| I already feel your skepticism. Buy commercial real | | | | chance that you are already spending most if not all of |
| estate? This year? Doesn't this guy know that | | | | the mortgage payment as rent. |
| vacancy rates are skyrocketing, unemployment is on | | | | 3) Short Term Value Fluctuations Don't Matter |
| the rise and market sentiment is that commercial real | | | | The idea is not that your owner occupied real estate is |
| estate will be "the next shoe to drop"? | | | | somehow immune to down market cycles. The point is |
| Actually, I do, and I want to be very precise with my | | | | that as a business owner you don't particularly care |
| strong buy recommendation. This article is specifically | | | | because you have no intention of selling in the short |
| for business owners who are currently leasing space | | | | term. Certainly all property owners hope to enjoy |
| and who also intend to be in business for at least the | | | | increasing property values, but for owner occupied |
| next 10 years. If that's you, the remainder of 2009 may | | | | properties it's not a day to day concern. |
| present the best buying opportunity you will see in your | | | | 4) Historically Strong Inflation Hedge |
| lifetime. Consider the following: | | | | Commercial Real Estate has a long history of being an |
| 1) You Need a Place to Operate Your Business | | | | excellent hedge against inflation. Over the long term, |
| This may seem obvious, but unless you've set up shop | | | | commercial properties tend to increase in value at a |
| in your home, every business needs space to operate. | | | | rate approximately two percent higher than the rate of |
| You've already decided to be in business, now you | | | | inflation. Large deficits combined with huge increases in |
| must choose to either rent or own your space. | | | | the money supply are going to lead to high inflation at |
| Real estate rental costs are typically the third largest | | | | some point. It's already baked into the economic pie. |
| expense a business incurs (after payroll and taxes). | | | | When that inflation hits, your commercial property will |
| On average, lease payments typically increase by 3% | | | | become more valuable. Additionally, you will be paying |
| or more per year, every year. Finding an ideal location | | | | your mortgage with dollars that are increasingly less |
| to purchase can convert this large, consistently | | | | valuable. |
| growing expense into an investment that you will | | | | 5) Outstanding Exit Strategy Options |
| someday recapture, hopefully with a nice profit, when | | | | When you one day decide to retire, owning the |
| you eventually sell the property. | | | | property will provide several attractive options. You will |
| Furthermore, you will be the owner of all tenant | | | | be able to sell the business and lease the property to |
| improvements you make to the property and never | | | | the buyer; sell the business with the property, |
| need to worry about a lease not being renewed or | | | | increasing the business value and making the |
| having a property sold out from under your business. | | | | transaction easier to finance, or sell the business and |
| Don't underestimate the pride of ownership you will | | | | the property to different buyers. |
| feel as the owner of your business and the place | | | | 6) Make Your Accountant Happy |
| from which your business conducts its business. | | | | Property ownership provides many tax benefits and |
| 2) We Are in a Buyer's Market | | | | can help shelter business income. Interest deductions, |
| This year is clearly a bad year for many commercial | | | | depreciation, amortization, 1031 exchanges and other |
| property investors; rental rates are down and | | | | benefits will help you keep more of what you earn. |
| vacancies are high. These investors, unlike business | | | | Speak to your accountant to gain a better |
| owners, depend on the rental income their property | | | | understanding on how commercial property ownership |
| generates to pay the mortgage. The vast majority of | | | | can help you keep more of your income and reduce |
| investment property loans have balloon payments | | | | your tax burden. |
| every 5, 7 or 10 years. In today's unstable market, | | | | 7) Excellent Financing Options are Available |
| banks are very conservative with property valuations | | | | Outstanding financing options are currently available to |
| and refinancing investment properties is harder than | | | | help business owners purchase or refinance owner |
| ever. | | | | occupied commercial properties. Several underutilized |
| Many investors need to sell properties, even ones with | | | | loan programs can provide up to 90% financing for |
| positive cash flow, due to a lack of available financing. | | | | qualified projects. These loans are fully amortizing, so |
| As a consequence, there are a large number of | | | | you never need to worry about facing a balloon |
| attractive acquisition opportunities available at | | | | payment either. |
| historically low prices relative to the cash flow they | | | | It's hard to get up the courage to invest in commercial |
| can generate. | | | | real estate when the market is in turmoil, but I urge you |
| The investor's challenge is your opportunity. As a | | | | to consider doing just that. The benefits of ownership |
| business owner you will use your business' cash flow | | | | are compelling and the timing is right. |
| to cover the mortgage expense. There is a good | | | | |