6 Reasons Commercial Real Estate is Crucial to Opening a Franchise
When starting a business, there are a lot of things that you need to consider. But, did you know that commercial real estate is important? This is the type of real estate that is only used for business purposes- you could never live in this kind of space.
Commercial real estate can feel tricky, especially if this is your first business venture. MMB Management offers franchise consulting and other types of helpful services that will give you the confidence you need to have a successful business.
When opening a franchise, you are going to be busy considering all of your options for location. A commercial real estate agreement might end up being your best option. Here are the 6 main reasons why:
1. You get Tax Advantages
If you own commercial real estate, you can get some benefits come tax time. This is because well-located real estate becomes worth more over time, but on your taxes, they are considered to be losing value.
This means that one day you can make more money selling the building, but the taxes on it decrease every year as well. In other words, the amount you are spending on taxes and putting towards the building balances out with the amount the building is worth- you can break even or be better off after owning a CRE building.
Leasing a commercial space will also be deductible on your business’s taxes, but only the interest on a mortgage payment is deductible when you buy the building. Overall, you can deduct more from the monthly lease payments.
2. It Costs Less to Move In
It costs much less for you to move into a leased space than a space that you had to pay to own. When you are also just starting with your business, this is a huge advantage, as you might not have a lot of money on hand to buy the entire building and all of the rights to it.
Leasing commercial property typically requires a security deposit and the full payment of the first month of rent- significantly less than buying the building outright. You can also often get moved in much sooner, right after you sign the agreement in fact.
Someday, you might have enough funds to buy and move your franchise to a building that you own, but right out of the gate, leasing a commercial space is going to be your best option.
3. Monthly Occupancy Rates are Cheaper
Leasing a space is better on a month to month basis than buying the building. The interest costs on a mortgage can be higher, depending on what you worked out with the group you bought it from.
If you plan on staying there only temporarily, then buying the property would not be a good idea. The monthly rent payments would end up being severely lower than the cost of buying- which is crucial to someone who is just starting up their first franchise.
Plus, landlords will often have to add and repair fixtures and appliances in the rented building. This can save you some time and money.
4. Greater Flexibility in the Future
If you need to move your franchise in the future and you own the building it is in, you are going to need to set aside a good amount of time to sell it. While you are working on that, you are not moving your franchise or have it in a running state.
When opening a franchise, you will want to think about if you are going to need to move the location in a few years. If you suspect you are, then buying the building it is in would make everything a lot more difficult for future you.
Leasing the space lets you choose what to do when that agreement expires. You can move out or resign on after trying to get a better deal for the franchise- overall, renting commercial real estate provides you with a lot more flexibility. Plus, when you leave, the landlord finds someone else to rent the space, not you.
5. You are Not in Charge of Repairs
When you go with commercial real estate, you are not responsible for the repairs to the building- the landlord is. You do not need to throw money into the building to keep it functional or hire others to do it. The landlord should be making repairs or upgrades as part of your lease agreement.
Many franchise owners find this to be to their advantage. When opening a franchise, there is already a lot on your plate- you do not want to also be worrying about the state of the building on top of that. Your landlord should be keeping the building in working order and should be in charge of making any repairs.
6. We Can Offer You Franchise Consulting
MBB Management offers a variety of business management services. One of them being commercial real estate consulting. If you decide that CRE is going to work for you and your franchise, then we can help you lower the cost and get the best possible value from the deal.
This is crucial to opening a franchise. If you want everything to go smoothly for the duration of your venture, then you should be sure that you are able to negotiate and find agreements that are tailored to you.
As you can see, there are many reasons as to why you should choose commercial real estate when you open your franchise. It is overall more cost-efficient than buying the building outright and we know how to help you navigate a complex lease agreement.
Buying and running a franchise is no small task, and saving funds at the beginning of the start-up process is crucial to the survival of the business. Commercial real estate will give you more cost-efficient options than the alternatives, so you can be sure to put the extra money back into your business.