Buying your first commercial premises can be incredibly exciting. Finally, the business you dreamt up in bed one night might start to look tangible. But what happens if you start your property search only to find the costs are much higher than you thought?
The costs of commercial premises can be incredibly high, especially in the high-demand or central areas that you’ll ideally choose for your business. This can leave you facing two options – either you’ll need to rent a business space instead, or you’ll have to settle for a commercial fixer-upper that’s selling for a lower price.
Both options have their plus points, but if you have your sights set on commercial property ownership, then the latter will inevitably appeal the most. But does it ever make business sense to tie up your profits in a commercial fixer-upper? Keep on reading as we help you decide.
Understand the Extent of the Work Needed
Unsure about a fixer-upper for your business? You can make these deliberations a lot easier on yourself by simply getting honest about the amount of work a property requires. Let’s say you’re just building a business, and you’re considering a property that effectively needs knocking down and starting again. Is this ever a wise idea? We’ll hazard a guess that it’s not.
But remember that not all fixer-uppers are complete redo jobs. And, if you’re simply looking at more dedicated repairs, such as interior replacements, commercial roofing, or even simply renovation of one or two areas, then this task might not be quite as out of reach. The same rules apply if the work required is largely aesthetic, such as carpet replacements or general decoration.
When viewing a commercial property, take detailed notes about problems you spot, and be sure to ask questions about the extent of the worst issues. Then, do your research to get an idea of how much work is involved and roughly how much it might cost.
Be Sure Your Budget Suits the Task
You’re probably considering fixer-upper properties because you can’t afford a pristine property in your chosen zip code. But remember that the costs of renovation work can easily get out of hand. If you commit to a property because of an upfront low price point without much thought, then you could end up paying a lot more in the long run. And there’s every chance that your budget won’t stretch to it.
Hence, you need to make a clear renovation budget before you put in an offer on any commercial fixer-upper. If in doubt about potential cost escalations, be sure to speak with builders to get a clearer idea beforehand. Then, make sure you can manage the work quoted, plus have some set aside for the unexpected costs that inevitably crop up throughout a renovation of this nature.
Ideally, your budget will come in at less than you’d pay for a shiny read-to-go commercial option down the road. But if that’s not the case, or if your final figure still feels frustratingly out of reach, then you might want to reconsider.
Make Sure Your Chosen Property Has Enough Going for it
Even if you can technically afford the work required on a fixer-upper, you’re about to commit to an intense and potentially stressful project that could take you away from actual work for a while. This effort could ultimately end up being more than worthwhile, but you will want to make sure of that before you jump in.
Namely, you’ll want to ask yourself this: what makes that property worth taking a risk on? It’s especially worth focusing on selling points like a fantastic central location or an incredibly low asking price that means you’ll save significant amounts of money long-term.
However, if you’re investing in a poorly located property that’s probably going to cost you as much as, if not more than, market value overall, then you might be better off letting go and looking elsewhere!
Think About Your Timeline
Remember, too, that this is a business pursuit and, as with anything in the business world, you’ll be working on a limited time frame. This is incredibly relevant before buying because, if a major renovation is required, you could be looking at a timeframe that spans well beyond a year or more. And that could obviously be a problem for your business growth prospects.
After all, you’re probably looking for a solid base because your business is growing, but these periods of business growth are almost always short-lived if you end up out of action right when you need to meet that demand. Yet, how can you possibly achieve that goal if your future premises are a building site? If you’re not careful, you might miss this wave of popularity and find yourself facing lost profits amidst an escalating bill for premises you no longer need.
So, it’s also vital to get clear on timelines in advance. If a project is set to take an extended period, then you should ensure you have the budget for a rented space in the interim, or that you can prioritize finishing a workable space for the time being. Alternatively, you’ll need to worry far less if minor repairs are only set to take a few weeks or months, as you should then be able to get in and get going a whole lot sooner.
Conclusion
Is it ever a good idea to buy a commercial fixer-upper? Honestly, the answer depends on your enterprise and your property of choice. If you manage to find an affordable option with limited work required in the ideal location, then you could certainly feel the benefits of this path.
However, red flags like long timelines, expensive repairs, and a rubbish location could all make a fixer-upper not only unsuitable but liable to damage your enterprise beyond repair. So keep your wits about you, ask the right questions, and be sure that you can always tell the difference between a wise fixer-upper investment and an undeniable mistake purchase.
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