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Most business owners often wonder if they should consider owner occupied commercial real estate or lease. There are many factors to consider in making a decision like this. For new business owners who are uncertain about their future space needs and who want to maximize their cash flow to grow the business leasing maybe the best option. However for seasoned business owners with strong financials, a clear picture of future growth, and have the ability to take advantage of ownership tax benefits owner occupied commercial real estate might be the best option. Below are a few advantages to consider when buying commercial real estate.
Advantages of Owner Occupied Commercial Real Estate
- Low Financing Rates – the mortgage interest rate is a big part of the costs. Rates are still low allowing your commercial purchase to be less than leasing however obtaining financing can be challenging unless you have spotless finances and a great business plan supporting the case to owner occupy commercial real estate.
- Equity Appreciation – As you gain equity in your business real estate it becomes an asset that you can leverage later on. As you approach retirement you can either sell the property or lease it out to produce an income stream.
- Cash Flow – If you have enough space to rent to other tenants then you can create cash flow to help pay down your mortgage and offset the cost of your commercial investing.
- Tax Advantages – Owner occupied commercial real estate allows you to depreciate the asset, write off the yearly mortgage interest and enjoy tax deductions.
- Section 179 of IRS Tax Code – Allows you to deduct furnishings and equipment the same year they are purchased.
- Cost Segregation – allows you to depreciate building components such as lighting and wiring over 39 years which can help with offsetting building maintenance
- 1031 Exchange – Investments used in business or trade can be sold and the proceeds used to buy a similar or like and equal or higher value commercial property within 180 days of the sale and not incur any tax consequences.
Before buying owner occupied commercial real estate consider consulting with your CPA or financial advisor so you completely understand how it may or may not benefit you. If you have any questions or are interested in finding commercial real estate in Austin for sale feel free to contact us.
