Buying or renting commercial Kisumu real estate, such is the
question many business people ask themselves around the 1st of the month, when
comes the time to write their rent's check.
With the interests rates being what they are and prices
being affected by the commercial paper crisis, the answer might very well be
yes if the right property becomes available and you can afford a relatively
important cash down.
Owning commercial property
in Kisumu real estate does have its advantages.
Choices: as the owner, you can decide whether to
select a building that matches your current needs, has enough room for future
expansion or maybe is large enough for you to lease parts of it.
Equity: every
month, your payments are applied to paying down your mortgage and building some
equity which could be useful eventually to secure a loan for new equipment, to
finance an acquisition or simply as an asset.
Appreciation: not
withstanding any unforeseen occurrences, your building should appreciate with
time. This appreciation could, just as the above mentioned equity, be used
to get better financing conditions.
Power: as the landlord, you are the person in charge
of deciding how to finance the building, picking the tenants, choosing the
decorations, selecting entrepreneurs for the work to be done, improving the
building. You even have control over
your rent's rate.
If it's so great, why
doesn't everyone do it?
The main reason why not everyone owns the commercial space
they're using is that, in real life, thing don't necessarily go exactly as in
late night's infomercials…
You can buy commercial real estate with no money down,
especially if it's because your money is bringing you more in another (safe)
investment.
On the other hand, if it's because your cash flow doesn't
allow you any flexibility and that you don't have anything aside should things
go a little unexpectedly, then you may want to seriously consider all the
ramifications of the deal you are considering.
Your business' cash
flow's growth stage.
Is your business bringing you comfortable and predictable
income which you are looking to invest or would spending an important part of
your income hinder any growth possibility for the near future?
Will you be able to afford any substantial and sometimes
unexpected expense should you have to do unexpected maintenance on your
building?
Usually, a commercial property will require a 15 cash down
which, in some cases, can end up being a lot of money.
Don't forget you also have to factor in the price of
insurances, taxes and legal fees. Due to
the importance of the figures involved in most commercial real estate
transactions, I recommend you surround yourself with adequate representation
meaning: a real estate agent with
experience and a positive track record as well as financial and legal advisers.
You make your money when you buy, not when you sell.
One last but extremely important factor to consider before
making your decision is that you make your money when you buy but realize it
when you sell.
Paying more than the fair market value, not taking into
consideration your cash flow factors (mortgage, interest rates, insurance,
taxes and repairs incoming rent, other income possibilities such as parking for
example) or letting your feelings dictate a purchasing decision may negatively
affect your exit strategy for year if you are not careful.
What you should
remember.
So we looked briefly at the different aspects of buying a
commercial property. Remember the
advantages of being a landlord are:
1.
Choices
2.
Equity
3.
Appreciation
4.
Power
5.
Make sure you carefully evaluate your future
cash flow.
6.
Purchasing the property won't hinder your growth
strategy.
7.
You can afford unexpected and sometimes quite
expensive repairs should they be needed.
8.
You can afford the cash down.
9.
Get advice from a professional financial advisor
about your tax situation.
10.
Get advice from a professional law adviser.
11.
Get advice from a professional real estate
adviser.
12.
Avoid free advice as it often end up being the
most expensive kind.
13.
Evaluate the building's cash flow.
14.
Make sure the purchase makes sense even without
appreciation.
15.
Find a reputable Kisumu real estate specialist.
