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  • Ryan O.

3 Reasons Why Businesses Should Buy Instead Of Rent

I’m selling a fee simple commercial unit at 465 Kapahulu. The unit is being used as a hair salon. Here’s the online fact sheet:

In residential real estate, own vs. rent is an often-debated topic. In commercial restate, most business owners, especially small business owners, go through the same debate. Here are a few reasons why buying is better…

No Landlord

Commercial real estate is a dog-eat-dog business. I’ve heard horror stories on how some tenants go unrepresented and they sign leases that heavily favor the landlord. Honolulu has some of the most prime commercial real estate in the nation; you’ll have to pay a pretty penny to get in some Class A properties. If you own a fee simple property, you don’t have to deal with rent increases, lease (re)negotiations, and landlords/leasing agents. In addition, if you own, your mortgage payments should be fixed.

1031 Exchange

Owning a property is a long-term investment. Over time, your property could appreciate in value and you can build equity. If you decide to sell, you can execute a 1031 Exchange to defer your capital gains taxes. In addition, if you have equity in your property, it might be easier for your business to get additional loans. It’s important you speak with a CPA and financial advisor about this.

Earn Rental Income

There are five work stations and five sinks at my hair salon listing. If you used one station, you can rent out the other four stations. Let’s say you rented each chair for $500/month. You can generate $2,000/month in rental income.

At a $380,000 purchase price, with 25% down, at a 6% interest rate, your monthly mortgage payment is approximately $1,700/month. As you look to build your business, other people can be covering your mortgage.


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