Purchasing commercial real estate for you company is very exciting. This indicates that your company has had recent growth or is upgrading.
Either way it is a sign of progress. As mentioned in the previous article, there are several steps that should be followed to make a wise real estate purchasing decision.
In addition to the advice given in the previous article, a business owner should also consider following the suggestions given here. As soon as business has the capital for the down payment, they should switch from a rental payment to a mortgage payment.
The money will then go to the purchase of the asset for the company instead of simply paying money to someone else. Essentially, once the mortgage is paid off most of the money that you paid toward is will be back in the business.
Before purchasing, think about purchasing a place that has more room than is needed right now. Now only is it fun to anticipate growth of a company, but it can save a lot of money and time in the long run.
In the mean time, you can charge rental income for the extra room. To qualify for a loan, you may have to occupy most of the building, but you can still rent out part of it.
Once you own the building, establish an Eligible Passive Concern (EPC) or real estate holding company to own the new property. By creating a master lease between the EPC and the operating company you will connect the two entities.
When you decide to sell the business you can keep the real estate business and the property by extension. This will result in rent checks still coming to your mailbox once you have sold the company.
If you are struggling to pay the down payment for the building, consider working with another company or business owner to form an EPC. This partner company will also have to be examined for a loan, if you applied for one.
Be very wise when selecting a partner company and be very specific in things such as buy-out provisions from the very beginning. Write down your agreements and specifications.
This will prevent disputes and misunderstandings later on. A commercial specialist will save you time and money, if you select a good one.
Extra people will hinder the process and waste your time. Time is a precious commodity for business owners.
Do not waste it by involving unnecessary people such as residential mortgage brokers or bankers. In addition to slowing you down, they may have less expertise than a commercial specialist.
A commercial specialist would know which deals are the best as far as loan terms and fees. Hiring a specialist does cost a little more in the beginning, but think of it as part of the down payment, and they will save you a lot of money in the long term.
As owner of the property, your company will cut costs and earn many tax benefits. An accountant will know all of the possible ways owning the property can save you money.
For example, in addition to tax deductions, there is depreciation and amortization. Amortization is the keeping track of the increase and accounting for an amount or property.
Eventually, you will pay off your mortgage and the rent income will be applied to simply company expenses. Officially owning a building with a paid mortgage is a land mark for your company.
Hopefully, through wise commercial property decision making, your company will thrive off of the new space and continue to increase in size, reputation, and prestige. Purchasing commercial real estate is even more fulfilling with self-accomplishment as you see how your company has grown and it establishing itself more firmly in the market.
A business that owns its own company can continue to grow exponentially and provide excellent services to its customer’s more fully.
Jack Landry has worked since 1991 in property investments. He loves all things financial. He recommends (http://www.stanjohnsonco.com) for your property investment needs.
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