When you get tired of dealing with a landlord, and commercial real estate prices seem reasonable, you might give serious thought to buying your own property for your business. While you may be able to finance a mortgage that’s lower than monthly rent, there will be other costs involved, both at the outset and on a regular basis going forward. Here are some hidden costs that you have to keep in mind when deciding whether buying property is the right move for your company.
This is essential both inside and outside the building. Poorly maintained business premises will only discourage customers and lower the morale of employees. There will be constant expenses in cleaning at the least, plus the occasional painting, new carpeting, and upkeep of essential components like roofing, plumbing and HVAC systems. You’ll have to determine whether you should hire full-time maintenance staff or contract with an outside service like City Wide Fence Co.
You’re likely going to find that you need to make some improvements. Some buildings may just need a little interior refurbishing such as replacing carpet or drywall, but others may require extensive upgrades like rewiring. Knocking out one wall or building another may be required for promoting good workflow across the office space. If you’re looking at the need for substantial improvements, get quotes from several contractors before you buy to help you estimate costs.
Your property tax obligations begin the day you take ownership. Residential taxes are based on a percentage of fair market value, but commercial property tax is based on a percentage of estimated value. You will generally receive an assessment of value in the mail that determines your tax. The IRS also has strict business income tax rules that you should be aware of. Before making a purchase, speak to a tax attorney to get a clear idea of what kind of obligations you’ll have and different business structures that can benefit you.
Protecting your property, employees, and physical assets is also important. You should have a good security system in place, such as electronic locks, alarm systems, cameras, and adequate lighting at all entrances with backup power supplies for emergency lighting. You should also have a chain link fence around the property, and a gate to the parking lot to keep your own fleet or customer vehicles protected. Upgrading and maintaining gates should be part of your security budget.
Bear in mind that it may be nearly impossible to come up with an accurate summary of expenses. No matter how well you do your homework, there will always be emergencies or rising costs.