Business owners should consider financing owner-occupied commercial real estate. There are several benefits including lowering costs and lessening potential constraints on operations.
There are several classifications. These include:
- Special-purpose properties. These are generally built for unique uses. They have limited marketability for the special purpose the property was originally intended for.
- Healthcare, agriculture, and retail are three other property types.
- Manufacturing facilities and warehouses are classified under industrial.
- There are also office uses such as commercial condos and office buildings.
Understanding the different uses is the first step. It’s also helpful to have a list of the benefits of this type of property. These can often sway business owners away from renting and they include:
- Stable Costs. Renting a place for business use can be a variable. There can even be issues with cash flow when it goes up. Owner-occupiers reduce this risk.
- There are tax advantages to the owner-occupied commercial real estate model. For example, renting doesn’t provide many bonuses when it comes to tax time. However, commercial owners can deduct building expenses and interest on a commercial real estate loan.
Owner-Occupied Commercial Real Estate
Another key difference is important. Commercial properties are classified as either investment or owner-occupied. An owner-occupied property can finance up to 100% of the purchase price. An investment property allows for either 70% to 80% of the acquisition price. Or 65% to 75% of the property’s market value.
We like to suggest owner-occupied commercial real estate financing is the right move for businesses who want to use at least one-third of the location for the enterprise.
