Should I Buy My Building?

Did You Ever Think About Owning Your Office Building?

Are you paying rent? Did you ever think about owning your office building? Whether it be a self-standing building, or space in an office condominium, at some point most of us think about owning our own space. So – should you?

Seemingly, like every other article I write, the answer is “it depends”. First and foremost, your office should be the best you can get – whether it is rented or owned. In other words, don’t move to a place because you can own the real estate. That to me is the tail wagging the dog. (The same thing goes for buying equipment for tax purposes, by the way, but that is for another discussion!).

Perhaps The Rent Costs More, But Guess What

Move to a place that gives your practice the best exposure. Perhaps the rent costs more, but guess what – there’s a reason for that! It’s better. That’s how the world and real estate works. Now if you can buy your space in a great location, that’s icing on the cake. The absolute last thing you want to do is move from the office you’re renting in a good location to a location you own in a bad location. Everything should be about your business’ income and profit.

It’s a no-brainer when you can find something to purchase nearby your old office, or a place that is better, and the rent and common area costs are similar to the principal and interest of a mortgage you’d pay if you purchased.  

My First Office

That’s what happened to me. Here’s my story. My first office was located in a small strip center of about four businesses. After a few years a brand new Walmart shopping Center opened up down the street. They were under the gun to find tenants and basically built my space for free. My first month there I more than doubled my sales. That’s when it hit home for me – location, location, location!

After about eight years a great piece of commercial property became available. It was less than half a mile away, and located at the busiest intersection in town. In short, it was a better location. I bought the lot, and built an 11,000 square foot building. Total cost was about $1.2M. I took 5,000 square feet for myself  and rented out the rest. Between my rent (paid by me at a fair market rate) and that of my tenants, the mortgage payment was basically covered. After fifteen years it was paid off.

The Real Estate Market Changed

I sold my practice to another OD and I was his landlord for a while. Between rent from my old office and the other tenants, life was great. After paying off the note, that rent money went right in my pocket. But all good things come to an end. The real estate market changed, and there was suddenly a glut of commercial property for rent, and I saw that I would have to lower my rents to stay competitive. When my biggest tenant (a pain clinic) talked about moving out and building his own building, I knew it was time to sell. Luckily, the pain clinic bought my building instead of moving.

The real estate didn’t appreciate, but they paid for the building what I spent in the first place. And all those years I basically got free rent! Maybe next time we’ll talk about how to pick a good location. Let me know if you’re interested.

John Scibal
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