Maximize the Return on Your Commercial Property Investment
When buyers purchase commercial property, either they do so to use the space for their small business or as an investment they can lease to other business owners. Although with the right investment, you could use a portion of the property for your own business and lease out the remainder.
Depending on your game plan, it is important that you select the best property for your needs in order to maximize the return on your investment. To do this, you need to determine exactly why you are making the purchase.
Buy Commercial Property to Use it
Frequently when small business owners consider the cost of doing business, they compare the cost to own versus the cost to rent their workspace. Before you decide the best move for your small business, this 2010 article from Inc. suggests you consider these three things:
- Location. When you buy, you are committed to the neighborhood. When you lease, you have the freedom to move should your business or the surrounding area warrant it.
- Liquidity. If you’re not in the real estate business, think twice before tying up all your capital in property. As another Inc. article points out, ‘The fastest way to jeopardize your existing business is to get distracted by starting a second business.’ In this case, real estate.
- Cost. Owning property means you are responsible for repairs. If the plumbing or the air conditioning need to be fixed, it will come out of your pocket.
On the other hand, if you own the property, you can always choose to sell it and perhaps, earn a profit.
Buy Commercial Property to Lease it
Buying commercial property in order to lease it to others can be a profitable business, if you know what you’re doing. Factors you’ll want to consider include:
- Location. It’s always about location when it comes to real estate, which in business means access. This includes customers, employees, vendors, and suppliers as well as parking, bus lines, airports, and similar modes of transportation. Other important features you’ll want to consider when buying are the safety of the neighborhood and the proximity to competitors.
- Zoning. In addition to ensuring that the zoning on your property is right for small businesses, investigate building code limitations on the building. For example, historic areas may have certain restrictions or potential issues—such as retrofitting.
- Building. As you’re looking at the condition and structural soundness of the building, also consider its prior use(s), required future maintenance and general upkeep, and the potential to expand, should you want or need to grow your business.
Additionally, keep in mind that when you buy property for leasing it makes you a landlord. With this role comes certain other responsibilities, such as keeping the property in pristine shape and finding (and keeping) the right tenants.
Owning and leasing commercial property can be a great financial investment and business venture. However, be sure to investigate fully the ups and downs of real estate investment and management before you decide. That’s the only way you’ll be able to maximize the return on your commercial property investment.
Do you own commercial property? Do you lease it to others? Tell us your experience.
Article written by: Deborah S. Hildebrand Harris - Freelance writer with a Bachelor’s Degree in Business Administration, Human Resources option, from Cal State Northridge, a Certificate in Human Resources Management from UCLA, and over 10 years working in human resources both in-house and as a consultant for organizations of all sizes. My article, “Retention and Job Satisfaction: Compensation, Opportunity, Recognition, Environment” was selected by the Ontario, Canada, Ministry of Education, as an educational tool. Other articles on business and career have been cited in the March 2010 edition of ”A Woman’s Guide to Green Jobs” from the U.S. Department of Labor, “Hot Careers for College Graduates 2010” from the University of California, San Diego, as well as in the book, Management, by Richard L. Daft (page 390). Follow Deborah on Twitter (@DSHildebrand), friend her on Facebook and read her Suite 101 articles (http://deborah-s-hildebrand.suite101.com/).