Real Estate Advice

Renovating Commercial Property

Written by Stefan Martinovic for Gaebler Ventures

Renovating commercial property can be a great opportunity for successful business owners. You get a great space for your business and an investment that is sure to appreciate in value.

You might have seen one of the many real estate investment programs that have flooded television airwaves in recent years.

During the recent real estate boom, individuals from coast to coast turned to the business of "house-flipping" in order to turn a profit and for a new and exciting challenge.

As a small business owner, real estate speculation can prove to be a similarly fulfilling enterprise.

Whether you are looking to invest in real estate to keep the property, subdivide it, or sell it outright, there are many ways to reap the rewards of commercial property speculation.

If you are looking to purchase a piece of property to hold on to and use as a home base for your business, renovation can be a very cost effective alternative to a new property purchase or lease.

Through a variety of outlets, abandoned, foreclosed, or dilapidated commercial property can be purchased for well below market value.

As a small business owner, you are probably used to rolling up your sleeves and putting in some elbow grease to make ideas reality. Where others may see a run-down property, your business may be able to occupy a prime piece of commercial real estate for a fraction of the cost.

If you find a space that meets your needs and budgetary requirements, renovating the property to suit your needs not only allows you to tailor the space to your business, but instantly builds equity. Should you decide to sell the property down the road, the time and money spent on renovations should provide an exponential increase in equity once the property no longer suits you and you decide to sell.

In many cases, you will find that commercial space for sale will be much too large and the facilities available greatly exceed the needs of you and your business.

With a property in disrepair, many other businesses may elect to look elsewhere for commercial space. This can work to your benefit.

If you determine that you would be willing to trade the costs of a larger mortgage and renovation expense in refurbishing a larger space, you can reap the benefits of being a landlord and leasing subdivided commercial space to other tenants. By choosing to do this, you can set aside whatever piece of your real estate investment how you see fit, then lease off other sections of the newly renovated space to other businesses who did not have the foresight and real estate prowess that you possess. Depending on the location of the property and quality of renovations, if you receive market value for the lease from the other businesses, the added mortgage and maintenance expense should take care of itself, as you purchased the property at well below market value due to the initially run-down condition that it was in.

If you are looking to simply add another element to your investing practices, buying the property below market and then renovating to resell immediately, a true "flip" would be the final option. This does not afford you a new commercial space for your business, but if you are already established in a particular location that meets your needs, commercial flipping might serve as a profitable way to diversify your business investment dollar.

Be forewarned, real estate can prove to be a very volatile investment in many ways. Between contractor disputes, mortgage rate fluctuations, and the possible complications that you may encounter during renovations, real estate is certainly not an enterprise for the weak of heart. However, by using the investment savvy that allowed you to become a successful small business owner, you can reap the benefits of the real estate speculation market.

Stefan Martinovic has an extensive body of work across the financial services, manufacturing, and retail industries. He is currently pursuing an MBA in Management and Entrepreneurship at The College of William & Mary.

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