Corporate real estate misconceptions are prevalent, which is scary because buying a building is never a small, inconsequential undertaking. Making misinformed real estate decisions will cost you in ways that (chances are) you’re already worried about. Making the right calls results in a property investment that slingshots your company forward in capital and performance.
This guide will illuminate some common real estate myths, and then bust them. You’ll have a better idea of which direction to pursue as you contact real estate professionals to exchange property.
#1: Is Real Estate Ownership Best For Corporations?
With real estate, ownership means you’re responsible for the entire property — and the entire maintenance bill, too. This is an added expense.
Furthermore, real estate is an illiquid asset, meaning you won’t be able to quickly exchange it for cash without losing a sizable chunk of its worth. Instead, it takes a relatively long time to exchange real estate; assuming an interested buyer lands in your lap, there’s still a ton of due diligence, paperwork, and financing.
Real estate and depreciation go hand in hand. Every year you own a building, it gets older and more worn out. While you can argue this adds character, it also adds an expense for your corporation. The CRA sets the depreciation rate of each building type; overall, building owners lose between 4 and 10% of their property value each year.
All this is to say that for a corporation with cash flow and profit needs, owning real estate can be a hindrance.
#2: How Should Corporations Approach Selling Unneeded Buildings?
First things first, your property is legally considered “idled” when no one has used it for a month consecutively. This often happens when owners shut down a plant or move their warehouse to a new location.
Should a corporation sell off a building when it’s no longer in frequent use? Should that selling process be actively looking for a buyer or putting up a listing and turning your attention elsewhere?
No, don’t settle for passively selling your company building. Intentionally determine who your potential customers are. Intentionally set up something they have every reason to buy.
When it comes to your products and services, you painstakingly present them as the best and easiest decision your ideal customer could ever make. Do the same with your empty building until it gets leased.
Since you’ve already invested in the asset and gotten your use out of it, consider how it can still generate profit for you by being useful to someone else. You likely can name a hundred things you’d do with that extra cash flow.
#3: How Do I Determine How Valuable My Property Is?
We’ll cover that in part two of corporate real estate pitfalls, which is out now.
When you’re making big decisions with your money, getting personalized advice makes all the difference. Contact us for a free consultation call with an expert in real estate, law, corporations, or finance. You’ll have the stage to share your circumstances and goals before we start working on a plan with clear steps you can take.
