Lease or buy a commercial space?

Question

Hello. I have an idea for my community that is needed. I want to create a co-working space like @work for business people to collaborate, network, rent private offices, have a short term lease (part time), coffee bar, printers, WIFI, conference room, etc.

I have a few buildings that can suit this idea. What would you suggest in regards to bring the building or start small and rent? A few building I would need to build to suit. Others may really work well but need cosmetic work.

Which ever way I choose I am looking for financial backing to accomplish this goal. Thank you for your time answering.

Brad Jacobson · Answer

Hey Account Closed,

What I'd recommend is combining your ideas with the "house hack."  A SBA loan (small business loan) will allow you to buy a commercial space with multiple units as long as your business occupies at least 50% of the building.

You should buy a building with 50% co-working space that would act as your business and one or two more units that you could rent out to other businesses.  Then those other one or two businesses would cover most of your mortgage and your business could own a space without a big monthly debt burden.

Good luck!

Chris Davidson · Answer

Account Closed really neat idea and more in line of a business with real estate component. I would do some market research and verify demand and market conditions. While doing this should be laid out pretty clear if renting or buying makes more sense.

Best of luck would love to hear how it turns out.

Account Closed · Answer

I was thinking on that too. We are on the same page. Love it. I need to find out how much rent will be in order to sustain even the min of expense- rent, insurance, taxes etc. I am even thinking of going to the seller and negotiate something in the lease. I appreciate your ideas. Thanks!

Account Closed · Answer

That sounds really fun. I was thinking small for now. At least a putting green. This particular building would not have space for a pool and such. I would have to build that here.

Account Closed · Answer

This is why I thought of the idea. WeWork will never come to our growing mid size town. We are into not will be metropolitan enough. I will have to find money to buy the building and rehab. I need to create my business plan for the lenders. By asking for investors, I can still do the business plan but they get to know who I am and the work I would put into it. I am thinking starting small. The space I am looking at is 9,000 sq ft. Monthly rent 8k plus utilities etc. I don't have to use all that sq footage. Build a name, reputuon, money in the bank and then go to a lender????

Account Closed · Answer

Thank you. I have just started and asked some people I know who think it is needed. Many people here have satellite. If they work at home they need a fast internet and depending who they use it can be okay or really good. I am a realtor and hear of other agents wanting office space (cloud platform with no office) or people who work for an employer. I will do more research though.

Scott E. · Answer

I love this idea. The thread caught my eye because I've been considering something similar out here in AZ. I spend a lot of time at coffee shops and the challenge with coffee shops are:

1. Often there aren't any seats left

2. If there are seats, they aren't close to a power source so can't plug your laptop in

3. No private space for taking a phone call or having a more private 1:1 business meeting/job interview/etc

What's cool about starting this coworking space business is that from what I understand, you can buy a small commercial building and finance with a SBA loan, which require less money down, no PMI, and better rates than a commercial loan.

Of course companies like WeWork are already doing this but on a much larger scale. I think there's got to be demand for a more boutique coworking experience.

Anyways to answer your question, I think buying is the right move. You'll have complete control over the space, you will gain benefits of owning commercial real estate (appreciation, principal pay down, tax benefits, etc), and again you can probably use the SBA loan for funding.

Scott Mac · Answer

Wouldn't it be interesting if places like this had a pool, hot tubs, and a steam room--like a club.

Mix business with pleasure...Do business from the hot tub--like Austin Powers.

Ronald Rohde · Answer

I'd lease first. Unless you can get commitments and deposits from people, you need a lot of tenants to cover the nut of overhead. if you lease, you make a narrower spread, but much less risk. Proof of concept, second location you can buy or you can look for a building instead of renewing.

These businesses often fail, you don't want an empty office that you own...

Lease or buy a commercial space?

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