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Should I Buy a Commercial Building for My Business?

We get asked this all of the time in Commercial Real Estate by business owners and business managers looking to take their company to the next level.  Its not just a yes or a no and just because your business is successful and you can afford it doesn’t mean it always makes sense.  You really need to start asking yourself some questions and lean on your advisors early on to find the best solution for your business.  Here are a few steps I would consider to get started on this process.  One thing I will make very clear and that is timing, something you have no control over.  The time it may take to go from starting this process to closing and moving into a building could be months and even years, so don’t hurry at any stage and focus on making the best decision for your business.

  1.  Ask the accountant – Most businesses have an accountant or bookkeeper either on staff or on an as needed basis and they can be key to figuring out whether or not a building purchase or lease is right for you.  I use Schaaf CPA and would encourage anyone without an advisor to look them up.  Otherwise call your advisor and they will walk you through how your business finances match up to a new building or different lease.  To this day the first thing I ask a client looking to make this move is “have you spoken to your accountant?”  Until they have done so there is no point moving forward.
  2. Ask the lender – After you have established that your business is strong and what your true cash flow and abilities are, you need to spend some time with a lender.  The lender will have several options from loan types, to government programs and creative financing to help you make the best decision in terms of a loan.  Do not just ask any lender for help.  We suggest Ryan Mooney with First Merchants Bank and I will tell you why.  You must align yourself with someone that is reasonable and specializes in small business finance.  Many lenders will promise a loan for a commercial business but you must have a resource that knows SBA and every other option for your purchase.  Ask around and interview these people because 6 months into a purchase and making plans to move can be a disaster if the sale falls apart because you are using the wrong financing.
  3. Slow down – Unless you are in retail and have to be in the new hot market, rushing into a purchase is rarely nesecary.  Now I understand finding a deal and not wanting to miss out but a real estate windfall is peanuts to jumping the gun and putting your company in harm.  This is where your amazing commercial broker comes into play.  We always use Curt Whitesell with WKRP Indy Real Estate and want to make sure we are clear that a residential broker is not what we are talking about.  Have your broker really do the legwork on the location and get some confidence that this deal is not the last deal in that market.  We find that there is always a new option coming up and taking the time to plan is much more important then jumping at that first “amazing” location.
  4. Make a decision – Now you have a great company, have spoken with your accountant and have been given great financing from a bank and have found the best location.  What do you do?  You have to decide.  This is the big play and the most important next step.  You must look deep into your long term business plan and decide if this is the right move.  Buying a new building is no joke and can be stressful as well as time consuming.  Many times business owners decide the long term benefit of owning takes a back seat to convenience and the hassle.  So be sure you are ready for this big jump and finally make that decision to buy or not but do it and run with it.

Buying a building is a big deal and I think each established business should strongly consider this move.  But I also see it go wrong or the process break down because of poor planning and skipping the hard work up front.  Take advantage of fantastic advisors and lean on them for guidance and after all of that begin to make one of the biggest decisions in your career.

 

WKrp Indy

Curt Whitesell

Curt has been in the Indianapolis Real Estate business for over 10 years.  He spent his first years learning all aspects of commercial management and brokerage.  He has had great success in managing several existing projects and new developments.  Curt specializes in tenant/owner lease deals and purchases in Westfield Indiana.  Although he has worked throughout the Indianapolis Metro area on many transactions, his passion is growing his local Westfield community.

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