Is It Time to Buy Your Commercial Property for your Business?

As a business owner, one of the most significant decisions you'll face is whether to continue leasing or take the leap into property ownership. While renting offers flexibility, owning your commercial space can build equity, provide stability, and potentially transform your business's financial future.

Key Benefits of Owning Your Commercial Property For Your Business

Build Equity Instead of Paying Rent

Every mortgage payment builds ownership in an appreciating asset. Over time, your property can become one of your most valuable business assets and a cornerstone of your retirement planning.

Predictable Occupancy Costs

With a fixed-rate mortgage, you'll know your principal and interest payments for years to come. No more annual rent increases or surprise lease renewal terms that strain your budget.

Tax Advantages

Property owners can deduct mortgage interest, property taxes, depreciation, and operating expenses. These deductions can significantly reduce your tax burden compared to simply deducting rent.

Control and Customization

Own your space and make it yours. Renovate, expand, or modify your property without seeking landlord approval or worrying about losing your investment when the lease ends.

Additional Income Potential

If your property has extra space, you can lease it to other businesses and create an additional revenue stream that offsets your ownership costs.

Is It Time to Buy Your Commercial Property for your Business?When Does Ownership Make Sense?

Consider purchasing if you:

• Have been in business for at least 3-5 years with stable revenue.

• Plan to stay in the same location for 7+ years.

• Have outgrown renting or face frequent rent increases.

• Qualify for commercial financing with favorable terms.

• Operate in an area with strong real estate fundamentals.

  
  

Understanding Commercial Financing

Down Payments

Expect to put down 15-30% of the purchase price, though Owner Occupied loans may require as little as 10%.

Loan Terms

Commercial mortgages typically have 5-20 year terms, with amortization periods of 15-25 years. Many have balloon payments requiring refinancing.

Interest Rates

Commercial rates are generally 1-2% higher than residential mortgages and may be variable or fixed.

Steps to Make the Transition

1. Assess Your Financial Readiness

Review your business financials, credit score, and cash reserves. Most lenders want to see 2-3 years of tax returns, strong cash flow, and good personal credit.

2. Determine Your Space Requirements

Think beyond your current needs. Will you grow in the next 5-10 years? Factor in expansion space, parking, and location considerations.

3. Assemble Your Team

Work with professionals who specialize in commercial real estate: a commercial real estate agent, a lender experienced in business financing, a commercial real estate attorney, and your accountant.

4. Get Pre-Qualified

Knowing your budget strengthens your negotiating position and helps you focus your search on realistic options.

5. Analyze the Numbers

Compare your total cost of ownership (mortgage, taxes, insurance, maintenance, utilities) against your current rent. Factor in opportunity costs and potential appreciation.

6. Conduct Thorough Due Diligence

Professional inspections are critical. Investigate zoning, environmental issues, property taxes, and any deed restrictions that could affect your business.

7. Plan for the Transition

Coordinate the purchase timing with your current lease. Will you need to break your lease early, or can you time it perfectly? Budget for moving costs, renovations, and potential downtime.

Common Pitfalls to Avoid

• Overextending financially: Keep reserves for unexpected repairs and business fluctuations.

• Ignoring location factors: Ensure the property supports long-term growth and customer access.

• Skipping professional inspections: Hidden issues can become expensive problems.

• Neglecting operating expenses: Property taxes, insurance, and maintenance add up quickly.

• Failing to plan for growth: Buy space that accommodates your 5-10 year vision.

  
  

The Emotional Factor

Owning your business property is more than a financial decision. It represents stability, permanence, and commitment to your business's future. For many entrepreneurs, it's a proud milestone that provides peace of mind and a sense of arrival.

Is Now the Right Time?

The commercial real estate market fluctuates with interest rates, economic conditions, and local market dynamics. While timing the market perfectly is impossible, buying when your business is strong and you're committed to your location often matters more than waiting for ideal market conditions.

Ready to Explore Ownership?

Start by speaking with a Royal LePage Commercial real estate professional and your financial advisors. With careful planning and the right guidance, transitioning from renting to owning can be one of the best investments in your business's future.

Is It Time to Buy Your Commercial Property for your Business?

To book a consultation, contact Ryan DeGobbi, CRE Investment & Development Team | Royal LePage Commercial.

This newsletter is for informational purposes only and does not constitute financial or legal advice. Consult with qualified professionals before making real estate decisions.