CFO Services-An Option to Consider

Business owners’ relocating is a situation I run into as a Part Time CFO. Owning the building you do business in has always been a strategy I like. You may as well build equity through the facility payment if you have to pay for facility costs anyway.

I made the mistake of missing out on this with an insurance agency I have interest in owning. Since 1983, I’ve had this equity interest. We continuously leased this same office space for years. Over 27 years, we paid close to $700,000 in rent.  If we had actually bought the property at any point in all of this, we probably would have still paid the same facility costs, but we could have enjoyed tax advantages, and own an asset with resalable value.  This was a scenario where I really fell asleep at the wheel.

I believe the right choice for a business owner is to own the building they work in, even with the real estate market down. Banks actually love SBA 504 programs, and they provide good financing options. Banks like to see a large percentage of the loan (among other things) guaranteed by the SBA. And a lease with an option to buy is a very productive strategy if you can’t finance a purchase today.

If you have a lease with the option to buy, you have:

  • Control of the property (and it can’t be sold from you).
  • The option of trying the property to make sure it’s a good fit before you buy.
  • No commitment to ever buy.
  • Time to work toward a down payment.
  • The ability to lock in an option purchase price that’s favorable in the current real-estate market.

In this real-estate environment, you can usually negotiate any non-refundable payments you may have to make for the option. The purchase price is what any non-refundable payments you make should go towards, if you exercise that option. Over all, getting a lease with an option to buy is a great way to set your self on the path of ownership, instead of the path of accumulating rent receipts.

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