Why You Should Buy Real Estate for Your Small Business

When we set out to start or buy a business, our minds are often preoccupied with finding customers, building a team, and scaling growth. Little did we know, we might have a wealth-building machine on our hands—our very own business property.

How Can Owning Business Property Generate Wealth? 

By buying the real estate that your business operates on. You might ask, why would I buy the real estate? Here are four major benefits to owning your business's real estate: 

Control Over Your Business Environment

Owning your business's property means you control the physical aspects of your operations. When you rent, you're bound by your landlord and lease terms. Many businesses have failed because their landlord sold the building, and they lost their brick-and-mortar location. By owning the property, you prevent such disruptions. Additionally, if you're in a shared space, you get to choose your neighbors, ensuring compatible businesses reside alongside yours. 

Build a Secondary Asset with Minimal Capital Tied Up

If your business requires a physical space, you're going to pay rent anyway, so why not buy instead? Real estate loans are generally easier to obtain than business loans. Your business's cash flow should cover the debt service for the real estate loan, likely more efficiently than rent payments would.

Once you've built some equity, you have an asset you can leverage. Plus, real estate almost always appreciates over time, providing long-term value. 

Increase Your Business's Value

A small business is typically valued based on cash flow and risk. Owning the real estate helps you control both cash flow and occupancy-related risks. This dual control enhances your business's valuation. When you package the business and the real estate together for sale, you can command a higher purchase price for both.

Enjoy Tax Benefits

Ironically, while we save the tax benefits for last, they are incredibly significant. You can conduct a cost segregation study on your purchased real estate to secure a substantial upfront tax benefit. Additionally, self-rental income is one of the more favorably taxed incomes, offering ongoing tax advantages. 

When Not to Buy Real Estate for Your Business 

While the benefits are numerous, here some situations where buying real estate might not be the best move for your business: 

Your Business Doesn't Require a Brick and Mortar Location 

If your business can thrive without a physical location, there's no need to tie up capital in real estate.  

Unstable Cash Flow 

Businesses with inconsistent cash flow need flexibility. Purchasing real estate can strain finances and add rigidity, which may not be sustainable during cash flow fluctuations. 

Need for Flexibility 

If your business model requires moving to chase emerging markets, it may be better to rent. Owning property can make it harder to relocate quickly. 

Final Thoughts 

Owning real estate can significantly benefit your small business by offering control, building assets, increasing business value, and providing tax benefits. However, it's essential to weigh these advantages against your own business needs and financial situation. 

Ready to explore how owning real estate can benefit your business? For more personalized advice and expert guidance, click the 'Let's Chat' button and let's build your business's future together!