Why You Should Own the Building Your Gym is In

Our hero today is Paul Neal, owner of Vantage Point Commercial Capital and a trailblazer in empowering business owners to create wealth, autonomy, and control by owning their commercial space. In this episode, he unpacks how to do this by purchasing the building your business operates in — or buying your own commercial property.

Benefits of Owning Your Commercial Space

When you operate a fitness business, the space you occupy becomes more than just a location – it turns into a cornerstone of your brand. Owning your commercial space rather than leasing can offer significant advantages. Let’s delve into the key benefits of ownership.

Wealth Accumulation

Owning the building enables you to build equity over time. Unlike paying rent, where the monthly payments disappear into the landlord’s pocket, a mortgage payment improves your net worth. As property values increase, so does your asset, contributing to your long-term wealth.

Control and Autonomy

Ownership grants you full control over your space. You won’t have to deal with sudden rent increases or risk displacement if the landlord decides to sell the property. This control translates into the freedom to customize and improve your space as your business grows.

Tax Advantages

Real estate ownership comes with various tax benefits. Mortgage interest and property taxes are often deductible, reducing your overall tax liability. Additionally, depreciation allows you to write off part of the property’s cost over time, further boosting your financial health.

Leverage for Business Growth

Owning commercial property can serve as leverage for securing additional financing. Banks and lenders generally view property ownership as a positive indicator of financial stability, making you a more attractive candidate for business loans and credit lines.

The Risks of Leasing Commercial Space

Renting might seem like the more straightforward option, but it comes with its own set of pitfalls.

Vulnerability to Rent Increases

When you lease, you are at the mercy of your landlord regarding rent increases. Unexpected hikes can strain your budget, potentially leading to a financially unstable situation for your business.

Risk of Displacement

Your landlord has the authority to sell the building at any time. If the new owner decides not to renew your lease, you could find yourself scrambling for a new location, which is both time-consuming and costly.

Practical Steps to Acquiring Your Building

Transitioning from renting to owning requires careful planning and financial preparation. Here are detailed steps to guide you through this process.

Planning and Financial Preparation

Evaluate your business’s financial health before diving into real estate investments. You’ll need stable cash flow and a good credit history. Organize financial documents and consider working with a financial advisor to understand your options.

Understand Your Growth and Client Base

Assess your business’s growth trajectory and client base. Will the location support your expansion plans? Is it convenient and accessible to your target audience? These considerations are crucial for making a sound investment.

Organize Financial Documents

Gather all necessary financial documents, including tax returns, income statements, and balance sheets. Lenders will require these to determine your eligibility for a commercial mortgage.

Exploring Real Estate Options

When it comes to finding the right property, you have multiple options:

Buying the Current Space

If you have a great relationship with your current landlord, they might be willing to sell the property to you. This can simplify the transition and save on relocation costs.

Finding an Existing Property

Explore locally available commercial properties that fit your business needs. Consult with commercial real estate agents who can provide access to off-market deals and valuable market insights.

Building a New Property

Building a new space from scratch allows for complete customization to match your business requirements. Although more expensive upfront, it ensures that the facility aligns perfectly with your vision and operations.

Leasing to Other Businesses

Offset Costs

If the property is larger than what your business needs, consider leasing part of it to other businesses. This can help offset mortgage payments and property maintenance costs, providing additional revenue streams.

Tenant Management

Commercial leases are generally longer—between 3 to 7 years—compared to residential leases, which are usually one year. This means lower tenant turnover and reduced vacancy risks. Commercial tenants are also easier to manage as they typically require less oversight.

Financing Your Purchase

Down Payment Misconceptions

One common misconception is that you need a substantial down payment to purchase commercial property. However, there are financing options available that require as little as 0% down. This lowers the barrier to entry and makes property ownership more accessible.

Loan Types and Commercial Agents

Commercial real estate agents are essential for navigating this market. Unlike residential agents, they specialize in commercial properties and can connect you with off-market opportunities. Additionally, they can advise on various loan types, such as SBA loans, which are often favorable for small business owners.

Managing the Property

Lease Types

Understanding different lease types is crucial. Triple net leases, for example, can shift the responsibility of property taxes, insurance, and maintenance costs to the tenant, reducing your liability.

Property Management Services

For those who prefer a hands-off approach, property management companies can handle tenant relations and property maintenance. This allows you to focus more on running your fitness business rather than dealing with property issues.

Conclusion

Owning the building your FitBiz operates in provides numerous advantages, from financial growth to operational control. The transition requires careful planning and an understanding of your financial health and business needs. Whether you choose to buy your current space, find an existing property, or build a new one, the benefits of ownership far outweigh the risks associated with leasing.

For more detailed guidance, Paul Neal offers a free book titled “Unleash Your Business” on his website ownyourbuildingnow.com. The site also features a free assessment to determine your readiness for purchasing a building, and you can schedule a discovery call for personalized advice and funding facilitation. Start your journey towards property ownership today by visiting ownyourbuildingnow.com.