Investing In An Office For Your Business: 3 Ways To Manage The Long Term Costs
Commercial real estate doesn’t come cheap, no matter where you are in the world. It’s the kind of real estate investment that often pays more dividends than residential property, but it’s still a hefty investment to make.
And when you’re a business owner who needs to use that space for your own commercial needs, you’re not going to be making an ROI off of any leasing income either.
So you’ve got to be careful here. You need to know exactly what office space you need, what you can do to offset the expenses early on, and how you can keep the ongoing costs as low as possible.
Here’s a quick guide to making a plan for investing in commercial space with all three elements in mind.
Keep it Small
A lot of new office owners go over the top on their space needs. They typically acquire 25%-50% in excess square feet, and that all comes down to not quite understanding how to create a suitable layout.
You need to make sure you have a floorplan to work with first, and then look for office space that fits the bill. After all, you’re otherwise going to be paying out of pocket for space that isn’t doing anything for you, and certainly isn’t paying you back.
Consider Serviced Spaces
A serviced office space often bundles in as much of the typical business overheads as possible. That’s very helpful for a small business’ budget, as you likely have a limited inventory.
A lot of the equipment you’ll need to use will already be in place. Any utilities you’d usually have to set up (electricity, wifi, heating etc.,) are all included as part of the package already. And you don’t need to hire your own cleaning team or building manager either.
This lowers the ongoing cost of running your office space by simply reducing the long term fixed expenses you’d have to fork out for.
Make Use of First Year Deductions
This is for those who have bought office space outright, rather than just leased a commercial space for business purposes. If you’ve put money into part of an office building, it’s possible to use first year deductions methods to save money on the overall long term costs.
You can do this in a couple of different ways, primarily either via bonus depreciation or via use of section 179.
But you need to be sure the method you choose is the right one for you and your investment. They differ in a few key ways, so check out a guide on bonus depreciation vs. section 179 to help you make the best decision, especially if this is your first time investing in commercial real estate at all.
When you need office space, you need to make your decision carefully. Work with a plan, keep your investment as small as possible, and double check what deductions you can make to reduce your tax payments at the end of the year.