Real Estate Options: When Business Space Outgrows the Budget

Real Estate Options: When Business Space Outgrows the Budget

Real Estate Options: When Business Space Outgrows the Budget

Profitability, productivity and growth define a business’ bottom line. Challenging economic times, however, can thin that line and even break it over time. Cutting some expenses can actually cost a business more in reduced services, customer dissatisfaction and employee turnover. Yet the challenge remains: How can business owners cut costs and restore profitability, productivity and growth? Commercial real estate offers creative solutions that, used wisely, can fatten bottom lines, provide access to essential capital and keep you just where you want to be.

Common Dilemma

Investment in space is the most common challenge business owners face. While some overestimate needed square footage, many others miscalculate total ownership costs like property and usage taxes, utilities, insurance, maintenance, repairs and inevitable updates. For others, shifting markets and rising costs of doing business outstrip profits, consuming capital needed to both pay the bank note and reinvest in the business. Many of the obvious options, however, are unpalatable to business owners:

  • Sublet or share a portion of space to another business.
  • Sell, and move to a less expensive property.
  • Lease your property to another business.

Ultimately, the ratio between a property’s annual net operating income and yearly payments of principal plus interest will clarify whether cash flow supports a property. Anything less than 1:1 falls short of breaking even.

Location, Location, Location

A business’ location is a primary determiner for success. Your accessibility, visibility and proximity to customer traffic provide that needed edge over competitors. At the same time, out-of-date storefronts, lack of amenities, sagging roofs and cracked parking lots translate into perceptions of inferior services and products. Many business owners find themselves struggling between restocking inventory or upgrading building infrastructure to install the automated systems customers count on to buy it.

Considering Ownership Versus Business Properties for Rent

Ownership ties up vital capital, and 20- to 30-percent down payments are just the start. Monthly mortgage installments and property responsibilities can easily absorb the cash flow needed to sustain a business. Property is a capital asset, so while you can depreciate the building over time, you can’t deduct it or the accompanying land as a business expense. Even when business property owners sell, transactions often involve seller financing, with payments over time contingent on a buyer’s success.

Leasing costs per square foot per year are typically a fraction of purchasing costs and are also deductible. Cash flow is available for investment, so you can grow, expand or – in time – move to an even larger or more visible location. Best of all, leasing from a reputable property management firm lets a business enjoy property benefits available through their lease, such as onsite maintenance or upgrades, without ownership responsibilities.

Freeing Up Capital While Maintaining Stability and Security

Billeaud Companies wants business property owners to know that they have viable, productive financial options that will let them keep their business just where it is. If you’re committed to retaining your location yet facing these financial dilemmas, your solution may lie in negotiating with a reputable property management firm like Billeaud Companies that will buy the property and lease it back to you. You can probably reduce your monthly payment, stay exactly where you are without any interruption in operations and put your equity where you need it most – in the business itself.

Not an Owner? Business Properties for Rent

If you’d like more information on sell-lease arrangements or are looking for business properties to rent in Louisiana, contact Billeaud Companies through our website, or call 337.837.5046. We’ve been serving southern Louisiana for over a century and value our role in developing Broussard, Lafayette and the surrounding Acadiana area. We can help you find your perfect business property solution.