Following are the Benefits of Owning Commercial Property – Spot72.com
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Spot72.com – Most business owners eventually have to face the problem of whether to buy or rent their office space. There are many factors to consider in making this important decision.
For new dental practitioners who are uncertain of future space requirements, and who want to ensure maximum cash flow as they grow their business, hiring may be a wise choice.
But for new or experienced owners with a strong financial profile, a clear picture of future growth, and the ability to take advantage of property taxes, purchasing Commercial Real estate can provide a solid foundation from which to grow a business.
Here are a number of potential advantages to owning commercial property:
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HISTORICALLY LOW PRICES
Commercial properties for dental practices are much more expensive today than they were before the recession. In some areas, it may ultimately be less expensive to buy and outfit commercial real estate than it is to rent and build-out space.
While property values are not likely to increase at the aggressive rates seen from 1998 to 2005, it is certain that at the current lower prices, both residential and commercial real estate values are likely to appreciate over time. The property owner will receive the full benefits of the award.
PROFITABLE FINANCING RATE
The most significant price of buying real estate is the mortgage rate. Today, prices for the purchase of commercial real estate continue to be at a very low time, ultimately saving significant funds as you pay off a commercial mortgage.
However, financing can still be a challenge, so it’s important to keep a clean financial profile and be prepared with a comprehensive business plan that makes the case for your practice. Also, consider working with a lender…..specialized in dental practice financing…..and understand your specific needs.
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As you build equity in your real estate business, it becomes a more valuable asset that you can further leverage your business without putting yourself at risk. This gives you greater flexibility in managing your business growth.
It also gives you additional options when the time comes to retire. As a commercial property owner, you can sell the practice and the underlying property immediately upon retirement, or sell the practice only and rent the commercial property, which generates an ongoing stream of income.
CASH FLOW OPPORTUNITIES
If you buy a commercial property that has space for tenants, you have the opportunity for additional cash flow through rental income. You can use the renter’s income to help pay for the purchase of the property, thereby offsetting the cost of your investment.
However, it is important to remember that owning a tenant involves property management responsibilities that may detract from attending to your core business to treat patients.
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Having your practice allows you to sort your assets while writing off all mortgage interest paid during the year. You may also enjoy the benefits of several tax deductions designed for business or property owners:
- Section 179-IRS Tax Code Section 179 allows deductions for equipment and furniture purchases that were put into service the same year that they were purchased. Over the last three years, Congress has awarded a generous deduction of $500,000, which can be a significant contribution towards delaying the cost of buying a property.
- Cost splitting — this reduction method allows you to sequence buildings and components, such as wiring and lighting, over 39 years, covering the cost of maintaining the building for a significant amount of time.
- 1031 Investment Property-used in a trade or business can be sold and funds applied towards the purchase of the same or like property within 180 days of sale, without any tax consequences REAP. The property purchased must be of equal or higher value to avoid tax penalties. This gives effect to a practitioner to transfer his practice to a larger facility as the practice develops, without being hindered by tax penalties.
Before buying commercial real estate, be sure to consult with a CPA or financial advisor to fully understand how the purchase will affect your particular circumstances.
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