The decision to buy or to rent business space can be grueling.
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Renting can be more convenient, especially if you expect your company to outgrow the space in a short period of time. However, mortgage payments are often lower than lease payments, and when all is said and done you have something to show for your investment.
If purchasing property seems like the next logical step for your company, here are just a few things you can expect to encounter along the way.
Weighing the Benefits
The first step in buying property is to weigh the benefits and decide whether a real estate purchase is really a good idea in the first place. Unlike the decision to purchase a piece of office equipment, the decision to buy real estate will have long-term consequences.
If greater flexibility, long-term capital investment, and future income streams are your goals, then you might be on the right track. But if funds are tight and you can't afford to tie up any capital resources for a long period of time, then you may need to reconsider your decision.
Locating a Property
The next step is to locate potential properties that may be a good fit for your company. You evaluation should take into account your business' space requirements, property features (e.g. utilities, layout, parking), and cost.
If the property is more than you can afford, don't let your emotions stop you from simply walking away. To assist your search, enlist the services of a qualified real estate professional with experience in commercial properties.
Retrofitting the Space
No matter how perfect the property may seem, a certain amount of retrofitting will be needed to accommodate the specific functions and operations of your business.
The cost of those retrofits has to be factored into the purchase budget. Extensive retrofits may also be subject to municipal ordinances, so it's always a good idea to check out municipal regulations before you buy.
Paying Fees & Expenses
When purchasing real estate, there are a wagonload of upfront fees that you simply cannot avoid. Real estate commissions, appraisal fees, attorney fees, and other closing costs can quickly add up to a sizeable chunk of change.
But in addition to the upfront fees, you also need to be prepared for the regular monthly expenses involved with owning commercial property. Electric bills, waste removal, property insurance, repair costs, maintenance fees, property taxes - the list goes on and on.
Although you can minimize or delay some of these expenses, many are fixed and need to be calculated into your post-purchase budget.
Closing the Deal
The last step in purchasing property for your business is closing the deal. Some business owners make the mistake of rushing to close, and in the process overlook details that have significant long-term consequences.
Work with your attorney to go over the closing documents and contracts with a fine tooth comb to avoid any nasty surprises months, or even years, down the road.