BeverlyMolfino

What should I consider before purchasing a commercial property?

How can I insure that income from a commercial property will cover expenses?

How can I avoid becoming overwhelmed by the work of owning and managing my commercial property?

What are the tax implications for owning a commercial property?

What should I consider before purchasing a commercial property?

---

Before searching for commercial real estate, it is important to determine your goals. What are you looking for in a commercial property?

Business Location

You may have a specific use in mind for your commercial real estate purchase. Perhaps you would like to open a restaurant, store, or art gallery. Buying a commercial space can be more beneficial than renting, because as the property owner, you can build equity, manage the property yourself, and renovate as you like, without restriction from a landlord. An added bonus is that in Hawaii, and especially on the Big Island, there is a need for products and services. Find your niche and make a smart real estate investment while doing it!

Investment

Purchasing commercial real estate, whether it is for your own business or not, is a smart way to invest your money. Renting out your commercial space can cover expenses while you are building equity in your property

Make Your Plan

Investing in commercial real estate requires making smart decisions and creating a thorough plan, preparing for potential problems and unexpected expenses. Real estate appreciates slowly, even in Hawaii. Be prepared to own your commercial property for a long time by planning well before making a purchase.

How can I insure that income from a commercial property will cover expenses?

---

You can never be sure that a commercial property will pay for itself. Any investment carries some risk. Before financing your investment, either with a mortgage or your own capital, you need to know exactly what you can afford and what risk level you are comfortable with. I can help you research the market to determine whether average rental rates in any specific area can support the expenses of the property. Expenses to consider are loan payments, taxes, insurance premiums, and repair and maintenance. Doing a little research beforehand can save you a lot of money in the long run.

How can I avoid becoming overwhelmed by the work of owning and managing my commercial property?

---

Before viewing commercial properties, consider your skills and the time investment you are willing to make as the owner of a commercial property. The condition of the property and the number of potential tenants are the kinds of things you should consider before buying a commercial property. If the building needs a lot of work, it might not be a problem if you have the time and skills to make a fixer-upper shine. On the other hand, you could be stuck paying a contractor a lot of money if you are not prepared for the work a building may require. Paying a contractor is fine, if you have budgeted for the work the building needs. Also, an apartment building with 10 units may be ideal for an outgoing, efficient person who has experience managing property, but perhaps a building with 1-3 units would suit you better. Again, if you have included it in your budget, you can lighten your load by hiring a property manager to take care of everything for you. Only you know what you are capable of and willing to do. I can help you estimate the time, skills and money required to manage a specific building, but you need to know your limits in order to purchase the commercial property that is right for you.

What are the tax implications of owning a commercial property?

---

I strongly recommend that you consult an accountant familiar with Hawaii tax law and real estate investment to ensure that you structure your investment to maximize any tax benefits available to you. If you do not know of a good local accountant, I can refer you to several.