* https://marsh-partners.com/blog/10-tips-for-buying-commercial-real-estate-as-a-small-business
