So You Want To Buy A Building? Follow These Steps

One of my favorite quotes is, “If you fail to plan, you plan to fail.” Having worked as a broker in commercial real estate for nearly 20 years, no truer words have ever been spoken. For Houston-area business owners that have an interest in purchasing a building, spending time identifying the type of building and requirements you’ll need can really pay off in the long run.

I often encounter small business owners who express an interest in purchasing a building but have a good amount of term left on their lease. They decide to table the discussion and put it off for a few years so they do not have to commit. But whether it is two or five years remaining on your lease, or you plan to build a new facility or acquire an existing building, there are several things to consider when the time comes to start the process of purchasing a new building.  The following suggestions should be very helpful:

  1. Location: Where would your company be best located? Consider where your employees and customers live and work and what sort of access you need to major highways.
  2. Identify a good CRE broker: Work with a reputable broker in the area and let them know how much time is left on your lease. They should be familiar with the market and can offer the best insight and guidance.
  3. Identify what type of facility you need: Consider how much space you’ll need, in addition to things like: office space, parking space, cranes, clear height, loading docs, power, sprinkler systems, and a yard for equipment. The more you visualize the move and what you need in a new facility, the better you’ll be able to prepare and/or narrow down the type of facility you’ll need.
  4. Work on the financials: Seek advice from bankers and financial professionals to clean up balance sheets, strengthen your ability to obtain financing when you’re ready, and advise on tax advantages of ownership. There’s nothing worse than finding the building fit for your needs, only to discover you’re not in a good financial position to move forward.
  5. Consider the exit strategy. Prior to investing in a new facility, make sure you consider an exit strategy in case you want to sell the property at a later date. While you may not know the price, try to identify who will potentially buy or lease the building in the future.

By following these steps, you’ll be able to achieve more advantageous lending terms, significantly reduce the costs of moving and reduce the amount of disruption in your business operations and avoid costly penalties associated with holdover rent. It is best to get with your trusted advisors (bankers, accountants, real estate brokers, etc.) to help create a strategy which will result in your successfully being able to purchase a property when the time is right.

The article was published in the Houston Business Journal print edition (July 21 – 27, 2017) on pg. 14. Written by Lee & Associates – Houston Managing Principal, Mike Spears, SIOR, CCIM.