Buying An Office Condo: A Good Choice For Many
Financing
Even though buying an office condo can be expensive and create additional work, it is usually a better choice financially than leasing office space. In some cases, condos can be purchased with as little as 10% down; however, up to 25% or more as a down payment is more common.
Financing can also be used to cover improvement costs and closing costs. In other words, it is possible to buy your office condo and redesign it with the same financing.
Some people set up a limited liability company and place commercial property inside this company and then lease space to other companies including your own.
Monthly Expenses
You can expect low monthly rates if you amortize over 25 years. On occasion, the monthly mortgage ends up cheaper than the cost of leasing. As well, if you have a fixed-rate loan, your monthly payments will not fluctuate year to year.
When leasing, you are subject to market changes when your lease expires. Some leases even include clauses in the contract that allow for annual cost increases making the leasee even more vulnerable to unexpected monthly cost increases. A fixed-rate loan, amortized over twenty-five years, takes the guess work out of monthly expenses.
Tax advantage
While many businesses choose to lease because the entire amount of their lease can be written off, people who own their office space can also enjoy tax advantages. Real estate expenses such as interest and taxes can be deducted from your taxes. Repairs can be written off. As well, improvements and depreciation can be written off over time.
Long Term Advantages
The long term advantages to owning an office condo are great. First, your monthly mortgage payment becomes long term equity. Second, there is the possibility of long term increases in value. And third, the condo could be used as a retirement fund at the end of your career.
One reason people lease office space is because they worry they will outgrow the space and need to move or acquire additional space. Some business owners, having outgrown their office space, buy new larger office spaces and lease out their old space. This option could allow you to be a landlord during a time when rents are increasing.
Know Before You Buy
Before you buy, you should know who you are buying from and what the property and building were designed for. Have the building inspected. Get confirmation that you will be given the flexibility to design your space the way that you wish. Confirm that your business will be acceptable in that area and within the building. Find out if any improvements have been made. Look into the building developer's track record.
Buying is a good option for business people who are relatively secure in their business, who are committed to staying in one place for several years, and who are able to handle the extra work involved in owning a property. Many if the issues associated with buying office space are similar to those of buying a home.
by: Jamie Mathwig
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