If you are an entrepreneur, you know that your monthly lease payment is one of the most expensive parts of operating a business. This is especially the case when you are operating a service company, such as being a chiropractor, a dentist or an esthetician. Once you acquire your equipment, paying your lease is the most significant cost.
The terms and conditions of a lease can be pivotal as to whether a company can survive or be profitable. The vast majority of business owners are beholden to their landlord. After all, you need a prime location to operate a service or retail establishment, and who can afford to build their own?
The escalating cost of leases during renewal is the single biggest complaint of business owners. To a large extent, they feel powerless to do anything but accept the higher cost of operation. After all, over the years they have acquired customers who have expected to find them in the same location. Will they follow you if you move to a new complex?
New business owners are especially vulnerable to substantial increases in lease expenses. When starting a business, entrepreneurs usually seek a lease term for the shortest number of years possible. After all, the viability of the new business is not certain, and they are seeking to reduce their financial risk. It is almost inevitable that just about the time the business is taking hold, their lease will be up for renewal and they are forced to relocate or accept the rental increase.
Now, not all business tenants are faced with substantial increases in lease rates. Market conditions have a hand in leveling the playing field, but over time, all business tenants will see a substantial part of their hard earned revenue be paid out for the right to have a space in that complex.
The landlord, on the other hand, has a phenomenal business model. When a single tenant does leave, this has little impact on the viability of the landlord. The revenue from the existing tenants will cover his cost and when a new tenant moves in to replace the old one, they will typically pay for their own buildout.
If you are a business owner who is simply tired of making large rent payments, month after month, to your landlord, maybe it’s time you pay yourself and earn a great cashflow while doing so. Have your neighboring business tenants pay you for the right to stay in your complex or strip mall.
There is the practical concern we have heard many business owners say:
“I have already spent so much of my hard-earned revenue on my own lease and employees that I can’t see a way to buy the property and certainly don’t have the revenue for getting approval for a loan. Even if I could, how would I have time to manage the property? It is a full-time job to operate my own business.”
Commercial Academy has helped business owners who have expressed these same concerns and find the way to purchase their business complex, and the revenues brought them a substantial return after paying a management company to operate and maintain the facility on their behalf.
While you may not think you have the financial wherewithal to purchase the office complex, many business owners make such an investment without using their own money. Here are several strategies that we teach at Commercial Academy through our seminars and courses.
- Obtaining a Loan – Yes, we were listening when you said you did not have the financial portfolio to secure a loan. That may be true if you were buying a residential property to live in, but if you are buying a business complex, the bank and lenders will look to the cash flow that the complex is generating each month as the foundation for granting a loan.
- Seller Financing – This is when the current owner of the business complex finances some or all of the purchase for the property. Seller financing for a property can provide benefits for both buyers and sellers. It can give buyers access to more capital to buy the property and while creating tax incentives for the seller.
- Partners – If the opportunity is a good one, there are experienced investors and developers who will provide the financing you need.
It is vitally important, for any of these options, that you understand the best way to structure the deal to allow you to minimize the risk and maximize the profit.
Commercial Academy has helped thousands of entrepreneurs find creative ways to acquire business complexes and strip malls. They can show you how owning the complex offers substantial tax benefits and is a means to help finance your retirement or the sale of your primary business when you retire.
If you want to “buyback” the freedom you thought you were getting when you started your own business, ask one of our coaches how Commercial Academy training can help you.