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What Is The True Cost Of Owning Commercial Real Estate?

May 10, 2016

Are you tired of having to pay rent every month for retail, office, or warehouse space in South Florida? Have you considered owning the building in which you operate your manufacturing, distribution, retail, or service business? Owning commercial real estate can be a wonderful feeling. You have the ability to customize and personalize your space to truly reflect the culture of your business, which will allow you to show who you really are and what you do. Although, owning commercial real estate can also be a major distraction for your business, employees, and customers.

Owning commercial real estate, similar to owning residential property, presents potential property owners with an amazing investment opportunity because commercial properties typically offer much more financial reward than residential properties. However, there can be many more risks involved with owning commercial property when compared with owning say a rental apartment or traditional single-family home.

With all of the unknown variables involved – how long will you use the building, what will the market be doing when you want to sell, etc. – it makes more sense to focus on the present rather than try to predict the future. That is why you should ask yourself the following questions before you make any major investment decisions.

Can I afford the time? Finding the perfect retail, office, or warehouse space can easily become a three-month process. Can you and your business afford that much time dedicated to the process of purchasing property.

Am I prepared to make a major move? Transporting heavy technical equipment, like computers, along with furniture and more is not easy. Moving offices can be a troublesome experience and is normally costly. Are you in a position for your business to make a major move?

Will I be better off day to day and month to month by paying the various costs of ownership or does the simplicity of being a renter make more sense for my business? Oftentimes, the most discouraging aspect of commercial real estate ownership is having to constantly keep up with repairs and maintenance. Plus, there are taxes, emergencies, and much more that property owners are responsible for.  

Should I buy or lease? Leasing a building for retail, office, or warehouse space might make more sense than buying a commercial building, depending on the circumstances. This is because buying commercial real estate is going to cost you a lot more upfront than leasing will. Are you able to allocate money for a down payment? Or, would that money be better spent investing in your business?

If you plan to stay in the same business location for several years, then buying is generally a more cost-effective option than leasing. Plus, the longer you stay in the building, the more the cost advantage for buying increases. However, monetary costs should not be your only consideration. If the money you dedicate to a down payment prevents the ability for you to grow your business, then leasing is probably going to be your better option.

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