We represent many of our clients on the purchasing and selling of the commercial real estate. The process and factors to consider can be very different than that of a lease.

 

Below are some questions to consider:

• Will you outgrow your space?

• Do you want to deal with the hassle of maintaining a property?

• Can you afford to tie up liquid capital in commercial real estate?

• Do you want the flexibility of a lease or the stability of a mortgage?

• Local trends in the commercial real estate market:

  • Where are we in the buying/selling cycle

  • Where are interest rates

 

 

The Benefits of Buying:

• Equity: You can eventually use this equity as collateral when you expand your business. You can even use it to fund your retirement.

• Steady Rent: When you take out a fixed loan, your monthly payments will never increase during the loan period unlike the Seattle leasing market which has gone up 50% in the past 10 years.

• Depreciation: While you won’t be able to write off the entire cost of your property at once, the IRS allows you to depreciate it, typically over 39 years. IRS publication 946 explains the process in detail.

• Tax Breaks: You can deduct interest payments on your taxes. Unlike a lease, you won’t be able to deduct your entire monthly payment, but you can deduct your mortgage interest expense.

• Play Landlord: You can rent out extra space. If the property is large enough, you can use it to increase your cash flow by renting out extra office space for additional monthly income.

 

Drawbacks of Buying: 

• Upfront capital Requirements

  • 10-20% down payment

  • Due diligence fees

  • Closing Costs

• Increased Liability

  • Increased insurance requirements

  • Repairs and maintenance

• Downside Risks – Risk of asset declining in value

• Weakened Location: Inability to put your business in a core location – buying a building in the downtown core is almost impossible