Investing in Commercial Property for Your Business

The following is a guide for business owners who are considering purchasing a property to occupy for their business. In the commercial real estate world we call these type of occupants “Owner-Users.” Paley Commercial Real Estate has specialized in the sale of “Owner-User” buildings in the San Fernando Valley for over 35 years.

If you are a business owner who plans on sustaining or growing your operation and have been leasing space for two years or more, you may want to consider purchasing a property. The reason many people consider purchasing when they are in this position is that if you plan on renting long-term and have the funds, it often makes more sense to invest in a property. In order to explore this option, the first step would be to gather all the pertinent information in order for your Broker to begin a search. This information includes the following:

1. Desired Location: If you are a retail or service based business with an existing location, you may want to consider staying within a 3 miles radius of your current location as to not deter your clients. If you are looking to move to an unfamiliar area (maybe your business is searching for additional locations) make sure to discuss demographics and things like traffic count with your Broker.
2. Property Specifics: How much square footage do you require? What type of building- Free-Standing? Retail? Office? Industrial? Restaurant? Make sure you describe the kind of layout you need- for example you may need an industrial space with offices in the front and a place for manufacturing in the back. Are there any other features you are looking for? This can include  number of restrooms, ceiling height, power/electricity capacity, signage, heating ventilation and air conditioning requirements.
3. Parking: How much on-site parking do you need? The city requires you to have a certain number of parking spaces on the property and that depends on existing zoning and type of business. Unless the subject property is within an “enterprise zone” or “grandfathered in,” you must confirm your use with the city before purchasing a property. Is there other parking options for your customers and staff if there is overflow? This can mean street parking, metered parking, or city parking lots.
4. Timing: How soon are you looking to buy? Are you looking to time a purchase to coincide with a lease expiration?
5. Budget: What is your budget? Are you only searching for a single tenant property for your business or would you be open to purchasing a larger building with other tenants and only occupying a portion? You are required to put down 3% of the purchase price at the opening of escrow, so make sure you have your funds in order for that immediately.
6. Financing: Are you looking to pay all cash or obtain a loan? If you are an Owner-User you may want to consider SBA Financing. With this type of loan you need to occupy 51% or more of the building. The attractive aspect of this type of loan is you only have to put down 10% if you have good financial standing and have a history (more than a couple years) of business finances to show. The other 90% can be financed over the course of 25-30 years at a rate of 3.7% (interest only). Interest rates are at an all time low and if you are considering purchasing property now is an ideal time! Paley Commercial works closely with several lenders and can refer you to the proper resources depending on your financial standing.

Once you have put some thought and planning into the information addressed above, it is time to reach out to your broker. Paley Real Estate is the premier choice for helping you locate your next investment in the San Fernando Valley. Jon Paley and Camille Paley are available by phone or email to answer all your questions regarding purchasing commercial property and to help guide you through the process. From expert document drafting to experienced negotiation tactics, we will have you covered every step of the way. No matter how challenging the requirement or budget, Paley Commercial Real Estate will help you find the perfect building for your business.