Lease vs. commercial real estate (via auction)? - Posted by Sbe

Posted by Monica Villasenor on May 30, 2007 at 01:54:04:

Ah, you are smart to consider the financial implications of renting versus leasing. Let’s discuss the auction first.

  1. Auctions usually require cash either on the day of the auction or within 30 days. A commercial real estate loan takes a lot longer than that. That is the first hurtle.
  2. You will need to check with the zoning/city officials to make sure that your type of business will not require any special permitting. If it does and you have a property that you are paying on, but can’t occupy because you don’t have the proper use permit-that can be a financial disaster.

Commercial real estate derives it’s value from the income of the tenant (which is you). The appreciation will come from writing up a landlord favorable lease between the property owner (you) and the business (Your Business). You would be able to force appreciation that way.

Definetely try to purchase your own building first. Even if the business is not successful, you have options when you own real estate.

Good luck!
Monica Villasenor

Lease vs. commercial real estate (via auction)? - Posted by Sbe

Posted by Sbe on May 23, 2007 at 15:18:36:

I have been looking for a retail location for a small business start-up (food business). The majority of the locations I have looked at require a 5 year lease with rent between $2,000 and $2,500 per month. So, basically over a period of 5 years I would end up paying $120,000 for a space I do not own. I just recently found a commercial free-standing building that is going up for auction. It previously housed a pizza shop so it is ideal for what I am doing (as well as a very ideal location and appears to be in good/move in condition). It’s approximately 1400sf and is valued around $100,000 according to the auditor’s website. Should I consider bidding on this property and then using it for my retail location? Any advice/tips/risks/concerns with auctions? Owning commercial real estate? My thought process is that the real estate loan would be as much if not less than what I would be paying in a lease and I would actually own the building and would be gaining equity. As well, I realize being a small business I am at risk of not lasting 5 years but I would rather own a property that I could then try to rent out vs. being tied to a 5 year contract with landlord. Thoughts?