Should I purchase commercial RE to rent back to my physical therapy practice?
I own a PT practice in San Diego - currently renting a 1890 sq ft space @ 2.69 per sq ft, been here 13 month and have 2 more years left on the lease, we're reaching capacity of our space and are considering finding a larger space. Should I look to purchase a new space? I've been looking to invest in a 2nd residential property in SD but the idea of being my own landlord is more exciting. Can I rent the commercial space back to my company? Pro's/Con's? I like the idea of being able to sell my business in years to come with a physical space.
[{"id": "i93ve6r", "text": "The answer to this question is almost always yes. Buy the building and have your business entity rent from you.", "replies": [{"id": "i95iwkw", "text": "Sir what do you do? You know your stuff?", "replies": [], "depth": 2}], "depth": 1}, {"id": "i93wbi1", "text": "Great way to build up a retirement nest egg that is separate from your business. \n\nSay you sell your business, now you have a building you can lease out. Also, a bit ironically, CA prop tax laws are advantageous to long term ownership. \n\nCould potentially look at a SBA loan for the building acquisition.", "replies": [{"id": "i93x0zd", "text": "This is awesome. I'm very much a newbie to commercial RE and need to do some research to learn about it and the process to getting the loan etc. Any reliable resources you could recommend?", "replies": [{"id": "i93zkco", "text": "Honestly, your best bet is to consult a broker. Since you\u2019re going to be an owner, I\u2019d consult an investment sales broker so he can guide you through the acquisition process. He should also have contacts with banks / financial partners. Try to find who has helped other PT practices buy their own building. Many times these guys/gals are specialized in niches. So there might be someone that specializes in Physician/dental/PT practices. They\u2019ll be your best friend through this. Don\u2019t try to skimp out on a good broker if you\u2019re a newbie at real estate. In the long run, it\u2019ll cost you more.\n\nOne thing, reach out to the bank your practice banks with, they might be willing to give you better terms on a loan than a bank that doesn\u2019t know you. Local credit unions are also a good idea for this type of purchase. \n\nReach out to a real estate attorney and draft a lease that will allow you to sell/market the building. This is super important. You need a market lease with market terms since the lease is really is what adds value and why investors buy real estate. Right now, imo, the capital markets (buyers) would eat up a NNN (tenant pays everything) 10 year lease with CPI annual adjustments. One caveat,  you have to do what is right for practice so find out what is best in terms of annual adjustments. I\u2019m just giving you my 2 cents as a real estate guy so I\u2019m biased. \n\nFeel free to PM me. \n\nAdventures in commercial real estate is amazing as a learning resource.", "replies": [{"id": "i95nu6s", "text": "They should be working with an office/medical broker with buyer rep experience.  This is not something an investment broker would be probably even interested in doing.  The bank, CPA and a good real estate attorney will make sure everything else is covered.", "replies": [{"id": "i95owqf", "text": "fair point. I\u2019ve seen them represent buyers and sellers but you\u2019re correct. They should focus on someone with buyer rep experience.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "i9405m8", "text": "Lots of people do this. I rent my office from an LLC that I have ownership in. No idea about CA laws or how it would impact your taxes. \n\n\nSo you\u2019re paying $425/month in SD? Typically I see commercial real estate prices listed as per sq ft per year. I\u2019m assuming in HCOL city like yours that\u2019s per month so $32.28/sqft/year?", "replies": [{"id": "i942kbp", "text": "CA typically quotes $/mo", "replies": [], "depth": 2}], "depth": 1}, {"id": "i94o21v", "text": "from a business standpoint, this not only gives you some sort of return, but you'll have better location stability and control over your costs.", "replies": [], "depth": 1}, {"id": "i95tpdo", "text": "I rep owners and this is quite common. Essentially the tax system in the US favors property owners. Not to get into any detail or tax/retirement advice but there are multiple tax advantages you can explore. You will need an experienced CPA to handle. Quickbooks and the like is not enough. Do not try it yourself. \n\nThe best advice I can give is to have a CPA that is experienced with commercial real estate on your team and work on finding a decent broker. A residential agent from your BNI group is not going to cut it. Ask other PTs you trust if they have used and agent before.  Look for those that specialize in the type of building you want - you want a retail building get a retail broker, you want a medical office building, get a medical broker. You want an office building then get one of those.", "replies": [{"id": "i967exb", "text": "Appreciate this advice everyone! What are some of the tax benefits? Any links/resources you could share to help me learn some?", "replies": [], "depth": 2}], "depth": 1}]