Hello Bigger Pockets Community! I have been on the site for a few months now and was hoping to reach out for some advice on a unique CRE opportunity I have come across. I am looking into personally purchasing a single office space in a new South Austin office complex and renting it out to my own company. It is unique because I do not own the company, I operate a small branch of a much larger company and I am responsible for finding and renting my own office space. With office leasing being so high right now, I believe it would be better to purchase the space myself especially considering I know I will have a paying tenant for at least the first 3-5 year (Me!). My wife and I have a couple of residential buy & hold properties, but this will be our first venture into CRE. It has been tough find information regarding commercial investing on such a small scale, as the loan amount for this purchase would only be about $250k with the build out included. I am looking for any general advice in addition to recommendations for lenders or banks that deal in these much smaller commercial loans. Since I am a in a little over my head I would also love any recommendations for a good real estate attorney that could offer advice and help us navigate through this process.
Just some advice...that is a conflict of interest. Most companies will terminate for that. I have seen operations managers get fired for:
Paying lawn care to themselves or family
Paying cleaning bills to themselves or family
Paying repairs to themselves or family
When it comes to a job be on the up and up. That company is paying you to make business decisions in their best interest. Even with noble intentions it could be misunderstood. Most importantly you do not beed to do that. Your company could have recourse so your risk is greater. Even with permission from an owner or CEO I wouldn't do it.
250k is very small. Most commercial lenders will not touch anything under 2 million. Some have 5 million as a minimum. I have a few at 1 million for retail.
At your level you are talking local to regional banks and credit unions. The local banks close to the asset that can drive by it probably have the best rate and programs for something like that.
Companies expand and contract so this company you think might be around you might merge with another company or no longer be at this company in a few years.
Probably want to keep business and personal separate in this case. I personally like retail over office. Office tends to not be on road frontage so dirt is less valuable. Rent growth for office per sq ft on average is less than retail. Office the tenant if having hard times can move everything out over night with just desks,chairs,and computers. Retail it is harder to relocate.
I am just not an office investor and prefer retail. When the economy goes down office owners will contract and move back into their house, back warehouse space, or a shared space to save money. That puts a glut of inventory on the market even with no new office space developed and depresses rents per sq ft.
For retail if a destination type tenant most will need visibility and a store front to operate.
No asset class is without it's pluses and minuses. Retail condo's might be a way to enter the commercial investing space.
I wouldn't touch the company thing but that is just me. You might want to run this by legal counsel to see what they say about it and what could go wrong worst case scenario. Your job is to find the best lease and location for your company branch which might conflict with what rate you want to lease out at or the property you want to own. You could possibly be steering them in the process (unintentionally) to a property that might not be best for them but is better for you ownership wise.
No legal advice given.
@Leland Barrow Thank you for the advice. I discussed this with my corporate office and they have no issue with it. Essentially, instead of leasing my office from another building owner, I will be the owner and my company will be leasing it from me at a fair market value. I will discuss this with a real estate attorney as well just to be sure there are no legal issues.
@Joel Owens Thanks for your input as well. I really didn't start thinking about purchasing an office space from a "great investment opportunity" standpoint. I knew I needed to move to a new office and when I compared leasing to purchasing it appeared I could save my company and myself (rent is paid on my individual P&L) rent cost while paying down a personal loan on a commercial investment at the same time. It will also allow me to control rent year to year and not require me to get into a long term rental lease with yearly increases. I guess at the end of the day I need to determine if it makes sense from an investment standpoint, post using the space myself. Thanks again.
you could look into SBA funding for the acquisition, as it is for business expansion. That amount would qualify for sba7a. i work with sba lenders nationwide, message me if you have any questions.
Not sure this would actually qualify for SBA lending. To buy a property and rent it to your own business you have to own the active business as well. If they just want you to find office space that wouldn't fit SBA. What do you mean by a branch of the company? Is this like a franchise concept or what? There are some exceptions for SBA lending that could work like franchise locations or other but this is not sounding like that.