New York Business & Investment Property Attorney
There are many benefits for company owners and entrepreneurs who buy or invest in commercial property in New York City. As one of the nation's most competitive commercial real estate markets, business tenants often find they have to jump through many hoops to negotiate workable leases with landlords. As an alternative, being an owner instead of a tenant can remove many restrictions, and confer a number of valuable, long-term financial advantages. Speaking with a knowledgeable New York attorney who has extensive experience in investment properties will provide you with the most comprehensive information you will need before buying property.
The following is a sampling of the type of information you can learn from speaking with Rubin Ferziger.
Here are a dozen of the most important reasons to own your space:
- Freedom from larger than anticipated rent increases
- Complete control over space design and décor
- Avoiding business disruption from having to move at lease expiration
- Protection from obnoxious landlord behavior and resulting disputes
- Ability to have tenants and collect rents to cover mortgage expenses
- Depreciation and other tax benefits, including potential for local tax exemptions if you buy in an economic development area
- Building financial equity in the property through appreciation
- Use of the equity as collateral for purchase of other locations
- Capacity to recoup investment by selling or renting the property if your business outgrows the space
- Covering future expansion by purchasing larger premises and renting out additional space until needed
- Additional cash flow from rents after monthly mortgage, tax and maintenance payments
- Potential for tax-free exchange of property for another similar parcel
In some instances, depending on the current market and your capacity to make a purchase, it may actually be less costly to buy than to rent on a monthly basis. That being said, there are several particularly important things to be aware of whenever you buy commercial real estate. Here they are...
Five Critical Guidelines When You Buy Commercial Property in New York City
Consider the customer. If the property is for retail use, only buy where there is known customer traffic. This may seem obvious. However, when you are looking to buy and find a good deal, it can be tempting to justify the purchase even when the location isn't completely ideal for traffic. Don't be seduced – customers are the lifeblood of the cash flow that pays your mortgage.
Make it easy for customers to buy. You then have a greater probability of success, and can use the profits to pay for and own your location. Sometimes a distance of even one block, or being on the wrong street, can make a big difference.
This guideline is also relevant to office, factory or warehouse locations. There may be an issue with your current personnel being able to get to work conveniently enough to retain them. Good employees are as important as good customers.
"Up to code" takes on a new meaning. New York City has hundreds of property codes and regulations that commercial property owners must comply with. If you buy without thoroughly investigating what violations may exist, and what the cost will be to repair them, you may be in for a nasty, expensive surprise that could put your business in jeopardy.
If you intend to rent to others, you will now be a landlord, and have obligations to provide space that meets building code requirements. Otherwise, you may be in for a lawsuit and lost rental income.
Look at your exit plan now. If you are going to buy a commercial property for your business, it's a good idea to have at least some general parameters for your future plans. Do you intend to grow your company to a point that will require more space? Will you then sell, and buy or rent another location? Or are you thinking about keeping this building to generate passive income for your retirement?
These considerations may alter your acquisition and financing plans. If you want to hold on to the property long-term, you may want to assume less risk. If your focus is on business growth, you may be comfortable with more risk, such as buying a larger building.
- Don't get greedy. A commercial loan package to buy real estate may allow you to include remodeling costs. Some business owners use this as an opportunity to do a level of remodeling that is unnecessary, and doesn't deliver a corresponding financial benefit from increased profits. If sales take a dip, you might not be able to service the extra debt.
Every buy is an eventual sell. This principle is related to the previous two, but is a bit different and important enough to be considered by itself. At some point, you will likely want to sell the property. Think about your future buyer now. Who is the probable purchaser? The rule here is: Don't buy a property that will be hard to sell. You don't want to be stuck if you need to liquidate.
This is also a good reason not to invest in unnecessary improvements. A prudent buyer may feel the space is overbuilt, and not want to pay you a premium price. Then you may have to lower your demands and take a loss on what you spent for the extras.
Buying business property is a complex transaction, and takes the coordinated efforts of an experienced real estate lawyer and many other professionals. Of course, there are many other considerations than those just mentioned. Your best bet is to assemble a team of qualified advisors to assist you, since this transaction may be the largest capital expenditure your business will ever make.
For additional insights and valuable guidelines from Rubin Ferziger's decades of experience as a real estate lawyer, see the firm's publication How to Maximize Your Profits with Real Estate Investments.
If you need legal assistance with buying commercial real estate, please contact the Law Office of Rubin Ferziger today at 212-490-8585.