In real estate, it's said that you make your money when you buy. While transactional considerations aren't as important when you're buying a corporate real estate asset as a long term hold, buying at the right time can significantly reduce your acquisition costs. Here are four ways that you can buy at the right time for you and for the market as a whole.
1. Get Started Early
If you put a building under contract today, you probably won't move in for at least six months. Inspecting, financing and closing it will take about three months, especially with an SBA loan. Once you close, it'll take about three months to design and build your tenant improvements. At the same time, you'll also have to install and test your utilities and services and move in your furniture, fixtures, equipment and records.
Finding the perfect corporate real estate acquisition for your company can be an extremely slow process. While a six month period for closing and construction is aggressively reasonable, it doesn't take into account defining your needs, surveying the market, and finding a suitable replacement property. Your search process can run at least six months, and even more if you need to wait for the right property to become available. Typically, you should start looking at least one year before you want to move.
2. Purchase a Future-Proof Building
One of the problems with owning corporate real estate is that it's inflexible. You can do almost anything you want inside your building, but unless you buy a lot of extra land, there isn't a lot that you can do to change the nature of the building itself. With this in mind, any building that you buy should be able to accommodate your company's future growth.
There are two primary ways to accomplish this. One is to purchase a multi-tenant corporate real estate asset that has tenants paying the rent for their spaces. As you expand, you can take over their spaces. Another way is to buy a building that is vacant, but larger than what you need. If you purchase inexpensive space that needs customization, you can wall off the unused area and just configure what you need now, knowing you can expand later. This saves you from carrying the additional cost of turnkey space that you might not use for a few years.
3. Market Timing
The key to market timing is to buy when everyone else is selling. Growing inventories both for sale and for lease are indications of a market turn. Bad economic news is another positive indicator. The value of vacant owner-user corporate real estate assets tends to swing with the economy as a whole, so the more able you are to buy when no one else is, the better your negotiating position will be. Bear in mind, also, that you're buying the building for the long term, so even if it's a bad year for your business, it's really immaterial compared to the span of time that you'll probably own the building.
4. Maintain Cash Reserves
Ultimately, if you're going to jump on a good buy, you'll also need to have cash in reserve in advance of the purchase. If you can qualify for SBA financing, you can acquire corporate real estate assets for as little as 10% down. However, if you're trying to buy during a down market, getting that financing can be challenging. The only way to ensure that you'll be able to buy when you want to is to have enough cash to make a meaningful down payment and get a lender willing to move for you.
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