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With interest rates now at historically low levels and the United States economy growing at a strong rate, many business owners have been considering purchasing commercial real estate for their business locations. The benefits and drawbacks of commercial real estate ownership vary from business owner to business owner, but potential buyers should educate themselves on the obvious and sometimes hidden benefits of commercial property ownership. Here are some of the top benefits to ownership compared to leasing a commercial space.
Tax deductions
For many business owners, one of the main benefits of commercial real estate ownership is the tax deductions that can be taken on the interest portion of the monthly business loan payment. These deductions can be substantial, and each business owner should consult a qualified tax specialist about their particular situation.
Equity valuation
On average, commercial real estate will appreciate two to three percent above inflation in the long run. This stock appreciation can result in significant financial gains over a period of decades.
A retirement fund
Many small business owners will not receive a pension when they decide to retire. The equity appreciation in commercial property can be significant. An owner can decide whether to sell their property in retirement, take advantage of capital appreciation, or lease it to another business for a continuous stream of retirement income. In fact, in many situations, a business owner can lease an unused portion of their property, such as a vacant office, before retirement to earn additional income.
Value added to the business
Unlike residential loans, many business loans are assumable. This makes the business and real estate much easier for a buyer to acquire and greatly increases the value of the business.
There are no taxes to pay for your rent
When a business leases its real estate, it must pay the sales tax on the rent paid to the owner. When you own the real estate, there is no rental tax to pay. The savings can be significant.
Easy access to finance
Large fixed rate loans for terms of up to 30 years are now available for owner-occupied commercial properties. In fact, in some cases, with strong finances, a business owner may qualify for a loan of up to 100% of the purchase price of their commercial real estate. Business owners should consult an experienced commercial mortgage advisor before bidding on commercial property.
In addition to the easily tangible benefits described above, the business owner who purchases a property to house his business location will be able to have the satisfaction that only comes with the property and will not make the owner rich.
