Vocino Labs

I’m buying a building for Dorsia somewhere between Boca Raton and Palm Beach, Florida. Previously, we’ve been in a stylish 8th-floor space at the Harvey Building on Datura Street in downtown West Palm Beach and in a smallish hipster office on Worth Avenue in Palm Beach. The primary issue with both of these spaces was the sales area — or lack there of.

The Datura Street office had some space for maybe 3 sales people to work somewhat comfortably, I suppose. It just wasn’t condusive to being on the phone. The Worth Ave. office is not condusive to sales at all. We currently have 2 sales people working there but it really doesn’t work. It’s just too small and we need room to expand. Plus the idea of being able to fully customize a place to our needs sounds great to me — that’s one reason I want to buy and not rent.

Overall, there are three reasons one would want to buy commercial real estate:

1. Run a business with commercial real estate

Some people buy commercial real estate with a specific use in mind. They want to open a store, restaurant, bar, strip club or whatever and need a place to put it. Buying the property can provide definite benefits over renting, including building equity (see below) and the ability to manage your commercial real estate space without restrictions from a property owner.

2. Earn extra rental income with commercial property

People who buy commercial property are also often looking for some extra income. Whether you’re interested in buying a duplex, an apartment complex, or a mini-mall, renting out your commercial real estate space can be a great way to earn some extra money. In a growing market, where real estate prices are rising, someone else is helping you build equity. If you rent out half of your duplex, your renters are helping you pay your mortgage and build equity (see below).

3. Build equity with commercial real estate

This is probably a simple concept for most people. Equity is the value of the owner’s share in a property. When you finance a large sale commercial real estate purchase, you’re borrowing the money from the bank and slowly paying the bank back. With each dollar you pay back, that much of your equity is growing. If your commercial real estate property appreciates, that single dollar can end up being worth more than a dollar. As the value of your commercial real estate property increases over time, so does your equity.

Well, duh.

My reasons are 1 and 3. While I’m open to the idea of renting out and off-loading some of that equity-building expense (2), the idea of being a landlord and dealing with people’s needs is not something that particularly excites me.

No matter what kind of commercial real estate property you buy, real estate appreciation is usually a slow process (although the area I’m looking in might be a great 2-5 year investment). You’ll need to make a solid plan and account for potential problems.

Finance commercial real estate

Before you secure financing, it’s important to know exactly what you can afford and how much risk you’re willing to accept. Determine whether the rental rates can support the expenses of the property, including but not limited to the loan payments, taxes, insurance premiums, and repair and maintenance.

Pick the right commercial property

Before you can decide what kind of commercial real estate property you want to buy, it’s important to take into account your skills, ability, and the amount of time you want to put into it. For us, we want to completely customize it to make it an awesome technological Dorsia headquarters. This will definitely take time and money. If you can afford a 10-unit apartment complex but don’t have the time (or the stomach) to deal with 10 different tenants, then maybe a duplex is more your speed. If you’re a do-it-yourselfer, then maybe you can buy a fixer-upper and make more money by doing the work yourself.

While the value of commercial real estate property can be averaged over a large area, each market is unique. Spend some time walking around the neighborhood. What is the rent of other similar commercial real estate properties in the area?

Tax and investment goals

Consult an accountant and make sure you structure your investment to meet your tax and investment goals. There are many commercial real estate books available to help you learn more about buying commercial real estate property and how to make it work for you.

I currently have my eye on one property in the Lantana (for those of you that know the area) area. It’s relatively cheap (I don’t want to spend more than $500,000) and is in an area that will make a great investment for the future. It’s right on a main road with condomenium buildings and CityPlace-style properties being planned in the vicinity. This makes for an excellent investment strategy as we can customize it to suit our needs and run the business while it appreciates over the next ~2 years.

Today at 4:00PM EST I’ll be heading over to take another look at it and perhaps take some pictures to share. I’d like to get a good picture of the outside that I can Photoshop and get a feel for how hipster I can make it look.