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Commercial Office Condos - Are You the "Right Size?"

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Small businesses face competition every day and any edge that can be gained over the huge corporate entities must be taken advantage of in order to compete effectively.  For mature small businesses, there is a new way to gain a competitive edge that wasn’t even an option not very long ago.

Commercial condominiums have appeared on the real estate market recently and small businesses are taking advantage of the benefits. While this option isn’t viable for every small business, it can make a huge difference for those companies that can most benefit.

Young, immature small businesses need lots of leeway regarding office space as they grow and change.  Those companies will likely move through several leased office spaces before reaching their “right size” and being ready to stay in one location and one size facility for the long haul. These are organizations that should remain in the office leasing market for some years to come.

Those small businesses that have found their “right size” and know exactly what they want and need in office space for the coming years can greatly benefit from a commercial condo. The reason to let a company mature and adjust before investing in an office condo is that it may be difficult or even impossible to obtain another condo in the same building in which to expand as the company grows. Businesses that have remained one general size for some time are best suited to investing in commercial condos for office space.

Leasing has lots of downsides. The largest, of course, is the fact that the investor who owns the office space wants to generate a profit from his or her investment. After all, that’s what owning real estate for lease is all about. Other down points include limitations on use, remodeling, even restrictions on paint and carpet color in many cases.

Investing in a commercial condo for small business office space clearly takes the “middle man” – the landlord – out of the picture entirely. The small business obtains financing directly from a mortgage lender, just as is done when a private individual purchases a place to call home.  Small Business Administration guarantees also may be available to allow for a 10% down payment and favorable interest rates.  If you have bought a home, you already know how much less expensive it is to make mortgage payments on a home when compared to leasing a like residence from another owner. The very same is true of office condos.
 
The small business becomes responsible for all repairs on the interior of the commercial condo because there is no landlord to turn to should something break or stop working. A small prudent reserve for such situations is wise on the part of any business purchasing a building, whether a condo or more traditional office space.  In the case of leasing, the landlord is already charging an amount to hold toward repairs in the lease payment each month. Instead, the small business can invest the money in an interest bearing bank account for earn money on the reserve held for repairs.

The business is also responsible for payment of all taxes on the unit. Here again, the landlord of a leased office space has taken this sum into account when setting the monthly rental fee. It’s just a matter of managing your budget so that making tax payments on a timely basis will not create a hardship on the firm.

In the next post about commercial office condos, we will look into the condo association board of directors and how the small business can effectively deal with and participate in that area of commercial office condo ownership.

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Buying Office Space , Commercial Condo , Commercial Real Estate , Lease vs Buy , Office Building Sales , SBA Loan

1 response to “Commercial Office Condos - Are You the "Right Size?"”

  1. Alyn Says:
    BS low - rationality high! Really good answer!