When Is the Best Time to Buy Commercial Real Estate?

October 10, 2018

Many entrepreneurs know their long-term business goals need to involve real estate investment. Real estate investments are a stable way to grow a business’s value with assets you can count on to provide a return. Whether you are investing in your own facilities to eliminate overhead expenses, purchasing investment properties to expand your company’s income, or looking to turn properties around after renovation, the right time to buy real estate hinges on a lot of different factors.

Commercial Real Estate Has a Seasonal Rhythm

Like residential real estate, commercial properties sell according to a seasonal pattern that favors warmer months. Though residential properties tend to revolve around the school year, there are more reasons behind business picking up during the summer. It is also substantially easier to move during the summer because the weather is more likely to be comfortable and there is no worry about slipping and falling on ice while making the move.

Weather acts as the same reasoning behind the boom in commercial real estate sales over the summer. However, as the school year does not inspire the timing of the commercial market, it stays relatively active during the spring and fall seasons as well. If you are looking to get a great deal on a property, it is worth noting that March through August stands as the best time due to competition from other buyers. After that duration passes, demand begins to fall, with January being the lowest point of the year.

Timing Your Purchase for Your Business

Timing your purchase to find the best selection and price in the market is important. However, it does not mean anything if your purchase happens at a time that does not work for your business. Understanding when to go ahead and make a big property investment is a process of fully understanding your business’s status and likely growth trajectory. Use these simple questions to help yourself evaluate if it is the right time to buy real estate:

Do you have the money in your business? Cost becomes important when you are shopping for commercial real estate. First, you need to have the money to cover the down payment. That means more than just having enough in your reserve accounts. It means doing a full accounting of your incoming and outgoing money over the next several months to make sure you do not need that money to cover other expenses.

Are you prepared for the increased monthly overhead? Most commercial properties are bought on financing, making it important to ensure you have the funds in your regular budget to absorb that payment without shortchanging your company’s other needed resources. It is common for this to be an issue even when companies have money for a down payment, so be sure to check your finances thoroughly before entering the market.

Will the tax write-offs help? If you have already streamlined your tax commitment as much as possible with leased properties, purchasing a building might not be a good investment at this point. If you will gain a tax advantage by changing the circumstances of your property ownership, then it is a great time to move ahead.

Do you need more control over your facilities? Sometimes, a company needs to make modifications to a property that the landlord will not go along with. When that happens, it is a clear sign that it is time to find facilities that you can control. That way, you know you can always reconfigure them as your company grows.

Will it help your company grow? Would a new building give you the opportunity to expand your operation in tangible ways that you can plan around? Will it provide a clear material benefit in the short, medium, and long-term? If it is a good long-term idea but would not help you expand in the short term due to the resources being taken away from other projects, then you might want to time your move a little differently to gain the best possible advantage by it.

Is a good building available on the market? You might have every other factor in place, from financing to timing the move to being ready to make full use of the space with expanded operations, but if the only properties that are available are not what you need, it is time to wait for the market changes before making a purchase.

Are you ready to be your own landlord? Buying commercial property means becoming a landlord even when you are not renting out part of your facilities to clients. This is because you have to start assuming the ownership responsibilities over the building. Increased maintenance costs come with the control ownership brings, and there are some trade-offs that make the overhead associated with ownership different from that of leasing, even if it saves you money. This is something to consider and be prepared for.

There are no secret real estate tips better than preparation, which is why reviewing this list and processing all these questions is your best way to know when you should buy a new commercial property. If you have decided that now is your time to buy, contact Unique Properties today to learn about current listings!

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